Mobile Ads Seen Picking Up As New Google Phones Hit Market

SAN FRANCISCO - Mobile advertising growth has slowed sharply over the past few months but is expected to reaccelerate next year, just as a growing number of cellphones built with Google Inc.'s (GOOG) Android software are expected to hit the market.

U.S. advertisers are seen spending $229 million on mobile ads this year, up 26% from $169 million in 2008, according to a report by Brian Wieser, global director of forecasting for Magna, a unit of Interpublic Group of Cos.' (IPG) Mediabrands division.

Magna's last forecast in July 2008 projected mobile ad spending would increase 43% to $298 million in 2009. Still, Wieser said despite the slowdown over the past several months, mobile ads remain one of the fastest growing emerging mediums on Madison Avenue. Magna predicted that mobile ad spending could nearly double by 2011, reaching $409 million.

"Every player is investing against the long-term promise of the platform, so I don't think anyone is slowing down," he said in an interview.

Google has been teaming up with hardware makers to build cellphones with the Mountain View, Calif., company's Android software, part of its strategy to accelerate mobile Internet access and generate more revenue by selling mobile ads.

Chief Executive Eric Schmidt said last month he expected Android to have a "very, very strong year," adding that a number of wireless carriers and hardware makers will be making "significant" announcements by the end of the year. Market research group NPD said the first so-called "Google phone," sold by Deutsche Telekom AG's (DT) T-Mobile wireless unit, was the fifth best-selling smart phone in the U.S. in the first quarter.

Wieser said in his report that a wide variety of trends have converged to drive growth in mobile advertising, despite the drag from the recession. He said the market isn't really a single ad platform rather than a "highly fragmented group of divergent advertising models collectively organized around portable (and primarily cellular network-based) media."

He said the emerging market is being driven by the prevalence of cellular subscriptions, increased mobile Web access and growth in mobile applications, such as those on Apple Inc.'s (AAPL) App Store, which has prompted users to consume higher levels of data.

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