Google sees mobile ad rates passing PC rates

Peter Chou, chief executive of HTC, holds the Google Nexus One phone his company will produce, running the Android platform, during a news conference at Google headquarters in Mountain View, California January 5, 2010 file photo.

SAN FRANCISCO (Reuters) - Google Inc said that it expects the rates that companies pay for search ads on mobile phones could surpass the rates of its existing PC-based ad business thanks to the growing popularity of powerful smartphones.

Google Engineering Vice President Vic Gundotra did not say when he expected the crossover in the so-called cost per click of its search ads to occur, during a webcast to analysts about the company's mobile business on Monday. But he said that mobile ad rates have increased "dramatically" in recent years.

And he noted that the number of Google searches on mobile phones have increased five-fold in the last two years.

"We hope and believe that there's even a chance that we could exceed desktop in the future," Gundotra said in reference to the cost per click of mobile ads.

He cited the availability of technology, such as the GPS data that can tell Google a phone user's physical whereabouts, as helping the company create more "relevant" online ads.

Google, the world's No.1 Internet search engine with $23.7 billion in 2009 revenue, has stepped up its mobile efforts as consumers increasingly access the Web from smartphones like Apple Inc's iPhone.

Google offers its own Android operating system that handset manufacturers like Motorola Inc and HTC use in their devices, and in January, Google began selling the Nexus One phone directly on its Web site.

In November, Google announced plans to acquire mobile advertising firm AdMob for $750 million, though the deal is currently facing regulatory review.

The mobile briefing comes as Google is in a standoff with China, the world's largest Internet market by users, over the future of its Internet search website in the country. Google has said it will no longer censor search results in China, a move that some analysts believe could mean the end of its Chinese language web site Google.cn.

Asked what the search situation might mean for Google's mobile plans in China, Google CFO Patrick Pichette said on the webcast on Monday that Android was an "open source" platform that's available to everybody and that the company thought China represented "another great market in which Android should flourish."

(Reporting by Alexei Oreskovic; Editing by Bernard Orr)