Apple Inc. doesn't appear to have barred Google Inc. and others from selling targeted ads inside iPhone and iPad applications, after implying several weeks ago that it might do so. Software developers say their new and updated applications are getting approved by Apple, even though the apps are enabled to serve ads by third-party ad networks such as Google's Mobile Adsense and AdMob. Apple and Google declined to comment on the ad services. At issue is the control that Apple is trying to exert over mobile ads in its devices like the iPhone and iPad. The Cupertino, Calif., company on Thursday launched its own mobile-advertising service, iAds, which works with brands to create interactive ads that appear inside applications. Apple is charging $1 million to $10 million to marketers who use iAds, with 60% of revenues going to developers. But questions have arisen about Apple's intent to limit other advertising networks from competing with iAds, particularly after the company in April changed the rules governing the development of applications in its App Store. The new rules, part of the license agreement for Apple's iOS 4 operating system for its iPhone and iPad devices, were interpreted to mean that the company would prohibit ad companies from collecting usage data from applications, making it harder to target ads to users and compete with iAds. Apple relaxed the terms in early June to allow independent ad networks to collect user data to sell ads. But the changes were believed to still bar Google from serving targeted ads in Apple's App Store because it said explicitly that advertising service providers owned by a developer of mobile phones and mobile operating systems did not qualify as independent. Apple has never confirmed who it was referring to with this statement, but Google has publicly criticized Apple over the amendment. But many apps including "Super KO Boxing 2," a popular game app made by Glu Mobile Inc., were approved recently for use in iPhones and iPads. The app uses Google's AdSense to place ads. Nikolai Sander also had his "Spawn Glow" app—which uses Google's Mobile Adsense—approved last week for the iPhone 4. Mr. Sander said he believes Apple "is not enacting the restriction." It's unclear why Apple hasn't enforced the rule. But as the fast-growing mobile-advertising marketplace has attracted the scrutiny of federal antitrust regulators, that apps with third-party ad services are still getting approval into the App Store could take the pressure off of Apple. The Federal Trade Commission currently is conducting an informal inquiry into Apple. Mobile advertising is important for developers because they get paid for hosting the ads. Revenue from ads sold on cellphones in the U.S. is expected to increase by 43% to $593 million in 2010, up from $416 million in 2009, according to research firm eMarketer. By 2013, it is expected to reach $1.56 billion. Despite Apple's allowance of new apps with third-party ad services, other developers aren't taking any chances. "We stayed away from adding anything other than the iAd network," said Scott Dunlap, chief executive of NearbyNow Inc., which develops apps for media companies like Condé Nast Publications Inc. Mr. Dunlap said it helps that iAds is more lucrative than other ad networks. Developers said Apple will charge advertisers a penny each time a consumer sees a banner ad, and $2 each time a user taps on the banner. With other ad networks, they get a fraction of a penny per banner ad shown, if they get anything, and 70 cents or less per click. Apple, which said last month that it had iAd commitments for 2010 totaling more than $60 million from at least 17 brands, said it started on Thursday with two iAd campaigns: Nissan Motor Co. for its Leaf electric car and Unilever PLC. for its Dove Men's products."IAds will roll out in North America first and we'll ramp up the number of ads served in the weeks and months ahead," said a spokeswoman for Apple, adding that campaigns will be timed with the back-to-school and holiday shopping seasons. For now, advertising companies said iAds is creating more business rather than inhibiting competition because it's generated so much interest in mobile advertising. "Apple's introduction of iAds has woken the brand community up to mobile, and their efforts are benefiting everyone selling in the space," said Eric Litman, CEO of mobile-advertising company Medialets.

Editor’s note: The following guest post is by Krishna Subramanian, co-founder of mobile ad exchange Mobclix.

Mobile search is still one of the big unclaimed prizes on the mobile web. Everyone from Google and Yahoo to Apple is going after it, but Microsoft’s Bing may stealthily become the king of the castle by aggressively promoting Bing through mobile apps. Let’s look at each player’s mobile search strategy.

