Google is buying mobile ad technology firm AdMob for USD750m in an all-share deal aimed at bolstering Google's share of the global advertising market. The deal underlines the growing importance of mobile advertising, which is seen as an increasingly lucrative market as smartphone use grows and the popularity of mobile apps continues to rise.
The acquisition follows Google’s recent declaration that it is ready to start buying companies “both large and small”. Spurred by its best-ever quarterly profits and sitting on a cash pile of USD22bn, the firm is well-placed to expand through takeovers.
According to Susan Wojcicki, VP of product management at Google, AdMob is “the quintessential Silicon Valley startup, generating impressive year-on-year revenue growth”. She justifies the takeover by saying: “mobile advertising has enormous potential as a marketing medium”.
It is significant that Google has targeted a mobile ad technology firm, as many see the mobile space as the next frontier in the battle for ad revenues. In September, eMarketer claimed US mobile ad spend would reach USD416m this year, and triple to USD1.56bn in the next four years. Earlier this year, Google CEO Eric Schmidt also declared that 2009 would be the “year when mobile browsing takes off”.
Google gets about 98% of its revenues from advertising and the firm’s success rests on it moving quickly to exploit new ad technology. Google’s growth over the past decade mainly owes to its successful search ad system, which Google was quick to develop at a time when many rivals where concentrating on display ads. The strength of search ads has been underlined during the recession as advertisers shift budgets away from display or video ad campaigns to search ads, where impact is more easily measurable. Google is now hoping that AdMob’s technology will help it move quickly to become the leading provider of mobile ads too.
Paul Palmieri, president and CEO of AdMob rival Millennial Media, describes the AdMob deal as “astounding”. He claims that Google’s entrance into the market confirms that “mobile is a different market, with a huge potential for advertising – possibly a bigger opportunity than online media”.