Wireless

E-marketing firm SmartReply has acquired mobile-advertising specialist MSnap in an effort to increase its presence on wireless devices.

SmartReply, which distributes advertisements via voice messages, e-mail, and text messages, is seeking to create the largest U.S. mobile-messaging ad network through the acquisition, according to a post on MSnap's Web site.

Terms of the deal were not disclosed, and MSnap and SmartReply were not immediately available for comment, but according to a report in The Wall Street Journal, MSnap's shareholders will receive a minority stake in SmartReply.

MSnap, founded in 2006, has received investments from Partech International and First Round Capital.

The Journal, citing figures from investment bank Partech, noted that approximately 80 mobile-marketing companies have collectively raised more than $1.2 billion in venture funding since January 2006. During the same period, the Journal noted that 20 companies in the sector have been acquired for a total of roughly $900 million.

The advertising sector has seen a large pullback in the weakened economy, and industry analysts have pointed to small companies and nontraditional media companies as being the likely targets of mergers and acquisitions.

Greystripe announced Wednesday it raised $5.5 million in a third round of venture capital funding as it seeks to gain traction for its ad-supported mobile game advertising network.

Incubic Venture capital led the round, which included additional existing investors Monitor Ventures and Walt Disney Co.-backed Steamboat Ventures.

Greystripe has raised a total of $15.6 million to date, last raising a second round of $8.9 million in May 2007 and a $1.2 million first round in October 2006. The company declined to discuss whether its latest round was at a higher or lower valuation.

The start-up has developed technology designed to allow advertising agencies to click on a mobile option to extend their existing online advertising campaigns beyond computer screens or TV. Greystripe aims to take flash advertisement and extend it beyond its online format to a mobile format. Flash advertisements have predominantly appeared online, rather than on mobile devices.

Michael Chang, Greystripe chief executive, said in a statement:

For too long the mobile advertising world has built a silo approach to their business.

Those days are over. It's time to join the online advertising world and bring new value in terms of reach, targeting and interactivity.

Among the smartphones that Greystripe works with, it delivers rich media flash ads on Apple's iPhone.

MyScreen Mobile announced Thursday it is offering a version of its advertising rewards service for Google's Android smartphones.

Under the service, users sign up for MyScreen Mobile to receive targeted ads on their mobile phones. In exchange for viewing the full-screen ads, users receive rewards points for such subsidized mobile services as ringtones, mobile games, and gift cards.

MyScreen, which already has versions of its service for BlackBerry, Windows Mobile, Symbian, and Palm OS devices, is offering up a service that is akin to other Internet advertising incentive programs that have popped up over the years from the former AllAdvantage to the former CyberGold.

AdMob put out a call Tuesday for Android developers, as it unveiled an ad unit specifically for applications running on Google's smartphone.

AdMob's ad unit is designed to allow third-party developers to generate revenue from the applications they create for Google's Android mobile phone. AccuWeather, Jirbo, and TapJoy developers have already put AdMob's Android ad unit to work, the company said.

"We are already seeing strong interest in developing applications for Android-based devices, similar to what we saw with the iPhone last summer," Ali Diab, AdMob vice president of product management, said in a statement.

AdMob, based in San Mateo, Calif., serves mobile banner and text ads. The company works with more than 6,000 mobile sites and 450 iPhone applications.

Microsoft is preparing to announce Wednesday it has been selected as the search provider for Verizon mobile phones, beating out archrival Google and Yahoo, according to a Reuters report.

Yahoo shares spiked during mid-day trading as news surfaced that Verizon had chosen a mobile search provider, but then fell back to earth after the Microsoft disclosure.

There has been much speculation over the past year about who would sign the coveted search deal with Verizon, which is expected to overtake AT&T as the No. 1 U.S. carrier after Verizon closes on its purchase of Alltel, Reuters said. Increasingly, consumers and businesses are turning to their mobile phones as a means to interact with the Internet and advertisers are well aware of the trend.

Verizon CEO Ivan Seidenberg, revealed the carrier's search choice during a presentation at an investment conference, noting Microsoft's CEO Steve Ballmer is expected to make a similar announcement at the Consumer Electronics Show in Las Vegas.

Although Seidenberg did not delve into further details about the deal, it is expected to generate between $550 million to $650 million in guaranteed revenue a year.

For Yahoo and Google, the announcement is a blow to their mobile efforts.

Yahoo in November announced a deal with T-Mobile USA to power its search and mobile Web portal. And although Yahoo recently was able to extend its relationship with Verizon to provide its Web portal to computer users, it fell short in doing the same for Verizon's mobile customers.

T-Mobile USA, which is currently rolling out its 3G wireless network across the country, is turning to Yahoo to power its search and mobile Web portal in an effort to boost data usage.

