announced this morning that it has acquired 3-year old mobile display ad serving platform AdMob for $750 million, half the price it paid for YouTube in 2006. Why did Google make this move? Two reasons stand out.Google
First, AdMob is a very strong company in a sector (mobile advertising) that everyone expects to become much more important in the future. Second, this is a chance to make a big move towards monetizing on Apple's iPhone platform while making sure that no one else does something similar to Android in the future.
Google's page detailing the acquisition today the company used imagery to say that mobile search ads had been its primary focus to date, while AdMob's focus was outside search and inside apps and pages. Google has an ad program for mobile apps to, though, called AdSense for Mobile Apps. You've probably seen it if you use the Pandora iPhone app.AdMob puts display ads on mobile web pages and inside mobile applications. On
AdMob is Strong in an Early Market
Apparently Google's mobile apps ad platform hasn't been doing so well, at least not compared to AdMob. AdMob has been growing fast. VentureBeat's Matt Marshall did some back of the envelope math and estimated that the company was pulling in $40m+ in annual revenue 18 months ago, which was just 18 months after it launched.
That was in a radically different time for the mobile market. As our own Sarah Perez wrote two weeks ago in a post about AdMob's latest mobile metrics report:
Believe it or not, it was only a year ago that the Motorola RAZR scored as the number one phone here in the U.S. while the iPhone was the only touchscreen device to even make the list of top ten handsets. Only a year later, and so much has changed.
That was durring the RAZR era that AdMob was at a pace that Matt Marshall said "looks headed to IPO-type revenues within three years."
Newspaper guy turned real-time, mobile content delivery founder at NozzlMedia Steve Woodward puts it like this:
"Google now has a way to extend its advertising dominance into mobile, which is growing faster than any other medium. Together, they have the delivery system, the analytics and the know-how to capture not only high-end advertising but also the medium and smaller business advertisers that Google caters to. It will be interesting to see how online publishers react, since a Google-AdMob network could sell ads at lower CPMs than its competitors, driving down revenue for publishers."
Planting a Flag on the iPhone, Protecting the Android Inventory
Now the iPhone rules. AdMob's own numbers claimed that mobile traffic from the iPhone and iPod touch grew 19X over the last year. AdMob is making a strong play on the iPhone. TechCrunch reported this Spring that the company claims to be the biggest mobile app ad network on the iPhone and is working on a traffic exchange system for app promotion similar to what's been done on Facebook.
Now move those efforts over into the Google column and Google is making money off of the free apps on Apple's platform. That's probably not something Apple feels great about.
Meanwhile, Google's own Android mobile OS is no slouch, either. Admob reported this Fall that Android now accounts for the 2nd largest share of mobile web traffic (far) behind the iPhone, at 17% in the US, beating RIM and Windows Mobile.
Does Google want to see someone else leading the ad monetization on its own mobile OS just like it is now poised to do to Apple? No way. The answer? Buy AdMob.
It's a very smart move. Perhaps unsurprisingly, Google's share price rose this morning to its highest point in almost 18 months.