Google just announced that it is focusing all of its mobile advertising on smartphones – skipping the 80% of the mobile phone market. As of today, only 20% of mobile phones are smartphones, but this doesn’t seem to phase the search giant, as it recently announced the launch of a new ad exchange.
Acording to the Kelsey Group, a market research firm, the mobile advertising market will balloon from $160 million dollars in 2008 to over $3.1 billion in 2013. According to Citi’s Mark Mahaney, mobile advertising revenue derived from mobile searches will grow from 24% to 73% in the same time period. Furthermore, Verizon’s CEO says that 40% of all of its new phone sales are from smart phones – helping to substantiate google’s decision to focus on mobile advertising. 
If these reports are correct – then Google is on the right side of the bet : smartphones are representing a growing percentage of mobile phones out there, and they need to be the ones capturing the revenue from search advertising on mobile phones.
There’s a potential problem looming on the horizon for Google though – and that’s smartphone apps. If applications are able to succinctly answer any problems a phone user encounters, then the need to “google” something may disappear. One example of this is Cha-Cha, the free 411 service. If you text 242-242 from your cell, you can ask any question on any topic,a nd receive an answer within five minutes. You can ask about the latest happiness index facebook is working on, or simply where the nearest mcdonalds to your location is, and Cha Cha will find the answer for you. If you can find this information through Cha-Cha, then you will no longer use traditional web searches on google from your phone….
As apps become the dominant way for individuals to interact, and find information they need, then their reliance on web searches from their phones diminishes greatly. Google had better get a handle on this market – and fast – and their Android is a good way to gauge how the app market is evolving.