Verizon iPhone Deal Could Boost Overall Mobile Ad Market

Verizon today confirmed it will begin selling Apple’s iPhone 4 mobile handset in February, ending rival network operator AT&T’s exclusive rights to the device and effectively doubling the potential U.S. user base for the iPhone.

That’s good news for Apple, but also for the mobile ad industry, potentially giving mobile ad vendors, developers, and advertisers the chance to exploit a larger audience and increased inventory. According to a Wall Street Journal report published today, analysts are predicting Verizon iPhone sales of between nine and 12 million in 2011, while AT&T is expected to have sold around 14 million in 2010. Assuming Verizon’s sales of the device aren’t exclusively at the expense of existing AT&T subscribers, new iPhone users could grow by at least 50 percent this year.

Michael Chang, CEO of mobile ad network Greystripe, expects most of this iPhone user growth to be from new iPhone users. “For advertisers, this means that they will be able to reach 50 to 70 percent more of their target customers.” Greystripe currently sells ads into a range of iPhone applications and mobile websites. Chang predicted iPhone ad impressions across his network will double in 2011, year-over-year, as more users gravitate to the handset and continue to spend more time using it.

That increase in impressions and audience size could also help boost Apple’s own mobile advertising product, the iAd, which appears to have grown at a modest pace since launching last summer. The slow start has been largely due to a lack of advertisers rather than inventory; however, the company unveiled a self-service tool late last year which should simplify the process of buying ads across its network.

Ultimately therefore, the Verizon deal could benefit most players in the mobile ad ecosystem, except Google – Apple’s major rival in the mobile platform and ad space. Although recent comScore data suggests Google Android devices now outweigh iPhones in the U.S., the increased availability could help Apple pick up its pace again in the smartphone race against its nemesis.

That said, a report issued late last year by market intelligence firm IDC suggested Google still dominates mobile ad spend thanks largely to its mobile search product, which helped it attract 59 percent of total investment in 2010. More iPhone users will likely result in more mobile searches, adding to the company’s mobile revenue rather than inhibiting it.

Chang predicted the Verizon iPhone would only be positive for application developers and publishers, thanks to increased audiences and exposure. “It presents an opportunity for at least doubling ad revenue in 2011 alone,” he said.

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