Twitter Namo Buy Challenges Google and Facebook in Mobile App Ads

NEW YORK (TheStreet) -- Twitter's (TWTR) purchase of Namo Media may prove to be the bargain of the year.

Terms of the deal haven't been disclosed, but The Wall Street Journal cites an anonymous source saying it was worth less than $100 million, and TechCrunch reports its value is around $50 million.

So for a modest price Twitter gets a place at the biggest new revenue table in the online world, mobile apps, which also happens to be Google's (GOOG) biggest headache.

A recent study from eMarketer, reported in Advertising Age, tells the tale.

As users switch to mobile devices, they stop searching on browsers and start doing it inside apps. The shift is already underway and should continue to cut into desktop ad revenues.

The eMarketer study throws the mobile apps into a category called "other." This basically consists of a host of single-purpose apps such as the Yelp (YELP) restaurant app and Priceline's (PCLN) Kayak app. It's this shift in traffic that explains Facebook's (FB) decision to spend $19 billion to buy WhatsApp. Facebook is following traffic.

Yelp and Kayak are just examples, however. The traffic is going through hundreds of apps. And it's these owners of the small apps who are flocking to agencies such as Namo Media to seek "monetization."

The mobile threat to desktops is growing rapidly. According to eMarketer people already spend more than an hour more each day using digital media than watching TV, and mobile is driving the shift.

Flurry, which runs the AppCircle mobile ad network, estimates users now spend 86% of their mobile time inside apps and that this has been increasing.

Gaming apps are the big winners, but Facebook is now taking 17% of mobile users' time, which is why that stock has been on a roll lately. Still, Facebook is less the consolidator of the mobile app ad space than the leader in an increasingly fragmented field.

Generally ads follow usage. The Internet Advertising Bureau estimated $42.78 billion went into Internet advertising last year, up 17% from a year earlier. Mobile ads represented just $7.1 billion of that total, but that was more than double 2012's figure, a compound annual growth rate of 123% since 2010.

But the usage trend is not yet reflected in the flow of ad dollars, according to Flurry, which found that Google continues to get almost half of all mobile ad dollars despite having 18% of usage, while the "other" category served by companies such Namo are getting 65% of usage but just 33% of the revenue.

Twitter's purchase may thus be seen as an inexpensive way to get in front of this flood of money and to try and to consolidate the space, which like the mobile apps themselves are diffused among dozens of players. A study from AppFlood last year showed 50 strong players in the mobile ad network space, including AppFlood itself.

Unlike other mobile deals, this isn't a slam dunk. We know Facebook will get traffic through WhatsApp, while Twitter is now just one player among many seeking appmakers' loyalty. But this is a quiet deal that makes good sense.

At the time of publication the author owned shares of GOOG.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

>>Read More: Finish Line Is Running to Runners as a New Super Loyal Customer Base

>>Read More: Broadcom, Walgreen and DuPont Are 3 Buys Near 52-Week Highs

More from Opinion

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Apple Buys Tesla? Amazon Buys Sears? 3 Dream Mergers That Just Make Sense

Apple Buys Tesla? Amazon Buys Sears? 3 Dream Mergers That Just Make Sense

Amazon's Assault on Grocery Stores Will Have a Profound Impact on Many

Amazon's Assault on Grocery Stores Will Have a Profound Impact on Many

It's Dumb to Think There Aren't Already Monopolies in Big Tech

It's Dumb to Think There Aren't Already Monopolies in Big Tech

Google's EU Battles Are Hardly a Reason to Panic

Google's EU Battles Are Hardly a Reason to Panic