On Thursday T-Mobile said it would use Yahoo's OneSearch as the default search tool on its phones. T-Mobile is rebranding its mobile Web service and calling it Web2go. This service is supposed to provide a better Web browsing experience and easier navigation through a home page on T-Mobile's mobile phones. And it integrates Yahoo's OneSearch tool into it.

Also as part of the deal, Yahoo will offer sponsored search results and in some cases display advertising within the search results presented through T-Mobile's Web2go service. The companies will share the advertising revenue, but further details weren't given.

With close to 3 billion mobile phone users around the world, every major search company is vying for a piece of the action. They're also competing for a piece of the emerging mobile advertising market, which is still in its infancy. As a result, the stakes for the three main search giants--Google, Microsoft, and Yahoo--have never been higher.

Google dominates the search and advertising markets on the traditional Web. And it's already getting a strong foothold in the mobile market. In fact, it also has an important relationship with T-Mobile. Just two months ago, T-Mobile became the first wireless carrier to offer a phone using Google's Android operating system. As part of the deal, the G1, made by phone manufacturer HTC, has several Google applications, such as Gmail, Google search and Google Maps integrated into the device.

Microsoft is also making headway in this market and is believed to be close to signing a deal with Verizon Wireless worth about $550 million to $650 million in guaranteed revenue a year.

Yahoo has worked hard over the past couple of years to make its mark on mobile. The company already has deals with T-Mobile in Europe to power its search in North and Central Europe. O2 in the U.K. is also partnering with Yahoo. In total, Yahoo claims to have about 25 percent market share in Europe and more than 30 percent in the U.K.

Yahoo's OneSearch service is the core of its mobile strategy, and it provides search results that are supposed to be the most useful for someone who is surfing the Web from a mobile phone. Yahoo also provides voice search, allowing users to speak the term they are searching for into their phones instead of typing it into the keypad. Google just announced its voice search for the iPhone this week.

While deals with specific carriers are important today, it's unclear how important they will be in the future. Yahoo's OneSearch can be downloaded from the Web and any mobile user with a browser can search using Google whether it's preloaded on the phone or not. That said, for now, most mobile subscribers using a basic cell phone don't download new applications. And most don't venture beyond the carrier "deck" or menu of choices that it is given to them on their phones.

But that could soon change. As smartphones like Apple's iPhone, all the BlackBerry devices, and new Android phones become increasingly popular among consumers, users are more likely to venture beyond the applications and services preloaded on their phones. Apple has already seen great success with its App Store. More than 3,000 applications are currently available through the App Store, and Apple has said that users downloaded more than 100 million applications between the site's launch on July 11 and the beginning of September.

Research In Motion, the maker of the BlackBerry, and Google are launching application store fronts that will allow subscribers to easily access applications from third party developers.

What this likely means for the mobile market is that mobile users are being conditioned to explore and download content that is not spoon-fed to them by their service provider. And as users get more comfortable exploring the mobile Web on their own, deals such as the one between Yahoo and T-Mobile may become less relevant.

Think of the portal wars of the late 1990s. AOL dominated as a portal provider, but once users realized they could find whatever they wanted or needed on their own, Google emerged as a top destination site providing search, aggregated news, and now a whole slew of new applications.

Still, for the moment, there are millions of basic cell phones on the market. And if carriers want to boost data usage on these devices, they will need a little help from the Microsofts, Yahoos, and Googles of the world.

Microsoft is working to hijack Verizon Wireless' search deal from rival Google, according to a report in The Wall Street Journal.

The software giant is counting on Google's recent regulatory distraction in offering more generous revenue sharing and higher payments, the newspaper reported late Thursday.

Google has reportedly been courting the No. 2 wireless carrier for months to make its search engine the default on Verizon phones, but Verizon is considering both offers, according to the Journal's sources.

Microsoft showed its desire to move into Google's search territory earlier this year when it made a . Microsoft's latest salvo comes after Google bowed to federal regulators' opposition and killed its controversial advertising partnership with Yahoo.

Google's preoccupation with regulators over the Yahoo deal helped create the opening for Microsoft with Verizon, the sources told the newspaper.

The move comes as the two companies ramp up their efforts in the mobile arena. The first phone based on Google's Android mobile operating system--a challenger to Microsoft's Windows Mobile--recently went on sale. Microsoft CEO Steve Ballmer on Thursday dismissed Android, saying he believed that building it was financially unsound for Google.

"They can hire smart guys, hire a lot of people, blah dee blah dee blah, but you know they start out way behind, in a certain sense," he said.

Apple's iPhone has revolutionized Web browsing on a mobile device, but some users of the breakthrough phone are still frustrated with their experience when surfing certain sites, like Yahoo.

