Updated: Medio Systems Partners With AdMob For Search Advertising; Won’t Build Ad Network For Now

Seattle-based Medio Systems, which is building a white-label mobile search engine, said today it is signing a partnership with AdMob to return relevant-targeted advertising links when someone conducts a search. Medio CEO Brian Lent said the two companies previously worked together, but this agreement will include a deeper relationship that will deliver AdMob’s ad inventory to subscribers using analytics provided by Medio.

AdMob today places ads based on a pay-per-click model, which means Admob may fill all the inventory in the world, but the advertiser doesn’t pay the publisher until an ad is clicked on. The same will be true in the case of Medio, however, Lent said he believes prices will increase as ads become more relevant. “It’s [CPCs] helping to jumpstart the industry, but I’m not sure if that’s where the value is long-term. We don’t believe it is since we want to provide relevant ads based on search.”

It was Medio’s original intention to build its own ad network, but Lent says that’s not in the plan anymore because they realized building the search experience was difficult enough. For instance, today they support 1,100 handsets. “That’s a big business…It doesn’t mean we’ll forgo that business in the future, but we are a startup…We’ll do it step-by-step. We’ll get the traffic and the adoption first. That’s the right way to do it.” Of course, Medio has steep competition with Google (NSDQ: GOOG), Yahoo (NSDQ: YHOO) and Microsoft (NSDQ: MSFT), in addition to other startups, like Jumptap, all going after the same market. A big win for Medio recently was when Verizon Wireless announced that it was going to use Google and Medio for its off-deck and on-deck needs, respectively. Meanwhile, AT&T (NYSE: T) announced this week that it will partner with Yahoo.

UPDATED: I just finished talking to Brian Lent who wanted to clarify his comments. It was always Medio’s intention to build an exclusive ad network in-house, and they still are building an ad network, but instead of doing it all by themselves, they are also using outside networks. At this point in time, the volumes aren’t high enough to do it exclusively themselves. “It was our intention to build our own exclusive ad network, but rather we found it better for the customer experience and monetization to partner with other ad networks.” At any time, Lent added that for any reason, Medio can change its mind and build an own exclusive ad network.