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Vodafone and Yahoo! link up for mobile ad agreement

Vodafone has signed an exclusive mobile phone advertising deal with Yahoo!, as the Internet giant's chief executive said that the potential for online advertising is much higher than currently predicted with the biggest growth still to come.

The news of the Vodafone and Yahoo! deal was revealed in the mobile phone firm's first-half trading figures, in which the firm has made a pre-tax loss of £3.3bn, compared with profits of £3.9bn a year ago.

The deal with Yahoo! will give UK customers the chance to receive ads on their phone in return for discounts. These will vary depending on whether the customer accepts the text message ads, display ads or full streaming video ads. Yahoo! will sell the advertising through its online ad division and provide the technology to supply them to mobiles.

The deal coincided with Terry Semel, the chief executive of Yahoo!, speaking at the IAB's Engage annual conference and telling delegates that not only was online ad being understated, but that the biggest growth in the industry is still to come.

The Yahoo! chief said that with the inclusion of video, mobile, social media and ipTV, online advertising will continue to record healthy increases over the next few years, adding that "most of the growth is still ahead".

Semel urged advertisers to embrace social media, saying: "I know we talk about Web 2.0, but it's about people to people; a lot more sharing... The user is becoming the producer and they will become new superstars of news... people can become publishers".

He added that in the next year or two, video will become a key driver in the growth of Internet advertising, adding that "video will become a major factor on the Internet, it will become ever present".

Regarding mobile content and advertising, he told the audience to no longer think of the PC as the centre, and that "media consumption is now about connecting all devices", underlining his firm's deal with Vodafone.

He said that "advertising on mobile phones will definitely happen".

Vodafone's revenues increased by 4% to £15.6bn in the six months to September 30, compared with the same period last year. However, the firm made a pre-tax loss of £3.3bn.

The European market suffered, with declining revenues in the UK, Germany and Italy. Vodafone made a £14.9bn loss in the 12 months to April 2006, after it said some of its assets were worth less than it previously believed.

Arun Sarin, Vodafone chief executive, was optimistic and said the firm was "on track" for the full year.

He said: "European markets are very competitive but we are doing very well in Spain while emerging markets and the US are growing strongly. So we're feeling good about the full year."

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