We know mobile advertising is effective. The question is: how effective? Recent studies suggest pretty solid results for both direct response and branding metrics, better, in fact than some online ads.

The lead article in yesterday’s eMarketer newsletter, for example, reported low ad recall but high response rates for location-based service ads, based on results of a recent Luth/Mobile Marketing Association study. On the other hand, the same survey indicated fairly high recall rates (and correspondingly lower response rates) for display ads seen while browsing or using applications, particularly among mobile users ages 18 to 34.

The 11th installment of InsightExpress’ Digital Consumer Portrait likewise indicates impressive branding and direct response metrics for mobile ad campaigns. In a podcast interview with MobileBeyond, Joy Cicman Liuzzo, InsightExpress’ senior director of marketing & mobile research, noted that banner ads on mobile websites generate the highest click-through rates and the lowest annoyance factor, although among “mobile intensives,” 68% of whom have smartphones, app banners (appearing in both the top and bottom of the application) also generated favorable results.

In an earlier interview with Mobile Marketer, Ms. Liuzzo discussed how, in some cases, particularly where brand favorability and purchase intent are concerned, mobile ads can be five-to-six times more effective than online ads. Overall, mobile display ads outperformed SMS and mobile video in every category other than aided awareness and brand favorability.

These findings add weight to the interviews eMarketer conducted last fall with executives from Razorfish, JumpTap and Admob, who indicated that response rates to their display campaigns were as much as 10 times as high as those on the desktop Web. Patrick Moorehead (then with Razorfish but now VP and director of mobile platforms at Draftfcb) told eMarketer he had seen click-through rates for sponsored SMS campaigns go as high as 10%. Note that full versions of these interviews are available to eMarketer Total Access clients only.

One of the main points of last fall’s “Mobile Marketing and Advertising: Change Is in the Air” report was that the lack of on-screen clutter (relative to the desktop) and the ability to reach people at their point of interest contribute to mobile ad effectiveness. Higher response rates and better branding metrics, in turn, help make the medium more appealing to advertisers. As indicated by studies cited here, these trends—along with the ongoing mobile app frenzy—continue to drive the market forward.

The key indicator in Yahoo!’s Q1 earnings call yesterday is not that the company’s profit rose from 8 cents to 22 cents per share, a 175% leap in earnings. While that news is certainly critical for the stock market, it’s far less so for the US online ad market.

When you dig into the numbers, several crucial elements say that Yahoo!’s results signify slow, but significant growth for US Internet advertising.

• Net US ad revenues of over $750 million represented a drop of only 4.5%, year-over-year. When you consider that all four quarters in 2009 delivered double-digit losses, this is a key improvement.
• Display advertising, which contributed 41.5% to Yahoo!’s total Q1 net US revenues, was up by 11.7%. That gain is due to continued expansion of brand advertising on the Web, which often looks for the scale and reach that the Yahoo! portal still provides.
• Paid search advertising, however—which made up 32.1% of the company’s net US ad revenues—fell by 19.8%. However, the light at the end of this dark tunnel was shed by the initial gains from the search deal with Microsoft, which netted Yahoo! $78 million worldwide in Q1.
• The Yahoo! ad network also showed a sharp turnaround, with its US net revenues up by 4.9% in Q1, compared with a 4.2% loss in the previous quarter. The spending increase from affiliate sites is one sign of an influx of ads beyond the Yahoo! portal, across the larger Web.

Overall, Yahoo!’s US net revenues in Q1 show the portal on track for eMarketer’s projection of minus 2.9% growth in 2010.

However, especially if more brand marketers look to further expand their reach online—to support their social media marketing efforts, for example—it’s still possible that Yahoo! could show positive revenue gains this year.

Google announced today it is buying leading mobile ad network AdMob for $750 million. That’s a hefty sum for a medium still considered to be emerging, although it’s still half of what Google paid for YouTube and pocket change for a company with as big a war chest as Google’s. Then again, Google tends to put its money where the market is (or, alternately, the market goes where Google puts its money, even if in the case of YouTube, ad dollars didn’t follow as quickly as Google would have liked).

Either way, Google’s acquisition sends a strong signal about the importance of mobile advertising in general and its growing centrality to the marketing mix. The move also indicates that as on the desktop, the twin bill of search and display will be the big driver of ad spending on mobile as well, a trend I identified in my recent “Mobile Advertising and Marketing: Change Is in the Air” report (full version of this report is available here to eMarketer Total Access subscribers only).

In the report, I predict that US mobile display spending will grow more than fivefold between 2009 and 2013 and mobile search will increase sevenfold. Looking at it another way, search and display represent 45% of US mobile ad spending in 2009, but by 2013, they’ll account for 72%. Key factors behind these big shifts are growing smartphone penetration and increased Web and application usage, as indicated in the following report excerpt:

A number of factors likewise point to steeper growth for display advertising. One is greater use of the mobile Web. eMarketer predicts that 36% of mobile subscribers will be accessing the Internet from their devices at least monthly by 2011, up from 26% in 2009. More surfing means more exposure to ads.

Another factor is increased usage of mobile applications, specifically free, ad-supported apps. All the available data suggests they will continue to become a more central facet of the mobile ecosystem, meaning that in-application display advertising will likewise grow in importance.

A third factor is the increasing array of attractive inventory options available to marketers. These include interstitials, takeovers and rich media interactive ads.

With respect to search, the logic behind predictions for its increasing primacy is clear enough: On the desktop Web, search ranks as one of the top online activities. As mobile devices mimic desktop PCs more in their capabilities, search will grow in importance on the mobile Web as well.

The AdMob acquisition comes at a time of renewed (or perhaps redoubled) marketer enthusiasm for mobile. Millennial Media, another leading mobile ad network, recently released the findings of its “state of the industry” study, conducted with online knowledge base DM2PRO, which indicated two key trends for 2010: more marketers planning on employing mobile advertising in the year ahead, and bigger budgets, especially among the brand marketers surveyed. All told, good news for the mobile ecosystem, especially for ad networks, which are now in play even more than before.