Apple encroached onto Google’s turf on Tuesday with its acquisition of Quattro Wireless, a mobile advertising company.
The sale, which Quattro announced, is the latest sign that the mobile phone is the next battleground for technology companies, particularly for Apple and Google, which are increasingly in competition. Apple paid close to US$300 million for Quattro, a person briefed on the deal said.
While Apple, maker of the iPhone, branched into advertising on Tuesday, Google, which is predominantly an advertising company, began selling its first piece of hardware, the Nexus One cellphone.
“You can just see the tempers rising between the two companies,” said Gene Munster, the senior research analyst at Piper Jaffray covering Internet companies. “Two years ago it was a very friendly relationship. Now just every day it gets more competitive.”
In November, Google agreed to buy AdMob, a mobile advertising network that competed with Quattro, for US$750 million. Apple had also been interested in AdMob, people with knowledge of that deal said. With Quattro, Apple will also compete in the mobile ad market with Microsoft and Yahoo.
Apple is probably less interested in profiting from ads than from making the iPhone the most attractive device for developers to build applications, analysts said.
Eighty percent of the 3 billion downloads from Apple’s App Store are free, Munster said. By offering a way to sell ads, Apple will help these developers — as well as developers who might build applications for a future Apple tablet — make money.
“My hypothesis is this has more to do with ensuring their platform is as valuable to developers as any other platform,” said Julie Ask, a vice president and mobile analyst at research firm Forrester.
Quattro, based in Waltham, Massachusetts, places ads for major companies including Ford, Procter & Gamble and Visa. It serves 4 billion ad impressions a month on iPhones, Google Android devices and other smartphones.
The ads range from full-blown applications or videos to small brand ads on a group of Web sites including those of Time, CBS Interactive and Gawker Media.
The business of placing ads on smartphone screens is nascent but quickly growing. Advertisers spent just US$416 million on mobile ads last year, compared with US$22 billion on Web sites, eMarketer said.
Yet mobile ad spending is expected to grow to US$1.6 billion by 2013, as smartphones and other small mobile computing devices become increasingly popular. Seventeen percent of adult cellphone subscribers in the US have smartphones, up from 11 percent a year ago, according to Forrester.
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