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Google Display Ads in Your Pocket

With the launch of display ads for mobile Web sites, Google (NASDAQ: GOOG) joins Yahoo, AOL, MSN and a host of niche players scrambling toward the next frontier in interactive advertising.

Google has already been selling mobile text ads through its cost-per-click AdSense program, which it is now expanding to offer contextually targeted graphical banners, formatted to fit within the constraints of the mobile browser.

"Image ads are really attractive to brand advertisers," Sanjay Agarwal, a mobile ad engineer with Google, said in a video describing the product. "We want to give them the flexibility of either choosing a text format or an image format."

With more carriers moving to flat-rate data plans and new smartphones able to perform more functions of the traditional computer, Google has lately been evangelizing the prospects for the mobile Web.

Today's market is still nascent, but recent research has suggested that mobile browser deployment will grow dramatically over the next five years, even if consumer usage of the new capabilities remains uncertain.

Nevertheless, Apple's (NASDAQ: AAPL) iPhone has shown that with a decent screen size and intuitive navigation, U.S. consumers will use their phones for activities other than talk and text messaging. Google is hoping that efforts such as its own Android initiative will lead to a new generation of handheld devices that help the mobile Web live up to its promise.

Mobile advertising in particular holds a great deal of promise, at least according to industry watchers.

JupiterResearch analyst Neal Strother concurs with Google's claim that mobile display ads have a higher clickthrough rate than Web display ads. A clickthrough rate of 5 percent to 6 percent for mobile ads is common, Strother said, whereas a 3 percent clickthough rate for online display ads is very high.

Part of that success for mobile ads could relate to the novelty of the format, Strother suggested. As people grow more accustomed to seeing ads on mobile Web pages, clickthroughs will decline, the argument goes.

Just as the size of the consumer segment reachable through mobile ads is small, but growing, so too is the proportion of advertisers leveraging the medium.

Over the past year, Jupiter estimates that fewer than one-fifth of all companies created any type of mobile advertising. The firm projects that in the next year, 34 percent will be advertising on mobile devices, but of those, more will engage in some kind of texting campaign than search or display advertising.

While "some of the bigger brands have made some serious commitments to mobile," Strather said that the tendency among advertisers is to make mobile a microcosm of an aggregate digital budget, or to treat mobile advertising as an experimental expense.

"Very few companies on the advertising side have made mobile a standalone item on a line-item budget," Strother told InternetNews.com.

For advertisers, the mechanics of Google's display ads for mobile work in a similar fashion as banner ads on the Web, with a few tweaks for the mobile medium. Advertisers submit their image ads to Google, which will then place them on publishers who participate in Google's mobile content ad network and have optimized their sites for the mobile browser.

Google will offer advertisers four ad sizes from which to choose, none with a file size larger than 3 kilobytes. The company is trying to keep file sizes small, so that the ads do not unduly slow the load times of mobile Web pages, Agarwal said. Slow speeds have been a common complaint about the experience of browsing the Web on a mobile device.

Google also said it will only show one display ad per page.