With dozens of smartphones spanning multiple manufacturers and all four major U.S. operator networks, it was inevitable that Android sales would surpass the iPhone sooner or later, and that time is now. Android represented 28 percent of first quarter smartphone unit sales in the U.S.–behind only Research In Motion’s BlackBerry (36 percent) and seven percentage points ahead of iPhone–according to new data issued by market research firm NPD Group, which credits carrier distribution and promotion as catalysts behind the Google operating system’s growth. “In order to compete with the iPhone, Verizon Wireless has expanded its buy-one-get-one offer beyond RIM devices to now include all of their smartphones,” said NPD executive director of industry analysis Ross Rubin in a prepared statement.

Android’s sales surge caps off an impressive quarter for the OS–in mid-April, Google said application inventory in its Android Market storefront increased 70 percent quarter-over-quarter, and according to tracking service AndroLib, there are now more than 50,000 Android applications in all, up from about 40,000 roughly a month ago. Of course, Android Market still lags far behind Apple’s App Store, which boasts more than 200,000 applications for the iPhone and iPod touch according to Apple’s latest count.

But Google is reportedly stepping up its efforts to court iPhone developers to write for Android, reaching out directly to programmers to convince them to expand their creative horizons. Last month, The New York Times’ David Pogue received a message from iPhone app developer Texts From Last Night, which was recently contacted by a Google representative claiming to write on behalf of the digital services giant’s Android Advocacy Group. “He basically said that he wanted to open a line of communication with me in case I chose to port the app to Android, and he offered to ship me a free Nexus One to play around with… Contrast with Apple’s approach: it took us about three months of resubmitting our app to Apple before they stopped rejecting it for inappropriate content. And even now (after we peaked at the No. 7 paid app), we still have no relationship with anyone there. Huge difference in approaches between the two companies.”

And yet for all the developers who’ve run afoul of Apple’s draconian App Store approval policies, defections from the iPhone platform remain relatively few and far between. Chalk it up to the bottom line: Bernstein Research analyst Toni Sacconaghi estimates that iPhone developers presently generate $1 billion to $1.8 billion in annual App Store sales. That number stands to get a whole lot bigger: Sacconaghi forecasts Apple’s forthcoming iAd mobile advertising initiative could yield developer revenues reaching $825 million this year, an annual increase between 40 percent and 80 percent. (TechCrunch reports the iAd effort will incorporate the new ViP [Verification of iTunes Purchases] Program for App Downloads, a real-time conversion tracking system that will tie the ad directly into purchasing data from iTunes–according to an email pitch sent to select developers by mobile advertising network Quattro Wireless, acquired by Apple earlier this year, iAd will boast features that “cannot be duplicated by any of [Apple's] competitors.”)

Sacconaghi’s estimates are even more astounding given that estimates for total U.S. spending on mobile advertising in 2009 range from $184 million to $416 million. But iAd is not like past mobile advertising programs–The Wall Street Journal reports Apple is planning to charge marketers as much as $10 million for inclusion in the first wave of iAd promotions when the service goes live on iPhone and iPod touch devices in June. By comparison, ad execs say they typically pay between $100,000 and $200,000 for similar mobile deals. Sacconaghi anticipates Apple will collect about $815 million from iAd this year–$550 million from apps and $265 million from media providers like publishers and television networks–which the analyst contends would afford the company the latitude to subsidize the iPhone moving forward. If that’s true, then all bets are off. Android sales may have edged past iPhone for now, but iAd–and the new opportunities it portends for Apple and developers alike–could shift the balance of power once again. -Jason

Mobile advertising network AdMob announced an expansion of its AdWhirl program enabling developers to leverage an unlimited number of ad networks in their applications. According to AdMob, developers could previously add just one network of their choice in addition to AdWhirl’s default support for AdMob, JumpTap, MDotM, Millennial Media and Quattro Wireless for iPhone apps and AdMob and Quattro for Android apps. AdMob notes that the upgraded AdWhirl also includes full support for Apple’s forthcoming iAd mobile ad network.

