Mobile Advertising.....lots of noise, but how will it really work?

A flurry of Big Stories from Yahoo
and Google on mobile advertising this week.

Google CEO Eric Schmidt said yesterday that you may get a free phone in the next few years if you sign up for targeted Ads. He also said Google had no plans to directly give away phones itself, nor is he aware of any effort by partners such as phone makers or mobile operators like Vodafone to make such a radical move, he said.

However, there is more data from the other announcement - Yahoo and Vodafone have tied the knot on a deal too... to quote:

Under the deal, Yahoo will become Vodafone's exclusive display advertising partner in the United Kingdom, providing a variety of mobile advertising formats across Vodafone's content services. The companies plan to roll out the initiative in the United Kingdom in the first half of next year.

Customers who agree to accept targeted display ads will receive savings on certain Vodafone services, which may include the "Vodafone live!" portal, games, television and picture messaging services.

Cool, I love free...but...I live in the UK and I get a very nice free phone once a year already, without signing up for Ads, all I need is a contract above a certain value. Clearly not aimed at me then, so is it yet another play for the Pay As You Go "yoof" demographic who have little money but enough time to watch the ads?.

Also, this plan is to subsidise all those extra services rather than pure telephony (or are there plans to charge for the phones unless you take Ads?). I'm not sure that its going to be used by the kids for these media services either, because there are already ad-free devices around, called iPods et al.

Death before Inconvenience, as they say on the barricades of the New Media Revolution.

Or is this just the next draught of 3G snake oil to persuade the teenage scribblers in the City that Mobile is still a Growth Industry, not a Utility?

The one near-certain prediction is that Mobile Ad Avoidance technology will suddenly become very, very hot.

Actually, I am told (anecdotally of course) that the cost to acquire a new mobile customer is c 5 - 10 x greater than the cost to retain an existing one. As the UK is now oversold and they all seem to keep about the same relative share year on year its a zero sum game anyway, so maybe its a better plan to recruit fewer new customers, "re-engineer" the customer recruitment functions, pocket the recruitment fees and just focus on keeping those customers that one has? Imagine if much of that saved sales and marketing cost was handed back to the existing customers in the form of discounts, sans 'phone adverts.

A Utilitarian approach, methinks?

On a slightly different tack, Katie Fehrenbacher over at GigaOm thinks this is all interesting because Voda chose Yahoo over Google, pointing to Google's "interesting" reputation in dealmaking in the industry. (Yahoo also recruited a senior UK Mobile bod from Vodafone fairly recently, so that may also have had some bearing on this outcome.)

Big Issue for me though is that Vodafone is c 25% of the (very competitive) UK market, so will Yahoo do deals with all the others too, or will one go with Google, another with AOL etc? (O2 is allegedly flirting with MySpace too.)

And then, what happens if I like Google services more than Yahoo but own a Voda 'phone. Do I chuck Voda to go to Google, or chuck Google to stay with Voda? And if I'm on Bebo not MySpace? And, if I sometimes use Google and sometimes Yahoo.....

Ah, the joys of walled gardens...clearly they are built to last