Keynote Systems, which provides testing tools to help companies improve their mobile experience, found in a study released Thursday that satisfaction rates of iPhone users using certain sites were low and only a small percentage of users clicked through on advertising. The results suggest that the usability of many mobile Web sites still needs improvement. It also suggests that advertisers might have to adjust their practices on the mobile Web.

Keynote used the iPhone for its study primarily because the phone is designed for Web surfing. And on average iPhone users spend more time surfing the mobile Internet than users of other smartphones.

"The iPhone is a breakthrough mobile smartphone," Dan Richards, senior product manager at Keynote, said in a statement."But our Keynote WebEffective study shows that the user experience of surfing Web sites is not."

As part of the study, more than 75 participants were asked to find an entertainment news story, read it, and search for a story on another specific top and then send that story to a friend. Keynote found that even big Internet brands, which have invested a lot in mobile development did not score exceedingly well in terms of satisfaction. In fact rates were low for both Yahoo, which only scored 51 percent satisfaction, and Fox News, which scored 64 percent satisfaction for their mobile Web sites.

That said, Fox News users were more likely to find the mobile experience to be better than a computer experience. Meanwhile, Yahoo users were more likely to find the mobile experience to be much worse than a computer experience, according to Keynote.

About 60 percent of Yahoo users reported frustration, while only 33 percent of Fox News users were frustrated. Users said they were most frustrated by site errors, cluttered pages, slow Web site speed and excessive scrolling.

The study also found that only four percent of users clicked on advertisements while surfing. And only a quarter of respondents noticed the advertising, but did not click on it. Another major hurdle for mobile Web surfers had to with search. Many users found search on these Web sites to be difficult.

Mobile search and advertising start-up JumpTap has received an additional $26 million in funding and has expanded its relationship with U.S. operator AT&T, the company said Tuesday.

JumpTap, based in Cambridge, Mass., provides search technology and advertising services for mobile operators such as AT&T and U.S. Cellular. The company also provides advertising for carriers and content owners such as NBC Universal and Fox Mobile.

JumpTap, which works with 17 mobile operators around the world, competes against search and advertising heavyweights such as Google, Yahoo, and Microsoft. The new funding, which completes the company's fourth round of financing, brings its total cash raised to around $72 million.

AllianceBernstein led this round of funding. It also included funding from previous investors, including General Catalyst Partners, Summerhill Venture Partners, Redpoint Ventures, and Valhalla Partners.

The cash infusion will help the company continue to develop its technology and expand its sales force to take on the bigger players.

"It's really a David and Goliath story," said Paran Johar, chief marketing officer for the company. "And we aren't Goliath. It takes a lot of investment to compete against Google, Yahoo, and Microsoft."

But Johar believes that JumpTap is well-positioned to take on these big companies because it's not perceived as a threat by the mobile operators. The company has made significant inroads with operators around the world. It provides the technology and the operators are able to use the technology and integrate it as a "white label" solution into their own mobile platforms.

This approach differs from Google, Yahoo, and Microsoft, which all brand their mobile search platforms as their own.

It's still early days in the mobile search and advertising market. In fact, in 2007 the mobile advertising market was only worth $2.7 billion, according to eMarketer. That number is expected to jump to $4.8 billion in 2008 and could grow to more than $19 billion by 2012.

At this early stage in the game, operators are still trying to figure out which technology partners to work with. Last week, the Wall Street Journal reported that Verizon Wireless is in talks with Google. Exactly what the scope of the agreement will be is still uncertain. But it's believed that Verizon will likely embed Google's search tools in some of its phones. And it will likely strike some kind of advertising/revenue sharing agreement with the search giant.

But Johar believes that operators should be wary about working closely with Google. Mobile operators have a wealth of information about their subscribers that can be used to refine search queries and tailor advertising to individuals, making the search and advertising content more relevant to users. This is great for search companies and terrific for operators who will likely get a cut of the advertising revenue. But giving up that information to a Google, for example, could end up being an operator's biggest mistake.

"No matter how big a check someone like Google can write, they are a Trojan horse," Johar said. "If an operator shares all its customer information, it will allow someone like Google to come in and commoditize the most precious assets it has, which is all that customer data."

Johar argues that JumpTap's white label approach allows operators to retain control of their customer information while still being able to use advanced search and advertising technology to tap into targeted advertising.

AT&T, Verizon Wireless' largest rival in the mobile market, is already working with JumpTap. AT&T is also working with Yahoo, which sells a portion of the carrier's ad inventory. But now JumpTap is deepening its relationship with AT&T, Johar says. Previously, JumpTap only powered the carrier's on-deck search, but now it will be accessing AT&T customer information to help sell targeted advertising.

"Google may have a larger share of the overall search market," he said. "But the game is just beginning in mobile, and we're just starting to unlock the data to provide better and more targeted search and advertising. So I feel very good about our position in the market."