Apple: In The Driver’s Seat

During the Apple keynote in April, Steve Jobs announced the new iPhone 4.0, iAd and a few other features even he didn’t seem too excited about. Out of the many mediocre features, Mr. Jobs happened to squeeze in a declaration that, “ On mobile, search hasn’t happened. People aren’t searching on their phones.” During the keynote at WWDC this month, Mr. Jobs declared that iPhone 4 users would have the opportunity to select their search engine from among Google, Yahoo, and Bing. Out of the three, Bing got a special endorsement from Mr. Jobs.

Is Mr. Jobs trying to blindside the other players in this space by making them think he is not concerned about search? I’m sure all of the search traffic he is sending to Google is driving him nuts. Meanwhile, Google has happily—and quite beautifully—optimized their search results page on the iPhone to make it extremely convenient for local searches by incorporating phone numbers, maps and more within the Safari window.

Remember the days you would dial 411 or, even more recently, send an SMS to GOOG for information about local businesses or venues while you are on-the-go? Does anyone do that anymore? I’m sure people love paying $1.75 to find out the name of the local pizza shop. By the time you dial 411 and struggle through the automated voice menu, you could have pulled up addresses, phone numbers and reviews to the five nearest pizza places and be one click away from an interactive map.

Apple brought the traffic to mobile search, but why not make money off it? Google, Yahoo! and Microsoft all see the value of controlling search across mobile devices—not just the iPhone. Similar to the web, these three goliaths want to be the starting point for every consumer query. All three have launched iPhone specific apps with slightly different flavors as they try to first win the hearts of the iPhone user.

Yahoo! Doesn’t Know What It Wants To Be

Yahoo! is all over the place in the App Store. It has two iPhone apps in the iTunes App Store. Within the reference category, the Yahoo! Search app is ranked at #30 with 658 comments. For the most part it includes many of the same core features that the other search apps offer.

To get more mindshare from users, Yahoo! has sprinkled many other apps in various categories with the Yahoo! Finance and Yahoo! Shopping and Yahoo! Entertainment apps and a pretty successful Yahoo! News app (#47 with close to 50,000 comments). This attempt to build interest just dilutes Yahoo!’s audience across multiple apps—which, if combined together, could have a significant impact.

It’s Google’s Game To Lose

As the default search engine plugged into mobile Safari on the iPhone, Google has always had an advantage driving mindshare to its mobile apps. It was the first one to use voice activated search and has steadily built out its host of features since making it easier to access core Google products like Gmail. The Google Mobile app is currently ranked first in the reference category for iPhone apps with more than 2,000 comments.

Hello, Bing!

Far behind when the gates opened, the Bing team is pushing out new features as fast as possible, trying to draw from Google what works best. Interestingly enough, the results (even on a local level) are quite different from the very accurate Google search results. The Bing search app received a nice endorsement from Mr. Jobs at the WWDC keynote, so lofty expectations are already set. It is currently ranked No. 2 in Reference.

Microsoft released an updated Bing app last week with a few new notable features: Visual Scanning (very similar to the Red Laser iPhone app eBay acquired earlier this month) and tapping into social graphs through Facebook and Twitter status updates. The entertainment angle is allowing Bing to create a unique niche that ties back to search. It also redesigned its mobile browser search to make it more of an app-like experience.

Advertising as a Distribution Channel

The biggest hurdle is getting these app installed on as many devices as possible, but thanks to all the apps in the App Store there is an abundance of ad inventory available for marketers. App developers, if you don’t already love these big boys, you should. They have been spending significant amounts of money (think six figures-plus) desperately trying to get in front of as many of your users as possible, which translates into more money in your pocket.

All of the search giants use in-app marketing to push their own apps. Yahoo! and Google have done a great job avoiding creative saturation by building out a wide array of messages, colors, languages and landing pages, as well as making use of geo-targeting.

Boom! Bing Changes the Game

As the Bing team continues to spend more money on advertising, they recently changed the game, significantly crushing Google in the app rankings. How? Easy…

Attaching yourself to successful apps with consumer brand power is a sure fire way to rise to the top.“We absolutely market our applications on the iPhone, I don’t think of it as unique to anything else. It is like promoting on the toolbar,” Yusuf Mehdi, Senior Vice President, Bing recently told TechCrunch co-editor Erick Schonfeld. “Yes, it has been effective.”

