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There has been a lot of buzz among online advertising companies about mobile ads being delivered to smartphones.  Google's Chief Executive, Eric Schmidt has mentioned about Google becoming a "mobile first" company. Furthermore, Google's move with its acquisition of Admob, and Apple's recent announcement of its iAd Mobile Advertising platform demonstrates that mobile advertising continues to gain increased attention.

However, there are issues with advertising on mobile phones - the screens are too small even on today's smart phones. This makes it difficult to deliver a compelling advertising user experience to consumers. Also, when users click on the the traditional banner ads, it redirects them to a new browser window. So the user experience on the mobile phone is compromised.

Although spending on mobile advertising is growing, it is still a tiny portion of online advertising.  Up until now, mobile advertising has consisted mainly of small banner ads tucked into the corner of a mobile web page or text-message ads that often resembled spam.  According to market research firm, eMarketer, mobile advertising accounted for $416 million in spending in 2009, compared with $22.4 billion in overall online advertising.

The new Apple's iAd platform is looking to change the face and quality of advertising.  Apple's CEO believes there is a flaw of both standard online advertising and TV advertising - the combination of interaction and emotion. The key is that ads will keep users within an app, rather than redirecting users to a browser window.

When you click on an iAd advertisement, it will take up the screen using HTML5. Once it is open, you can explore the ad.  Apple demonstrated an advertisement for Toy Story 3, where it showed that you could not only get information about the movie, but you could also watch trailers, play games and do much more all within the same application from where you launched the ad.

Many technologists and analysts are putting a lot of bets on the standard HTML5 technology for enabling the creation of richer content experiences.  Furthermore, according to WSJ, several analyts are projecting a positive outlook for Apple's iAd platform as they believe that it will provide a significant source of revenue for Apple. Piper Jaffray believes that in-application advertising could reach roughly $700m by 2013, with about 70% going to ads within the iPhone platform.  But, can it really become a multi-billion dollar business ?