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The increased use of mobile search has in turn led to the increase in the revenue generated by mobile paid search. Google dominates this space with a worryingly large market share.

A report from the banking firm Macquaire Group, using data from Efficient Frontier, has found that at present, mobile paid search spend accounts for 5% of paid search spend in the U.S.

It has also been estimated that this could further increase to 10% by the end of 2011. In actual terms, mobile paid spend could then be worth $1.1 billion.

Quite expectedly, it has been found that Google is the major stakeholder in this market with about 97% of the market share, while Yahoo! and Bing jointly hold about 3.2% of the market share.

95% of searches on the iPhone come through Google. Of these, 50% are from the tool bar, 42% from Google’s home page and less than 10% from Google Apps. On Android devices, the number of searches through Google is likely to be even closer to 100%.

If Bing manages to tie up with Apple to become their default search engine, a large share of the mobile search volume could automatically go to Bing. Or, iPhones could lose favour with some users for providing a poorer search experience.

CPC for mobile search is currently higher than that for PC searches in some markets, while click through rates for mobile search are lower than for PC searches.

A Growing Monopoly

Google CEO Eric Schmidt has said that mobile search is growing very fast. It now accounts for about 15% of search across all categories.

This underscores the importance of mobile search. The fact that Google’s starting off in this growing market with such a strong position can only mean one thing – its position will get stronger, at the expense of all competition, and as a result, CPC rates will go up.

Advertisers stand to lose in such a situation, as the lack of a viable alternative will leave businesses with no choice but to advertise on Google AdWords if they wish to build a mobile search presence.

Users too will suffer in the long run, as the lack of competition will stunt development in mobile search, as the incumbent, Google, will have little reason to continue to innovate in that space.