There continue to be conflicting views as to whether iPhone developers actually make money from ads on the iPhone. One issue is that free app developers who advertise in games end up paying on a CPC basis, in which the click takes the visitor to the App Store. But often times the actual download doesn’t take place, so the developer is left paying for clicks that don’t produce conversions, says mobile game advertising network Greystripe. Now the network is changing its ad network economics around to help developers mitigate this issue.

Greystripe is offering a $0.99 per download program available today to guarantee iPhone application developers downloads of their free apps. Of course, this comes with a catch. Greystripe is offering download program to publishers who spend a minimum of $10,000 and is being offered on a limited basis to the first 200 developers who apply. The first 100 qualifying developers who email techcrunch@greystripe.com will gain instant access to the program.

When Google CEO Eric Schmidt mentioned a few weeks ago that the M&A spigot is now back on at the search giant, he wasn’t talking about a trickle. Today’s announced deal to by mobile ad startup AdMob for $750 million is Google’s largest acquisition since its $3.1 billion purchase of DoubleClick in March, 2008, and its third-largest ever after the $1.65 billion YouTube acquisition in 2006.

Why such a big bet? Because Google is gunning hard to dominate mobile Web advertising and AdMob has an early foothold in the display side. By focusing on the needs of mobile app developers, AdMob has “built what is approaching a $100 million business in three years,” says Jim Goetz, the partner at Sequoia Capital who sits on AdMob’s board, referring to the annualized revenue run-rate of the company. Since AdMob splits its revenues 60/40 with publishers, that implies AdMob is on course to see $40 million of that $100 million gross. The company is also cash-flow positive, with 140 employees.

Google has just announced that it has acquired AdMob, the mobile ad platform that has been especially popular on the iPhone, for $750 million. This is a big win for the company’s early investors, which include Sequoia Capital and Accel Partners (this is a huge day for Accel — they were also investors in Playfish, which was just acquired by EA. More recent investors include DFJ and Northgate Capital.

AdMob founder Omar Hamoui sent the following letter to customers:

Today we announced that AdMob has signed a definitive agreement to be acquired by Google for $750 million. We are extremely excited about this new partnership and what it means for our advertiser, developer and publisher partners.

AdMob’s people, products and tools will continue to work to deliver successful campaigns for you and to effectively monetize your mobile traffic – no interruptions. Our product and engineering teams will keep building great products for our customers. Our sales team will keep working with our thousands of advertisers to deliver successful campaigns. Our business development team will keep working to maximize ad revenue for the more than 15,000 mobile Web sites and applications that make up AdMob’s publisher network.

WIth the rise of Web phones like the iPhone, Android, Blackberry, and Palm (Verizon’s CEO says that 40% of its new phone sales are such smartphones), mobile advertising promises to be a huge growth area. The Kelsey Group, a market research firm, projects that the mobile advertising market will balloon from $160 million in 2008 to $3.1 billion in 2013.

Of course, that is just an educated guess which will turn out wrong. But there is no doubt that mobile advertising will be much bigger in four years, perhaps even ten to 20 times bigger than it is today. Where will all of that mobile ad money go to? Here I think the Kelsey group is more on target. It projects that mobile search will go from 24 percent of the total mobile ad market last year to 73 percent of the much larger pie in 2013, according to a recent research note put out by Citi analyst Mark Mahaney, which is where I’m getting all of these numbers.

In the budding world of mobile advertising, whoever can control the app developers and gain access to the ad inventory on their apps will eventually win the game. Keep that in mind as you try to understand the very strange acquisition of AdWhirl by AdMob.

You see, AdMob is perhaps the largest independent mobile ad network and AdWhirl is a fast growing mobile ad exchange which allows mobile app developers to switch from AdMob to other competing mobile ad networks such as Quattro, VideoEgg, or Mobclix. Although it launched only last April, AdWhirl was quickly becoming the preferred advertising interface for many developers because they could still serve AdMob ads through it, but not be tied to AdMob if a better deal came along.