In conjunction with the upgrade, AdMob updated its AdWhirl House Ads functionality, promising developers tools to more effectively manage ads in their iPhone and Android apps. Developers can employ House Ads to cross-promote their apps and to serve ad campaigns they sell directly to advertisers–AdMob adds that the AdWhirl UI is now more intuitive as well, making it easier to manage ad inventory spanning multiple apps.

AdMob acquired the AdWhirl aggregator service in August 2009. Late last year, AdMob introduced open-source versions of the AdWhirl iPhone software development kit and AdWhirl Server, promising developers increased transparency and flexibility in mobile ad network mediation. The firm reports there are now over 1,700 apps actively using AdWhirl (including more than 175 Android apps), up from 1,300 apps four months ago. Daily ad requests have increased from 40 million to more than 100 million since AdWhirl went open source.

For more on the AdWhirl upgrade:
- read this AdMob blog entry

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Google snaps up AdMob for $750 million

Consumers worldwide will download about 4.51 billion mobile applications in 2010 according to a new forecast issued by research firm Gartner, increasing from 2.51 billion downloads last year–that translates to app store revenues close to $6.8 billion, up from $4.2 billion in 2009. Gartner anticipates that free applications will represent 82 percent of app store downloads in 2010, a number that will grow to 87 percent of downloads in 2013 even as expected revenues jump to $29.5 billion: Gartner estimates corresponding mobile advertising revenues will leap from $600 million per year in 2009 to about $7 billion in 2013 as developers embrace a host of mechanisms to subsidize their efforts. Gartner contends that developers have little choice but to pin their hopes on mobile advertising, arguing that as smartphones continue to come down in price, the new wave of mass-market users will be reluctant to pay for mobile software. “Growth in smartphone sales will not necessarily mean that consumers will spend more money, but it will widen the addressable market for an offering that will be advertising-funded,” Gartner research director Stephanie Baghdassarian said in a prepared statement. “The value chain of the application stores will evolve as rules are set and broken in an attempt to find the most profitable business model for all parties involved.”

But some experts question whether existing mobile advertising concepts and approaches are on the right track. The doubters are said to include Apple CEO Steve Jobs, who believes “mobile ads suck” according to BusinessWeek, citing a source familiar with Jobs’ thinking. So Apple reportedly is exploring new approaches to mobile advertising in the wake of its recent agreement to acquire mobile ad network Quattro Wireless, plotting ways to exploit consumer data to better serve mobile advertisements. Insiders say Apple’s efforts seek to make ads more relevant to consumers, factoring into the equation data like purchases and downloads from iTunes and the App Store as well as geo-location. “[Apple] could also use the iPhone’s capabilities in creative ways–say, having someone shake the device to win a rebate the same way they do to roll dice in games,” the report notes.

Despite Gartner’s app store revenue projections for the year ahead, more than half of developers are pessimistic about their immediate financial outlook. A new Mobile Entertainment Forum study examining the state of the U.S. mobile content value chain reports that among 100 respondents from 80 companies spanning across the mobile entertainment landscape, 42 percent said they expect at least a 20 percent revenue increase in 2009, and 58 percent anticipate comparable revenue growth in 2010–app developers are less optimistic than any other industry segment the MEF polled, with only 48 percent believing revenues will increase 20 percent or more this year. MEF Americas chairman Jim Beddows theorizes developers have serious doubts about the longterm viability of current marketplace conditions: “The explosion of app stores and applications continues to feed consumer demand, but it’s still not proven whether there’s a sustainable revenue model,” he said in an interview with FierceDeveloper. Nor is it proven that mobile advertising is the solution to those concerns, but if not, then what is? -Jason

Mobile advertising network AdMob–acquired by Google for $750 million in early November–announced the introduction of a new open-source SDK enabling developers to integrate ads into their Palm webOS applications. Available on Google Code and aligned with Palm’s announced app distribution strategy via MIT license, the beta SDK–AdMob’s first advertising unit for webOS apps–supports CPC text ads and CPM banner ads. AdMob notes it is already working with developers including Delicious Morsel and Byte Sequencing to incorporate the new Palm unit into their software.

For more on AdMob’s webOS unit:
- read this Life and Times of AdMob blog entry

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