In a push to expand its digital advertising empire to cellphones, Google has agreed to acquire AdMob, a fast-growing mobile advertising start-up, for $750 million in stock, the companies said Monday.
Omar Hamoui, left, the founder and chief executive of AdMob, and Google’s vice president for engineering, Vic Gundotra.
AdMob is one of the top sellers of banner ads on iPhone applications and Web pages that can be retrieved from mobile phones. The acquisition could help establish Google as an early leader in the small but rapidly expanding mobile phone advertising business.
“The deal shows that Google is serious about becoming a major player in the mobile advertising ecosystem,” said Neil Strother, an analyst with Forrester Research. “It puts Google in the front-runner position.”
Mr. Strother and other analysts said that position could prove tenuous. The mobile advertising business, which has long been hailed as the next big thing, remains embryonic. Sales of mobile ads were just $160 million last year, according to the Kelsey Group, a market researcher, and the vast majority of it went to ads delivered by text message. By comparison, marketers spent more than $23 billion in online ads in 2008, according to the Internet Advertising Bureau.
The growing popularity of the iPhone and other powerful mobile devices ensures that mobile ads will become more ubiquitous, but predictions for the growth of the business vary widely. “We see mobile as a huge growth opportunity for us,” Susan Wojcicki, vice president for product management at Google, said in an interview. “We see an opportunity working with AdMob to really accelerate our efforts in an important industry for Google.”
Google is already ahead of its rivals, Microsoft and Yahoo, in one segment of the mobile advertising business: ads linked to search queries. The acquisition of AdMob, whose ad clients include Procter & Gamble, Adidas and Land Rover, will help it expand into display ads.
The all-stock deal is modest for Google, given its roughly $177 billion market value. But it is the company’s third-largest acquisition, behind the $3.1 billion deal last year for the advertising specialist DoubleClick and the $1.65 billion acquisition of YouTube in 2006.
As Google’s core business of selling text ads has been slowing, the company has been looking for businesses that could bring new growth. It has focused in two areas in particular: display advertising, a business where it has lagged behind rivals like Yahoo, and mobile advertising.
Google’s ambitious push into cellphones includes mobile applications like search and maps as well as the Android software for smartphones. AdMob also sells banners that appear inside apps made for smartphones running on Android, and the acquisition could help Google profit from that growing market.
AdMob was founded by Omar Hamoui in 2006 while he was still a graduate student at the Wharton School at the University of Pennsylvania. The company is one of a few mobile advertising start-ups that analysts say have outsmarted the giants of Web advertising and established themselves as leaders in the emerging business. Analysts said that the others, which include JumpTap, Millennial Media and Quattro Wireless, are likely to draw the interest of Google rivals like Microsoft and Yahoo.
“I suspect the market is ripe for consolidation,” said Noah Elkin, an analyst with eMarketer.
AdMob has received $47 million in financing from Sequoia Capital, Accel Partners and other investors and has about 140 employees. In an interview, Mr. Hamoui, who is chief executive, declined to disclose AdMob’s revenue but said that sales had more than doubled in the last year. Google said it hoped to close the acquisition in the next several months. The deal is likely to be reviewed by regulators, but Ms. Wojcicki said she expected it would be approved.
“We think that mobile advertising is a very competitive area, and we don’t see a lot of regulatory concerns,” she said. Critics of Google’s rapid expansion, however, said they hoped the deal would face a thorough review.
“We’ve reached a point in Google’s evolution in which Washington agencies and Congressional committees need to look more closely at the company’s dominance of Internet services,” said Marc Rotenberg, executive director of the Electronic Privacy Information Center, who had opposed Google’s acquisition of DoubleClick.
Source: http://www.nytimes.com/2009/11/10/technology/companies/10google.html?emc=eta1