Mobile Innovation

First, Microsoft wins a mobile search and advertising deal that enables them to be the exclusive provider on Verizon Wireless’s entire mobile network, and now it is bulking up on inventory and ad-serving technologies. Quattro Wireless, a Waltham, Mass-based mobile ad network, has entered a strategic relationship with Microsoft Advertising to help advertisers and agencies plan, buy and execute mobile ads as part of their overall campaign.

Going forward, Quattro’s platform will be able to accept traffic from Microsoft Advertising’s Atlas Media Console buy-side ad serving technology. Quattro manages ad inventory for mobile sites, such as Hachette Filipacchi Media, Gawker Media, Cox Newspapers, Def Jam Music, and also gained recognition after working on Barack Obama’s presidential campaign. Now ads from Microsoft’s network will be able to be served across any publisher in Quattro’s network.

Steven Rosenblatt, Quattro’s VP of Advertising Sales: “We view our relationship with Microsoft as a watershed moment for the mobile advertising industry…We are seeing unprecedented demand for buying mobile advertising inventory and this critical solution will simplify the process for the advertisers and agencies and revolutionize how they buy, manage and measure their media campaigns.” From Microsoft’s view, Ryan Mackle, director of Display Sales Product Management for Microsoft Advertising, said: “Advertisers are eager to track and measure their digital advertising campaigns holistically, across the PC, mobile devices and other emerging technologies.”

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Microsoft has finalized a mutli-million deal with Verizon Wireless for the right to provide the country’s largest carrier with portal, local, Internet search and mobile advertising services. The announcement is expected to take place during Microsoft’s Steve Ballmer’s opening keynote at CES tonight, starting at 6:30 p.m., although Verizon spilled the beans earlier at an investor conference. The search deal was hard fought and lasted nearly two years, in which all three Internet giants Yahoo, Google and Microsoft were first involved, and then more recently, only Google and Microsoft were left. During the negotiations, the WSJ reported that the deal size ranged between $550 and $650 million, making it a significant coup for the emerging mobile search and advertising industry that is just getting off its feet.

The decision by Verizon Wireless is important for a number of reasons. First off, it gives Microsoft a foot in the door, which had been rapidly closing—the other U.S. carriers were already locked up. If the deal went to Google, it would have owned half the market between Verizon and Sprint. If it had gone to Yahoo, it would have been a landslide victory for the Sunnydale company, which already works with AT&T and T-Mobile USA. With Microsoft also in the game, the mobile search industry—especially in the U.S.—is still completely up in the air.

The second thing to point out is the vote of confidence on Microsoft’s behalf that they believe the mobile search and advertising market could be of significant value over a five year period, which is the length of their contract with Verizon. Perhaps it is just buying marketshare, but Medio Systems’ CEO Brian Lent, who provides white-label search services, and to Verizon Wireless specifically, believes differently. “I would suspect that it would be recoupable. Why would anyone would bid that amount?...I think these are not completely unreasonable numbers, given the size of the space. My industry expertise says that over a period of five-ish year period, one should be able to make those types of revenues.”

—Some more details: The deal will last for five years and the first devices are supposed to launch in the first half. Searches will integrate voice commands and location-based services, and results will include maps, directions, traffic information, local business information; movie show times, gas prices and weather. In addition, users will be able to search for full-track songs, videos and games. Microsoft’s Live Search will be available on a device’s home screen, by downloading an app. The company did not say what the financial terms of the agreement were, or whether it also included a side deal in which Verizon committed to selling more Windows Mobile devices.

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Nokia has acquired Plazes, a location-based social networking service, as part of its continuing effort to work out what kind of business it wants to be in.

Plazes is a social-networking-service for anyone who wants to share where they are as well as what they're doing. Niklas Savander, Head of Nokia Services & Software said in a statement: "In addition to the key assets, through this acquisition Nokia will bring on a visionary team with an advanced understanding of social-activity services, as well as the technical ability to further develop this area."

The Finnish giant isn't saying how much it's paying for Plazes.

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As in all other telecommunications sectors, there will be further consolidation in the power equipment space. A prime example is Eltek Energy’s recent acquisition of Valere Power. While private equity firms are always in the mix, they should think twice before getting involved with any major vendor in this space.

While it is hard to anticipate the reaction of a large carrier, to a private equity company buying out a big player, such as the Tyco Power division of Tyco Electronics, it would be amazing if an AT&T took too kindly to such a situation. Even if the management of the power company were still left to run their own show, there would be doubts as to whether quality, customer service, and most importantly – whether new product development would be maintained.

While a large installed base in a lot of industries can be a valuable cash cow, in telecom, the continued generation of money is highly dependent on the ability to spin new products off of it. Owning such an embedded footprint is of no use to a player who is not going to invest in technology. At some point in time, supplying those legacy products actually becomes very expensive. The only other viable option for equity players in this space is to split up the supplier into two or more divisions (such as the power systems and components groups) and sell those off given the belief that the values would be higher than the sum of the parts.

While there have been private entity equity transactions involving Bell Canada, Alltel and Avaya, there has not been any purchases of companies in the critical portions of the public network infrastructure. The lack of activity there is probably not a coincidence. Especially in the power business, in quoting for any supply, guaranteed delivery for at least seven years is required. It is a necessity to retain experienced people from design engineering to the final packaging of the system. Major customers will not appreciate the their perception of a fly by night operator in this space.

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Fast Search & Transfer, the Norway-based B2B search firm, has acquired US-based AgentArts for an undisclosed amount. AgentArts, based in San Francisco, has a personalization and recommendation engine which has been used on the mobile side, and has clients including Infospace Mobile and Telstra Big Pond. The company was started in Australia in 1999, but moved to U.S.

AgentArts' technology provides the ability to understand online and mobile user habits and to recommend content and promotions based on user patterns, as well as enabling social recommendation. The capabilities will be added to Fast’s search services.

More details in release here.

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o2, the UK mobile telecommunications unit of Spanish company Telefonica, Monday said it has been engaged in the past in talks to buy The Link retail chain.

But an O2 spokesman declined to comment on a press report that said it was close to acquiring the chain from DSG International.

"There's been discussions in the past over the situation at The Link," a London-based spokesman for O2 said. He declined to provide further detail.

Earlier Monday a report in U.K. newspaper The Guardian, which didn't cite its sources, said DSG, owner of outlets such as Currys, Dixons and PC World, was on the verge of selling The Link to O2.

DSG will unveil full-year financial results this week, and details of the deal with O2 could be revealed at that time, The Guardian said.

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