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Apple to Acquire Mobile-Ad Network Quattro Wireless

Signals IPhone Maker's First Big Move Into Advertising Sales

By Published on .

SAN FRANCISCO (AdAge.com) -- Apple Computer is jumping on the mobile-advertising bandwagon and will acquire mobile ad network Quattro Wireless in a deal valued between $250 million to $275 million, according to industry executives who have been briefed by bankers.

Joining the advertising fray is a striking departure for a company that has honed its reputation on creating a superior and seamless user experience, first by the PC and now the smartphone. Yet, given Apple's success with the iPhone App Store -- a repository of more than 100,000 free and paid mobile applications -- it's logical that the Cupertino, Calif.-based company would want to extend its mobile efforts by providing a seamless path for its app developers to cash in on the ad dollars while helping itself to a share of that revenue.

"Apple has a huge app ecosystem and it's very invested in mobile," said mobile analyst Greg Sterling. "It wants to give its developers monetization capabilities while taking a cut of it too."

Quattro did not respond to calls and e-mails. Apple also did not respond to e-mail. AllThingsD.com first posted the Apple news this evening.

Competes with Google
The acquisition comes nearly two months after Google gobbled up leading mobile-ad network AdMob in a $750 million stock deal.

"Apple doesn't want to cede the apps space to Google," said one mobile ad executive who asked not to be named. "And search on the iPhone and smartphones is more app based and Apple needs to own that."

Apple's latest play heats up the already contentious relationship between the two companies. Google is playing on Apple's turf as internet search giant is looking to deliver an integrated software and hardware experience via its own upcoming smartphone, the widely hyped Nexus One, while Apple is flirting with Google's domain, advertising. The timing of Apple's announcement comes as Google today was set to announce the Nexus One's release and suggests that although the iPhone has six times more apps than Google's Android mobile platform, the latter is gaining steam and mind-share and Apple wants to take measures to make sure its developers don't stray.

The acquisition may also be Apple's attempt to cement its place among publishers as it prepares to make further inroads into the mobile platform; it's widely rumored to be readying a wirelessly connected touch-screen multimedia tablet called iSlate, with which users could read magazines, newspapers and books, watch movies and TV, play games and surf the web. The company has reportedly been negotiating with magazine and book publishers to distribute their content; meanwhile, some publishers, like Time Inc., have been readying prototypes of its print magazines for tablets.

Apple's tablet ambitions would seem to fit with Quattro's niche; the ad network has exclusive relationships with blue-chip magazine publishers such as Hachette and got its start by helping the likes of the National Football League and CBS News build their mobile sites.

Industry execs say Quattro's price tag was fair given that its app traffic doesn't come close to AdMob's and its annual revenue is estimated to be north of $20 million, compared to AdMob's $35 million to $40 million haul (AdMob has global operations while Quattro is primarily U.S.-focused). Moreover, valuation demands are lower for Quattro, as it has raised about $28 million in funding to date, compared to AdMob's $47 million. Industry execs also say AdMob was able to command top dollar because of the competitive bidding; Apple was also eyeing that ad network.

Surprise news
The news caught some by surprise as chatter has been swirling for weeks that Apple would snap up in-app ad exchange Mobclix. Either way, the latest acquisition in the mobile-ad space portends a mobile land grab.

"We're going into over-drive with mobile," said Mr. Sterling, the mobile analyst.

For Alec Andronikov, CEO of MoVoxx, a location-based SMS and in-app mobile ad network, "any M&A activity that could happen post-AdMob-Google would signify a true beginning of a second round of 'musical chairs' in mobile acquisitions post-2007, as big digital players begin to fight for domination in the mobile interactive advertising space."

Mr. Andronikov expects more consolidation to occur in the fragmented mobile ad space, but the interesting question isn't who is next in line to get snapped up but which digital giant will make the move.

AOL will likely try to get its online business in order before it focuses on mobile. Microsoft, with its 100-people strong mobile ad team, might encounter some redundancy in bringing an ad network into the fold. AT&T could be a dark horse, given that it's not seeing a single penny of the app traffic that's clogging its network.

"This concludes the app wars," said one ad exec. "Next comes the broader mobile ad plays."

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