VentureBeat

Updated

(Update: Separately, Nuance has agreed to buy VoiceSignal Technologies for $293 million, signaling further consolidation in the mobile voice search industry after Tellme’s acquisition by Microsoft.)

Time Warner’s AOL has gobbled up Boston-based mobile advertising startup Third Screen Media, signaling the beginning of consolidation in the industry.

Third Screen is just one of many start-ups founded in recent years, and intense competition between the players has caused some disturbing behavior, at Millennial Media for example. Other players include AdMob, Enpocket, Rhythm NewMedia and Ad Infuse. Microsoft bought ScreenTonic SA, a Paris-based mobile advertising firm, earlier this year.

The AOL deal was expected. A few months ago, the WSJ said Third Screen would likely be bought by AOL for $80 million. (Update: Dan Primack says the price was more like $110 million, but this isn’t confirmed)

The deal is a good one for Third Screen. It raised about $8 million in venture capital funding over the past four years, with the most recent $5 million coming last year from TD Capital Ventures, Blue Chip Venture Company and angels.

Wireless advertising in the U.S. will rocket to $4.7 billion in 2011 from $221 million last year, predicts eMarketer. Globally, the market will reach $11.3 billion in that time-frame, the group says. (Remember to take these figures with a grain of salt. You’ll recall how crazy the forecasts were during the last boom. The unassailable point, however, is that mobile phone use is growing quickly and that many more ads are going to be served).

Serving ads on mobile phones is a lucrative business, forcing companies with a stake in the game to engage in aggressive marketing — perhaps too aggressive.

Millennial Media, one of a handful of Young Turks targeting this market, is a case in point. The company, which recently raised $6.3 million, has just launched a marketplace for advertisers and publishers that has a fake ad counter on its home page.

In its fervor to stay up with aggressive players like Admob and Third Screen Media, the company’s marketplace, called Decktrade, sports a counter (go to page here; see screenshot below) that gives the impression it is scrolling all the new ads being bid on within the marketplace. The counter (go to the page here; screenshot below) shows the bids, the click-through rate (CTR) and estimated cost per thousand impressions (CPM). The counter is moving rapidly.

You know it is fake because if you disconnect your computer from the Internet, the counter keeps ticking. A tipster pointed this out to us, after he’d done some analysis. The counter’s data is all hard-coded (download code as text); there’s only one phone for Turkey, the Nokia 6680, for example. What is odd, is how elaborate the scheme is. CPM values are set to be $8.5 + a randomly generated number, keeping ads at a nice high rate — all the better to get publishers eager to join. This is sketchy. If these sorts of randomized counters are being condoned by the industry and its insiders, we suggest people start calling companies on this; it’s misleading. We’ve requested comment from the company’s public relations firm, but have yet to hear back.

This sort of thing was bound to happen. The temptation to create the impression you are the market leader is great. EBay and Google showed the biggest marketplace wins. Mobile ad spending was only $871 million last year, but is expected to reach multi-billions in coming years. And the counter idea is a blatant copy of competitor Admob’s impressive counter. Three weeks ago, Admob raised $15 million from high-profile Silicon Valley investors Sequoia Capital and Accel Partners. Even then, we noted that companies appear to be getting carried away with their stats, and wondered aloud whether anyone is holding them accountable. Third Screen Media, for example, said on its Web site it served 175 million ads a month, after earlier telling the WSJ that it showed 350 million a month.

Here’s a copy of Millennial Media’s announcement about Decktrade. Millennial’s backing comes from Bessemer Venture Partners, Columbia Capital and Acta Wireless. The company is headed by Paul Palmieri, formerly with Verizon Wireless and Advertising.com.

(Update: Apologies for the earlier version. A switch in servers and move to a new version of Wordpress recently caused a glitch, causing a draft to be published instead of the final version.)

(Update: This morning, the company has changed its homepage, freezing the counter and saying it is only for “marketplace simulation.”)

updated

AdMob, which says it has the largest ad platform for mobile phones, has raised $15 million in a second round of financing led by Silicon Valley’s venture firm Accel Partners, and including existing investor Sequoia Capital.

AdMob, of San Mateo, Calif., has served more than 1.6 billion ads in less than a year, and says that is more than any other player, including Third Screen Media, a Boston-based competitor that AOL is reportedly in talks to acquire (see WSJ).

But it isn’t clear whether AdMob is king. It says it served more than 600 million ads in Feb and March combined, an impressive acceleration from the 1 billion ads during the entire second half of last year. However, Third Screen says it shows about 350 million ads every month (we haven’t confirmed this, but this is what it tells the WSJ), suggesting it may be bigger. Third Screen has also announced major customers, from Fox News to Ford Motor Co. AdMob, by contrast, serves smaller companies.

[Update: We wonder if anyone is holding the companies to the fire on their stats. We've just seen a reference at Third Screen's own site to a mere 175 million impressions served.]

The mobile ad trend is just taking off. AdMob has 1200 publishers using it, across 160 countries. Despite this, it isn’t profitable yet. AdMobs lets advertisers target things like geography, behavior, demographics and handset manufacturer.

Other mobile ad start-ups include Ad Infuse, Enpocket, Millennial Media and Rhythm NewMedia. Google and Yahoo, the ad giants of Silicon Valley, serve ads alongside their mobile search ads, but have yet to roll out more general mobile ads.