AdMob didn’t really like this so it threatened to stop supporting AdWhirl’s “mediation layer” and basically pull out of it altogether. That plan didn’t go over too well with the app developers AdMob needs to keep happy, so it quickly reversed itself and decided to delay its decision to withdraw from AdWhirl. Since it couldn’t take its toys and go home, it did the next best thing. It bought AdWhirl. Problem solved.

Except that now, who is going to trust AdMob to maintain AdWhirl as a neutral exchange rather than use it to funnel more of its own ads to developers? Or worse, to track all of the ad impression data of its competitors to improve its own ad products?

We’ve heard from numerous sources that mobile ad network AdMob may be in the process of acquiring AdWhirl, the startup that lets iPhone developers tap into multiple ad networks. One source has even said that AdWhirl is already working out of AdMob’s offices, though we haven’t confirmed this. Update: this is confirmed

Asked on the phone whether AdWhirl has been acquired by AdMob, AdWhirl CEO Sam Yam responded, “How did you know that,” before clamming up with a “no comment.”

It’s an interesting partnership, and one that raises a few questions. AdWhirl allows developers to switch between different ad networks on the fly without having to submit a new application coded with another ad network to Apple. The service has support for five different ad networks, including AdMob, Quattro Wireless, Videoegg, Jumptap, Mobclix and Millenial Media. Mobclix has a competing iPhone exchange that AdMob is not a part of. But if AdMob and AdWhirl have a relationship, this might make the waters a bit murky for the other networks. It would be suspect to have an open platform that is owned by one of the ad networks.

AdMob is out with its latest Mobile Metrics Report, this time combining its readily available network data with survey results from over 1,000 users of iPhone, iPod Touch and Android devices. Just for your reference, AdMob claims to serve ads for more than 7,000 mobile Web sites and 3,000 applications around the world.

Key takeaways from the July report, with some commentary of my own after the jump.

AdMob has released its metrics report for May 2009 (PDF download link), and looked closely at the actual distribution of users of the iPhone apps in their network this time. The main take-away? There may be tens of thousands of applications available for the iPhone, but a whole lot of them simply never actually make it onto the device.

Out of 2,309 tracked applications (representing 15.1 million unique iPhone and iPod Touch users), no less than 54% are actively used by south of 1,000 persons. That’s a very long tail there, and not an economically interesting one at that. Only about 20% of the tracked apps have more than 10,000 active users, and only 5% (or 116 apps) boasts more than 100,000 active users. For the record, an active user is considered to be someone who used the app at least once in May.

Google is moving into the mobile ad market with AdSense for mobile apps. Over the past few months, Google has been testing both text and graphical ads with ten mobile app developers, including Shazam and Urbanspoon. Today it is opening the private beta to more developers who meet certain criteria.

These are contextual ads for iPhone and Android apps. To qualify for the public beta, the apps must be free and generate at least 100,000 pageviews per day. The program is only for iPhone or Android apps. Developers must be ready to go live with the ads in four weeks and participate for three months.

There have been questions as to whether iPhone developers can make significant revenue from ads on the iPhone, mainly because the supply of advertisers can’t keep up with the demand for iPhone apps. Others say that developers actually can make quite a bit from ads on free apps. Mobile game advertising network Greystripe is in that camp and it is launching a new CPM Protection Program designed to guarantee ad revenue to iPhone app developers.

Greystripe says that the various mobile ad networks, including competitor AdMob, are undercutting each others’ CPMs (cost per thousand impressions) when competing for advertising dollars, thus leaving iPhone app developers with lower CPMs overall. Greystripe’s CPM Protection Program offers to beat any other ad networks’ eCPM by at least 25% for 60 days.

While OpenTable had a very successful IPO yesterday, the IPO market might not open up for other tech startups for at least another year, says prolific Silicon Valley investor Ron Conway. He made the assessment in a video interview with Vator.tv’s Bambi Francisco on mobile startups, republished below.

Questioned on when he sees the IPO market open up again, Conway responds that he thinks we are at least one year away. He’s more bullish on the M&A market picking up again, expressing the hope that this is only six months away.

With more than 20,000 apps available for the iPhone, standing out from the crowd is becoming harder and harder for app developers. There are only so many slots in the the top apps lists in the iTunes Store. Discovering new apps is becoming a real problem. But what if apps started cross-promoting other apps, just like they do on Facebook?