For example, Bing took the Top 100s by Year app that allows users to stream songs by decade for $1.99, rebranded it to Top 100s by Year by Bing, made it free and inserted advertising to drive users to download the Bing Search App.

The Top 100s by Bing app instantly surged to the top of the App Store and remained in the top five for weeks. It remains at the top of the music category hovering near favorites like Pandora and Shazam. And, as I mentioned, the Bing search app is currently No. 2 in Reference, and in the top 100 free iPhone apps overall.

Ads within the Top 100s app that drive users to download the Bing app:

Fresh off the success of leveraging sponsored apps to drive downloads to the Bing app, Microsoft has recently reached out to a new audience segment by sponsoring the ESPN World Cup Trivia app, which is ranked No. 6 in the sports category.

Rather than taking the viral nature of the Top 100’s music app, Bing and ESPN are also running display inventory to drive additional traffic to the World Cup Trivia app.

So where does this leave the Bing search app? How about in the top 100 of all free apps and, more importantly, at one point it even squeezed Google’s app out of the top 50 free apps. Bing has taken a simple concept, executed and proved the value of the model by consistently keeping their brand top of mind across top apps in different categories.

Mobile search is here, whether you want to believe it or not. Take Apple’s recent acquisition of Siri for a small sum of around $200 million to $250 million. It will be pretty easy to use that as the nucleus for an Apple-owned local search product for mobile. Not to mention the valuation is around the same price tag as what it paid for Quattro Wireless.

As the market grows, Yahoo!, Google, Bing and Apple will become more cut throat. Don’t expect to see Bing ads on Google Mobile Ads or Apple featuring Yahoo!. Likewise, we may not see as many new Google and Bing apps in the App Store in the near future. But they will keep pushing forward as much as they can. After all, they probably don’t have much time before Mr. Jobs begins to think differently about mobile search.

Thanks to an SEC filing, another detail emerged today about Google’s acquisition of mobile ad network AdMob. We already knew the $750 million Google-AdMob acquisition was a cash and stock deal but we didn’t know the breakdown between the two. According to an SEC filing submitted by Google today, the search giant sold $530 million worth of stock as part of the deal, indicating that AdMob (and its investors) may have taken home the remainder, $220 million, in cash (because of some accounting issues, this number may not be exact).

So was AdMob happy with the split between cash and stock? I guess that depends on whether they think Google’s stock will keep going up. Google paid for the bulk of the deal with stock, and the deal will hardly make a dent in its huge cash reserves (the company has $26.5 billion in the bank).

The deal itself was drawn out due to concerns from the FTC over anti-trust issues. Over six months after announcing its plans to acquire AdMob, Google finally closed the deal at the end of May, a week after the FTC unanimously approved the deal.

Apple announced this week that it has already secured $60 million dollars in iAd campaigns, with the likes of Nissan, Best Buy and Disney being some of the initial brands to try out the new mobile ad platform. Some commnetators think Jobs lost the run of himself when he predicted that Apple would own half the US mobile ad market by 2011. The mobile ad market in the US is currently about $3.8 billion dollars – with SMS accounting for the bulk of that at $3.2 billion dollars. Mobile ad display only generates about $253 million dollars. It’s likely that Jobs was referring to this ad market segment when preaching his message to the Apple faithful. It is clear from this confident prediction that Apple is looking to lock down its platform very soon.

There have been two major developments in the past six months that suggest a more aggressive move into the ad display market by the company: first, the banning of location based advertising on new apps; and second, the big marquee purchase of Quattro, which serves as the engine for the new iAd offering. Apple has been looking to turn the screws on another potential lucrative revenue stream. It says it can do mobile advertising on the iPhone better than anyone else. Will they own the mobile display ad market by better innovation? Possibly not. I suspect it will engineer market dominance by kicking off all the ad nets currently servicing the iPhone app eco-system. Expect all this to happen to meet Steve’s expectations. It’s easy when you own the walled garden. [SmartCompany]