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Velti PLC (VELT) provides marketing and advertising solutions to brands, media groups and mobile network operators. On Tuesday they announced a major contract win of $27M over the next two years with an unnamed client. Velti already services many of the largest telecom companies such as AT&T (NYSE:T), Orange, Vodafone (NASDAQ:VOD), Telenor, Cellular South and China Mobile (NYSE:CHL). While $27M is not a huge percentage of future revenue it is a key indicator of what is going to be happening in the mobile space as contracts become larger and longer term.

The mobile advertising space has been slowly building up momentum over the last several years. Many retailers have been experimenting with mobile to understand the trade-offs between traditional media advertising and mobile advertising. They have discovered mobile will be a totally new advertising channel going forward. It has the ability to reach and interact with customers like no other medium before. A recent report by Juniper Research, reveals that, the total ad spend on mobile web search will reach $12 billion per annum in five years' time, three times the ad spend this year, which will reach $4 billion.

Velti's $27M contract is significant for several reasons. First this is one of the first large/long term contracts announced in the mobile space and is a good indicator of what advertisers are thinking in terms of where to put their dollars. Companies that have spent the last several years really getting comfortable with the how and what of mobile advertising are now ready to jump in with both feet and start to commit a more representative percentage of their total advertising budget. The other significant observation of this announced deal is that it is for 2 years. What this indicates to me is that companies are committing to mobile for the long term.

Two other mobile advertising companies that should follow this exact same path of announcing bigger and longer term deals are Millennial Media (NYSE:MM) and Augme Technologies (AUGT.OB). Millennial Media is a mobile advertising network and Augme Technologies is in interactive media and mobile advertising. Both of these companies have reported yearly growth of almost 50% and analysts estimate this trend will continue.

Of particular significance for all three of these mobile companies is client retention rates. This is where the large contracts will be coming from as companies expand their mobile advertising reach by including more of their brands and increase the amount of advertising they do per brand. In terms of client retention rates all three of these companies do an excellent job with Velti at 91%, MM at 90% and Augme Technologies at 95%. As mentioned before this really should come as no surprise since companies that have spent the last several years dabbling in mobile advertising are likely to stay with the companies they have been working with.

Some of the risks with mobile advertising companies have more to do with the perception of the complete mobile advertising space. Some have said that it is more a bubble and will never gain significant portions of advertiser's budgets. While this certainly could happen I see it as unlikely since the proliferation of mobile devices is only increasing. The ability to reach potential customers almost 24/7 is too big an opportunity to let slip by for any retailers.

Mobile advertising is still in its infancy. A growing percentage of people are more likely to be interacting with their mobile device, either tablet or phone, while watching TV than actually paying attention to the show they are watching or even worse for advertisers the commercials they have spent money on. As this trend continues the shift to larger mobile advertising budgets will only accelerate. Companies that have already established a large client base are good bets to grow both revenues and earnings in the years to come.

Source: Velti Contract: A Sign Of The Times In The Mobile Advertising Space