Yahoo! after the bell 10-4-06: Up on plans for mobile phone ads

Finally a day of reprieve for Yahoo!. Yahoo! Inc. (NASDAQ: YHOO) shares gained 37 cents today, or 1.49% to close at $25.21. Most likely due to the company's plans for mobile phones advertisement.

Yahoo! started a beta advertising program today. The program would show keyword-based ads on mobile phones in the U.S using the Mobile Web service. Yahoo! has been running such ads in Japan for the past two years and in the U.K. for the past year. Once these have started producing "interesting" revenue, Yahoo! decided to begin the service in the U.S. as well.

The Mobile Web service allows users to perform searches on mobile phones and handhelds. Yahoo!, starting with some 100 advertisers, would plug the ads on the phones and charge the advertisers when users click on their ads. The ad rates are comparable to online advertising, but the market for mobile advertising is still young and rates could change. Interest is indeed growing due to devices becoming more robust and the mobile web service more prevalent among consumers.

Just thinking about it, almost everyone I know has a cell phone. If web browsing, or web searches on mobile phones becomes second nature to making a phone call, then the potential of this yet untapped market is indeed great. Advertisers would want to be there, and Yahoo! could give them the means.

Not only that, but Yahoo! has found that mobile users have been receptive to the ads as they are relevant and actually add to the overall experience. By leading the market as Google still hasn't rolled out a beta program, Yahoo! could most likely translate this into a source of revenue.

The idea is simple. When a consumer clicks on an ad, he or she would be directed to the advertisers' site or to a Yahoo! landing page, which would provide a clickable phone number to be automatically dialed. In the future, advertisers will also pay Yahoo! for the phone call.