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Google To Buy AdMob For $750M; The Display Play; In India

admob-googleMobile is becoming a significant play for Google, and as the Android juggernaut prepares to conquer the world, Google has put the monetization piece into play with the acquisition of mobile advertising network AdMob for $750 million; Google has been on the lookout for both big and small acquisitions, and this appears to be the first big one.

The Display Play

This deal is not in the least bit surprising. Last quarter, Google reported a 30% quarter-over-quarter growth in mobile searches: as one of the largest mobile advertising network in the world, with a presence in 64 countries, Admob brings to Google immediate scale in display, and an entry into mobile advertising beyond search, particularly with iPhone and application based advertising units. However, AdMob’s revenues are not known, so whether they were bought for their “success” in a struggling mobile advertising space or their potential, is yet to be ascertained. Remember that Google’s online focus has been on developing the display advertising side of the business. Last quarter, on its earnings call, Google had suggested that display ads “seem to work well on mobile devices. Unlike in case of desktops, users tend to notice display ads on mobile more; much more of a forced engagement on mobile.” In particular, users tend to be more engaged on high end devices.

source:Google

source:Google

AdMob’s publisher network comprises of over 15,000 mobile websites and applications. According to its latest report, their monthly ad requests “increased 6.3x over the past 2 years from 1.6 billion in September 2007 to 10.2 billion in September 2009, while the number of countries increased from 16 to 64 countries over the same period.” India is AdMob’s number two market, albeit far behind the US.

The Importance Of TouchScreen Devices & Applications

admob-handsets-2009Much of this growth has been fueled by the introduction of next generation smart phones, a segment that the iPhone created, and one that Android is increasingly looking to dominate. In his blog post announcing the deal, Admobs Omar Hamoui has credited Apple for reinvigorating the mobile advertising space, and said that with the addition of smart phone, we have the preconditions necessary for a tidal wave of browsing and app usage. For AdMob, the top 10 devices in the US for September 2009 included five with touchscreens, six with Wi-Fi capabilities, and six with application stores, with higher mobile usage than their share of handsets sold. (right: Top Handsets for Admob in September 2009)

Android accounted for 17% of smartphone traffic in the US in September 2009 on the AdMob network, up from 13% in August 2009, with HTC Dream (G1) as the number three and the HTC Magic as the number 10 device in September 2009 in the US. In case of the iPhone, much of the traffic came from applications. The Android is a juggernaut: it’s gone from one device, one carrier, one country to 12 devices, 26 countries, 32 carriers in less than a year. 18-20 Android phones are expected to be out by the end of the year.

The only worry here is that Google has both a platform and the advertising network in play here. MocoNews had estimated in August this year that Google mobile got 31.9 million monthly unique visitors, while AdMob got 25.7 million. Combined, that is greater than the 45.6 million estimated forMillenial Media. Google’s increasing dominance is setting the stage for a potential anti-trust situation a few years into the future, which is perhaps why they highlighted the competitive situation in the market by playing up acquisitions by AOL, Yahoo and Microsoft in the same space.

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AdMob had raised $47.2 million in venture capital from Sequoia Capital, Accel Partners, Draper Fisher Jurvetson and Northgate Capital according to Crunchbase.

AdMob In India

By all accounts – however, primarily based on anecdotal evidence from vested interests – the mobile web advertising opportunity appears to be growing in India. While he didn’t mention absolute numbers, Google India Business Head Parminder Singh had told MediaNama earlier this year that an (almost unbelievable) 20 percent of searches for Google India are from the mobile. This also explains the importance of the recent launch of the Google application for the Series 60 devices, apart from the Blackberry. AdMob does have operations in India, led by ex-Googler Mahesh Narayanan, for whom this has been a rather short stint away from Google; he joined AdMob from Google India in May this year.

India is AdMob’s number two market, at 668.3 million ad requests in September 2009, around 6.5% of AdMob’s total requests, as compared to the US, which was at 47.3%. Among handsets, it’s almost all Nokia, at 60.9%, with only the Sony Ericsson W200i as the non-Nokia phone in the top 20; Symbian accounting for 94% of requests.

The problem for India has essentially been that of sales, and the reticence of agencies. Mobile Advertising has almost been considered a bad word, confused with SMS based mobile marketing initiatives; mobile is still an experimental budget among advertisers, with agencies still largely focused on TRPs and circulation from less measurable media. Mobile advertising is a hardsell in the country, and payment terms and Google’s entry allows the segment some leeway: Google is great at the long term game, growing usage and slowing incorporating monetization.

This deal also serves as a both a warning and a form of validation for InMobi (formerly mKhoj), an Indian company which has expanded operations of late to seek to compete with the likes of AdMob. InMobi had raised $7.1 million Kleiner Perkins, Caufield & Byers and Sherpalo Ventures last year.

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The challenge for Google and Admob will initially be in integrating quickly, and that might serve as something of a lull as the companies learn how to work together. After that, in India, they’ll have to grow the market – both from the publisher ecosystem perspective, and educating advertisers.

Related:

Google Mobile Searches Up 30% QoQ; Search UI Changes, Ad Trends, Place Pages
— mKhoj Now InMobi; Expands To Europe After South Africa
Investing in a mobile future with AdMob
Facts about Google’s acquisition of AdMob
Google to Acquire AdMob

Written By

Founder @ MediaNama. TED Fellow. Asia21 Fellow @ Asia Society. Co-founder SaveTheInternet.in and Internet Freedom Foundation. Advisory board @ CyberBRICS

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

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