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The news that Google is expanding its efforts to place ads on cell phone Web pages provides more evidence that the giants of desktop search advertising are the favorites in the race to extract revenue from the mobile Internet.
The search leader, which shared details about its AdSense for Mobile product this week, is flexing its muscle in a market where its rivals, Yahoo, Microsoft and AOL, are also jockeying for position. Yahoo has extended its desktop ad technology to the handset market, while Microsoft and AOL have both acquired startups.
All this may be enough to give nightmares to startups targeting the same revenue stream, yet the picture isn't all gloom and doom, according to one venture capitalist who's investing in mobile.
"In the U.S., the big desktop guys like Google and Yahoo will likely dominate mobile -- but they won't get everything," says Scott Raney, partner with the venture capital firm Redpoint Ventures. Raney says there will be opportunities for startups who create applications that take advantage of the unique capabilities of a phone, which is a much more personal device than a PC.
Mobile startups shouldn't "try to do 'MySpace for Mobile,' because MySpace will do that," Raney says. While his firm has placed a number of bets on startups whose software is designed to be sold or distributed as a service on a wireless carrier's network, Raney thinks that the best mobile investing opportunities from here on out will use a different model. Given the stranglehold that carriers have on the market for cell phone services, he's looking at companies whose applications can be marketed directly to consumers over the Web. "I'd rather see a viral, Web-based distribution model, rather than one that depends on the carriers," he says, adding that one Redpoint investment, Mig33, is gaining traction with overseas users especially, many of whom don't own a personal computer. Not everyone agrees with Raney, of course, especially execs whose startups are developing white-label platforms and services for carriers. What do you think?
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