AdMob, which claims to be the largest mobile ad network on the iPhone covering more than 1,000 apps, will be launching an iPhone App Exchange by the end of this month for any developer who is already part of its ad network. AdMob currently shows ads across 7.2 million iPhones. Developers will be able to volunteer a portion of the ad inventory on their apps to go towards promoting other apps. In return, their apps will be promoted on other apps in the network. Depending on whether monetization or distribution is more important to them, they will be able to adjust the settings on their AdMob account accordingly.

Mobile game advertising network Greystripe secured $5.5 million in Series C funding led by Incubic Venture Capital, Steamboat Ventures and Monitor Ventures. The company previously received a total of $10.1 million in Series A and B funding, with the same investors participating. Greystripe develops “advergames,” mobile ads that have game-like characteristics designed to increase the chances of consumers clicking on them. Greystripe has delivered 180 million ad-supported game and app downloads to date.

Greystripe has capitalized on strong growth in its mobile content distribution and monetization business, particularly with the iPhone. Greystripe is now trying to integrate mobile-centric ad campaigns with industry-accepted online media buying software. This unified integration allows for ad agencies to easily add mobile ads with one click and also allows for Flash advertisementsto appear on the iPhone (a technology that Greystripe developed). Ads can be used for both online and mobile purposes.

Mobile game ad network Greystripe has hit 140 million ad-supported game downloads thanks to iPhone users. In the fourth quarter of 2008 alone, it supported 30 million downloads. All of these ad-supported and Greystripe says that over 50 percent of ad impressions are from iPhone games. The ads themselves have game-like characteristics designed to increase teh chances of consumers clicking on them and playing with them, hence “advergames.”

Last summer, TechCrunch reported that Greystripe turned its attention to the iPhone, and is subsequently seeing an increase in downloads and ad impressions. In fact, Greystripe’s Top 10 Total Games (by ad impression) are all iPhone games. In December, the company created its own version of Adobe Flash for the iPhone, which Apple currently prohibits on the iPhone, that would allow advertisers to use rich media flash ads. The company is making the iPhone market a “priority for the foreseeable future,” finding that the device is a much more successful ad platform for gaming than Java devices.

The online advertising business is in for a rough patch, especially for display advertising. The signs are everywhere. Yahoo, the biggest publisher of display ads on the Web, reported a 2 percent decline in display ad revenues in the fourth quarter, and the New York Times is seeing even steeper declines.

There is just way too much advertising inventory out there, and Websites are actually trying to show less ads per page to reduce ad clutter and keep advertising rates from cratering. The chart above from comScore’s 2008 Digital Year in Review shows that the number of display ads served in the U.S. is actually slightly down from a year ago. Even so, comScore estimates that 4.5 trillion ads were served to U.S. consumers last year. That comes to 2,000 ads per month per person.

As a consequence of the declining display ad revenues and the over-saturation of ads, there is simply no need for the 300-plus ad networks out there. And what we are seeing now is the stronger ad networks are picking up funding to shore up their positions and the weaker ones are getting bought.

Each month, AdMob, a mobile advertising network, rounds up the data from over 6,000 mobile web sites and applications, analyzes it all, and releases their findings in their Mobile Metrics Report. In the September report, AdMob determined that the iPhone had become the #4 handset worldwide by count of ads requested. In the October release, the iPhone has skyrocketed all the way to #1.

Note that these rankings are not directly representative of sales numbers; while AdMob’s ad network is wide enough that these numbers can provide an accurate picture of usage trends, they don’t necessarily prove that one handset is outselling another.

AdMob, a popular mobile advertising platform, has closed a 15.7 million Series C funding round led by Sequoia’s Growth Fund with participation from Accel Partners. The company says that it will use the money to help expand abroad in India, South Africa, and Europe.

The round is a strong vote of confidence from Sequoia, especially given the fact that the famous firm recently presented its portfolio company CEOs with a 56 Slide Presentation of Doom that forecast dire economic conditions in Silicon Valley for years to come.