"For us, this is a very strategic area for the company, where we invest a lot of people and dollars," said Gary Roshak, Yahoo's vice-president for mobile advertisers and publishers.
With the market not growing as quickly as expected, "it causes a problem for the many startups because they'll need to make their cash last longer," said Baker. As such, industry insiders predict that many of them may be snapped on the cheap in a year or two.
A Google boost?
Many of the startups reject this glum outlook, pointing to new opportunities such as Verizon Wireless' plan to open its network to more devices and services as a potential kickstart for the mobile ad business.
It took CellySpace.com about 1½ years to get U.S. wireless carriers to allow its subscribers to receive text messages bearing coupons and ringtones created with the Web site's do-it-yourself software for small businesses. If wireless networks become more open, such approvals may take less time, said Rich Eicher, president of Skycore, the company that launched CellySpace.
Another possible boost may be the emergence of touch-screen devices like the iPhone, which make it easier to click on an ad, as well as phones based on Google's Android, a new wireless software platform designed to enable easier and cheaper development of mobile applications.
"Clearly, more openness is going to open up more opportunities," said Paul Palmieri, CEO of Millennial Media, which delivers mobile ads for Ford (F) and Procter & Gamble (PG).
It's too early, though, to say whether networks and phones will become open enough to facilitate a mobile ad boom any time soon.
"Right now, what we are really in is the foundation stage, trying to determine how to move into mobile advertising," said Phil Holden, a director of online services at Microsoft.
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