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Google to pay $750m for mobile advertising network AdMob

By CAROLINE GABRIEL

Published: 10 November, 2009

READ MORE: M&A | Google | Advertising | Android

Google is to pay $750m to acquire mobile advertising network AdMob, as part of its rapidly expanding activities in this area.

Last month the search giant, which makes much of its revenues from adverts run on its various online services, sees mobile as its fastest growing platform and will be looking for ways to enhance its position in the value chain and exert greater influence over how ads are delivered to cellphones. Last month, CEO Eric Schmidt said he wanted to move more firmly into mobile advertising as the smartphone looked set to be the primary search vehicle within a couple of years, and Android was expanding. According to research from Zenith Optimedia, paid search advertising will account for 15.1% of all marketing spend by 2011, up from 10.5% in 2008.

To tap into such trends, Google is buying AdMob from its private owners Sequoia Capital, Accel, DFJ Growth fund and Northgate. "Mobile advertising has enormous potential as a marketing medium and while this industry is still in the early stages of development, AdMob has already made exceptional progress in a very short time," commented Susan Wojcicki, VP of product management at Google, in a statement.

It is possible that Google pipped Apple to the post in snapping up AdMob - the start-up was rumored last week to have received a far lower offer, around $400m, from the maker of the iPhone, whose impact on mobile advertising and search uptake it has regularly tracked.

Google is strengthening its hand against other advertising platform providers that are going mobile, like Amobee, not to mention Nokia. Other mobile players are seeking their place in the advertising chain - for instance, Alcatel-Lucent, which has partnered with advertising specialists to provide carriers with ad delivery platforms in a 'Telco 2.0' environment, and Qualcomm, which offers operators its Xiam recommendation engine to pick the right adverts to show to mobile customers (and which partners with Amobee).

However, the market is not all plain sailing, and earlier this year, Nokia - temporarily at least - pulled back its own efforts. Mobile ads are a sector in which everyone wants to succeed, but where there is no convincing model as yet. For instance, a study of iPhone applications usage, by mobile advertising firm Pinch Media, found that most users who download an App Store product use it for only a few minutes, while only 20% return to the software the day after downloading. Such patterns of usage present a major challenge for advertisers, and it will be tough to make money from ad-supported free software when the App Store is so crowded and users' attention span so short. Pinch reckons only 5% of apps in the Store are sufficiently sticky to justify advertising, and there is no reason to think Android will be different.