Pop-up ads: Coming to a mobile phone near you?

Google, Microsoft, Yahoo, AOL and other online giants have all said they hope to take advantage of what they see as great potential in mobile advertising. But some startups say that those companies are looking at delivering the ads the wrong way.

While the most popular mobile advertising mechanisms so far are banner or text ads in mobile Web pages, some startups are pushing technology that essentially delivers a pop-up advertisement to mobile phones. The ads appear not when customers are using a browser, but they can pop up on the phone’s idle screen any time.

These companies, such as Mobile Posse and Acuity Mobile, say they’re working to ensure that the ads are so useful to customers that they won’t be annoying.

Mobile Posse offers what it calls idle screen ad insertion. After downloading a small application onto a phone, users start getting advertisements that often include discount coupons on their phones. Around 5,000 people in Ohio and Indiana with mobile phone service from Revol Wireless have tested the service, which also initially collects some basic information such as age, gender and zip code from users in order to best target the ads.

Mobile Posse is in the midst of another trial with a “top five carrier” that it can’t name and has a commercial launch planned for the near future.

Mobile Posse’s system learns from the type of ads that users click on so that it can avoid annoying phone users, said Jon Jackson, CEO of Mobile Posse. “The last thing we want to do is advertise to someone who is not interested,” he said. If, for example, a user receives five ads about fast food establishments and doesn’t click on any, Mobile Posse won’t send any more similar ads to that user.

He says the Mobile Posse system should be far more attractive to advertisers than mobile banner ads. That’s because banner advertisements are limited to the approximately 30 million people in the U.S. who use mobile Web browsers. On average, those people rack up four to five page views per month. Compare that, he says, to the approximately 200 million people who can receive idle screen ads from Mobile Posse, and an advertiser may see a more interesting prospect.

Acuity has a similar offering, only the advertisements can also be delivered based on a user’s location. Mobile phone users must first download a small Java application onto their phones and can set parameters about the types of advertisements they receive. Then, if they’re near a certain coffee shop, for example, they might receive a coupon or information about special offers.

But these companies face a significant hurdle in that they require close relationships with operators. Some require partnerships for technical reasons in order to enable their technology. Others would greatly benefit by teaming with operators that can ease the distribution of software by loading it onto the phones before selling them to customers. Otherwise, end users may need to visit a store to get the software that enables the pop-up ads.

Forming those close partnerships with operators could present a problem, because some industry experts say that the major operators aren’t interested in the pop-up type of mobile advertising.

“I don’t think we’re going to see that coming from tier-one carriers any time soon,” said Jeff Janer, until recently the chief marketing officer of Third Screen, a mobile advertising company that AOL announced it would buy in May. Janer left Third Screen in late July in search of a new startup opportunity.

Third Screen mainly delivers banner ads but has the capability to offer idle screen ads, he said. Operators are worried that such ads will annoy users, he said. “If you ask someone if they want mobile ads without qualifying it, the answer is clearly no. So I think they are very concerned about subscriber churn,” he said. Churn refers to the rate at which mobile customers switch operators.

Third Screen finds the 30 million figure of U.S. mobile Web users promising. Its advertising network can reach half those users, a “significant” number that is finally encouraging advertisers to go from trial projects to true campaigns, Janer said.

A Google executive wouldn’t give a definitive answer about the search giant’s interest in mobile pop-up ads, but he seemed to be leaning against it. “We have looked at a variety of models,” said Dilip Venkatachari, director of product management responsible for mobile monetization efforts at Google. “The formats we deploy now and in the future are all around things we think are least intrusive and deliver value.”

Google already delivers ads along with search results on mobile phones and is testing AdSense for mobile so that mobile Web page operators can place ads on their sites.

The backers of the pop-up model say the big online players will come around to the idea. “I think they will become interested in what we do,” Mobile Posse’s Jackson said. “Typically innovation doesn’t happen at the big organizations.” Presumably, if a powerhouse like Google or AOL started backing the pop-up idea, a major operator might consider it, thus enabling Mobile Posse to deliver ads to a large number of mobile users.

Jackson points to AOL’s recent purchase of Third Screen. Third Screen had been around for several years before AOL bought it. The pop-up companies have only just been founded and as they grow and interest in mobile ads grows, they’ll attract notice, he said. “I think if you showed this to [former Yahoo CEO] Terry Semel or [AOL CEO] Randy Falco, I think they’d get interested,” he said.

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