Google Woos Insurers to Repel Apple Mobile-Ad Attack

Google Inc. executive Mike Steib is courting customers such as Progressive Corp. and touting tools that let marketers create the snazzy, interactive ads that rival Apple Inc. has been using to snatch mobile-ad business.

“We have a significant investment in mobile and competition is going to push us to be really, really good,” Steib said in an interview the day Google closed its $750 million acquisition of AdMob, which places ads on mobile programs and Web pages.

As Google’s head of mobile advertising, Steib leads the effort to build his company’s next $1 billion business from sales of ads on wireless devices -- and lessen its dependence on Web-search ads. With a team located in an old cookie factory in Manhattan’s Chelsea neighborhood, Steib is striving to persuade advertisers they will win over more consumers by working with Mountain View, California-based Google than with Apple.

“Google will respond to iAd and respond very strongly,” said Michael Collins, chief executive officer at Joule, a mobile-ad agency that’s part of WPP Plc. “They have too many assets to pull from, too many arrows in their quiver.”

Staying ahead may not be easy, now that Apple is luring advertisers to iAd, a service that places ads inside applications that run on its iPhones and other mobile devices. Apple has sold more than $60 million in advertising on iAd since it was announced in April, CEO Steve Jobs said at a June 7 conference. That represents about half of the mobile display-ad market, according to JPMorgan Chase & Co.

Photographer: David Paul Morris/Bloomberg

Apple has sold more than $60 million in advertising on iAd since it was announced in April, CEO Steve Jobs said at a June 7 conference. Close

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Photographer: David Paul Morris/Bloomberg

Apple has sold more than $60 million in advertising on iAd since it was announced in April, CEO Steve Jobs said at a June 7 conference.

Blocking Ads?

Tension between the companies escalated yesterday when AdMob accused Apple of barring developers from using Google ad services to create ads for the iPhone -- a move that may threaten AdMob’s ability to get revenue from the device.

This year, AdMob and Google together may generate more than $100 million in U.S. mobile-ad sales, according to IDC in Framingham, Massachusetts.

Apple won business as Google awaited a green light from the Federal Trade Commission for its $750 million AdMob acquisition, announced in November, Joule’s Collins said.

Introducing iAd “gave Apple the opportunity to suck all the oxygen out of the room,” he said. “Apple is on a tear these days with the iPhone, iAd, the iPad.”

Shift to Devices

As sales of smartphones rise, more users are viewing ads on handheld devices in addition to -- and sometimes instead of -- computers or televisions. Spending on mobile ads in the U.S. is expected to reach almost $500 million this year, from $220 million in 2009, according to IDC.

Google rose $12.99 to $487.01 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has lost 21 percent this year. Apple, based in Cupertino, California, climbed $7.31 to $250.51.

In the next three years, as much as one-third of global digital ad spending will be devoted to mobile, according to Alexandre Mars, who oversees mobile ads for Publicis Groupe SA.

“You’re seeing advertisers who see mobile marketing as a significant business driver,” said Steib, who joined Google in 2007 from NBC Universal. “This isn’t slide 22 in a deck of all the things we could do together. This is a big part of the conversation.”

Google’s strategy includes creating tools that help developers embed videos and make ads more interactive, similar to what Apple’s iAd can do. Google also wants to sell more ads tied to a user’s location and deliver coupons for nearby deals, said Steib, Google’s director of emerging platforms.

Local Coupons

The company is keen to make money from delivering coupons for nearby businesses and selling ads alongside a tool that lets customers take photos of an item and search for it on the Web, said Steib, a graduate of the University of Pennsylvania.

That way, a bistro could offer free appetizers to a nearby customer who’s searching for a place to eat, and the user could later see where to buy a bottle of the wine paired with dinner. The restaurant and wine seller would pay Google for the ads.

Google and AdMob together had 21 percent of the U.S. mobile ad market in 2009, said IDC analyst Karsten Weide. Quattro Wireless, which Apple acquired in January after losing out on AdMob to Google, had 7 percent.

Steib says iAd may create “short-term disruption.” Still, Google can contain the fallout in part because it has experience letting customers manage campaigns on multiple websites and it can change ads on the fly based on performance, said Steib, who himself is an avid user of Apple products. He owns about a dozen iPods, iPhones and the newly released iPad.

Bank of America

Bank of America Corp. went from buying an occasional mobile campaign to paying Phonevalley, the agency run by Publicis’ Mars, a $1 million annual retainer, said Kathryn Condon, a vice president of digital marketing at the bank. Google’s AdMob is among the ad-placement companies used by Bank of America, the largest U.S. bank by assets.

“We did take a hard look at iAd and we passed on it,” Condon said. She said she’s not convinced it will provide more value than AdMob and the other companies Bank of America uses.

The bank uses mobile ads to provide a homebuyers’ guide to potential mortgage clients and to reach shoppers with an offer of 20 percent cash back on purchases with debit or credit cards.

Google says other users of its mobile-ad services include Progressive, an insurance company, and Carnival Corp., which operates cruise ships.

Big Brands

Apple spokesman Tom Neumayr declined to comment, referring instead to June 7 comments from Jobs. “We’ve attracted some pretty exciting brands,” Jobs said at Apple’s Worldwide Developers Conference. “We couldn’t be happier. We’re really excited about this.”

Apple charges higher ad rates, according to Marc Ruxin, chief innovation officer of advertising agency McCann Worldgroup in San Francisco. Still, iAd offers key advantages, Collins said. It lets marketing managers embed features such as games, videos and product catalogs, for example.

“The association with Apple, which is one the top brands in the world right now, is obviously an incredibly appealing thing,” Babs Rangaiah, vice president of global communications planning at Unilever in London. “It gives us the opportunity to access and learn from some of the brilliant design and creative teams at one of the great design companies in the world.”

Other early users of Apple’s platform include Citigroup Inc., The Walt Disney Co. and Target Corp., Jobs said.

IPhone’s Impact

Though it’s new to mobile ads, Apple has played a big role in making advertising take off, Steib said. For years, companies bought mobile ads in Europe and Asia while steering clear of the U.S. There weren’t enough smartphones and few customers had the all-you-can-eat data plans that encourage Internet surfing. That began changing after the 2007 introduction of the iPhone.

“In 2007, Apple shipped a million smartphones to normal people -- not people who will use a stylus with their phone,” Steib said. “People’s moms got iPhones in 2007.”

For all Apple’s advantages, Google stands to benefit from its position in search and related advertising, said Andrew Frank, a New York-based analyst at Gartner Inc. AdMob lends heft in the part of the market that deals with graphical ads and gives Google large brand advertisers, he said.

“Google may not have the cool factor or the experience in rich media, but what they do have is tons of advertisers who spend money with them on a daily basis and that’s where Apple has some catching up to do,” said Greg Woock, CEO of mobile-app maker Pinger Inc. “But is Apple in a good position? Of course. Who doesn’t want to work with Apple? Who doesn’t want to be a cool kid?”

To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net; Brian Womack in San Francisco at Bwomack1@bloomberg.net

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