Is Apple Really “Threatening” Google In Mobile Advertising?

Earlier this week a Bloomberg/BusinessWeek article appeared under the headline: Apple Threatens Search Giants’ Mobile Ad Shares. It gained a tremendous amount of secondary pickup and discussion for the proposition that Apple had tied Google in mobile advertising revenue.

The article relied on IDC estimates to argue “Apple may be gaining share in the U.S. mobile advertising market this year at the expense of Google and Microsoft.” Here are the IDC US mobile advertising marketshare figures (based on revenue) cited in the article:

• Apple: 21%
• Google: 21%
• JumpTap: 13%
• Millennial: 11%
• Yahoo: 9%
• Microsoft: 7%
• Nokia: 2%
• Other: 16% (missing from the figures mentioned in the article)

When I saw this it immediately struck me as wrong. IDC has gotten it wrong before. But how could Apple with its very recent entry in mobile advertising (albeit based on the Quattro acquisition) have greater share than a combined Google and AdMob?

Google “owns” the vast majority of mobile search ad revenues in the US — and globally in fact. Eric Schmidt recently said that “mobile will be a larger business than the PC-Web. But it will take a few years.” However he also said that mobile revenues were “immaterial” for Google at the moment. Immaterial at Google could be a $100 million or more however.

Indeed Citi’s Mark Mahaney, a very reasonable and thoughtful financial analyst, previously estimated that Google will see $500 million in global mobile ad revenue (doesn’t include display) by the end of this year. If true, that’s hardly immaterial, considering that all of mobile display advertising in the US is worth less than $1 billion today.

It’s true that Apple CEO Steve Jobs in June said that advertisers had committed $60 million to iAds and estimated (using JP Morgan figures) that Apple would control about 48% of US mobile display advertising in the second half of 2010. JP Morgan estimates that US mobile display in 2010 is going to be worth $250 million. ICP’s MagnaGlobal has put the number at around $400 million, while others have larger numbers. One prominent mobile ad network estimated that US mobile display is closing in on $750 million.

I immediately reached out most of the companies on the list to get their feedback and reactions to the IDC figures. I talked to several people though no one wanted to be quoted. Almost without exception those whom I spoke with faulted the numbers.  I was told by one party (in an informal estimate) that the universe of mobile display advertising in the US looks like this as a practical matter:

• Google, Apple, Yahoo, Millennial Media (60%)
• Publishers (20%)
• Other (20%)

I reached out to the IDC analyst mentioned in the article. He did not respond to my questions in email, however. So I’m relying on others who’ve talked to him or are more directly familiar with the IDC estimates.

One question that immediately arose is whether the market share figures above include mobile search revenues. According to second-hand information I obtained they apparently do but don’t include “hybrid” campaigns, those that run both on PCs and mobile devices. But since this describes most of Google’s mobile search advertising it undercounts Google’s mobile ad revenues by a mile — at least.

One reputable source told me that the $60 million that Apple reported was based on upfront commitments and not actual billings. That same source said that at least two major advertisers had canceled their iAd campaigns over frustration with Apple’s tight control and the slow pace of the process. (There’s been a mixed reaction to iAd.) That would mean the $60 million figure will translate into less actual revenue for Apple.

God love ’em, Apple has done more for mobile consumers and mobile advertising than any other single company. But they’re not the revenue leader. And if the Mahaney figures are anywhere near correct — and they’re search numbers exclusively — then Google has got to be, far and away, the mobile ad revenue leader in the US.