Wednesday, November 11, 2009

Google scoops mobile advertising pioneer

UK: Google is set to buy mobile advertising network specialist AdMob in an all-stock deal valued at $750 million -– a deal that shows how serious Google is about being a top player in this space.

The acquisition is a good fit: Google needs to strengthen its hand in mobile display advertising, where Admob is already a strong player (particularly in serving ads on Google’s Android platform and also the iPhone). AdMob, although well established and respected, needed a strong partner and funds for future growth.

A deal that should bring benefits to both sides
Google is getting stronger in mobile search but lacks a strong foothold in mobile display advertising.

AdMob reportedly serves more than 8.5 billion mobile banner and text ads per month across a publisher network of 15,000 mobile websites and applications in 160 countries. AdMob, which was set up in 2006, has a strong track record of campaigns with leading brands.

One of the things we’ve always liked about AdMob is its spirit of constant improvement. It has put a lot of effort into improving the targeting capabilities of its platform. AdMob publishes regular metrics for different aspects of its mobile advertising network – advertising traffic requests by region, country and device type.

It was one of the first companies to launch a unit to handle ads for the iPhone platform in July 2008, followed by a similar unit dedicated to the Google Android device platform in February 2009.

AdMob ripe for acquisition
We marked AdMob as a hot acquisition target in our March 2009 report Mobile advertising players: ones to watch. AdMob is privately held and only reveals limited financial detail.

It is well funded (investors include Sequoia Capital and Accel Partners) and when it received a third round in October 2008 it stated that it had achieved positive cash-flow results. This is good for a company barely out of start-up mode, but what AdMob needs for future growth is the resources and scale to compete against larger players in mobile advertising such as Microsoft and Nokia.

There are also clear benefits for AdMob in becoming part of a group with a platform that offers a larger set of capabilities to advertisers and publishers. The Google acquisition provides all of this, along with a strong sales team infrastructure and relationships.

Careful integration is key to future success
This kind of acquisition strategy is not new for Google. In December 2007 it bought DoubleClick to strengthen its position in display advertising. The thinking behind the AdMob deal is similar. What will be important to its success is how carefully Google integrates AdMob into its sprawling business.

For example, how will AdMob sit alongside AdSense for Mobile, which was set up in June 2009 in a bid to improve Google’s push into mobile display ads? AdMob has a stronger track record in mobile so this might not be too much of an issue. We hope Google does not turn AdMob into a vehicle to drive ad sales only on the Android platform.

The key selling point of AdMob has been its willingness to serve ads across a wide range of device platforms, enabling advertisers to reach the broadest base possible and one of the reasons why AdMob has one of the largest mobile ad networks in the business.

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