Google acquires AdMob for $750 mn

12Nov2009

Google has acquired AdMob, a mobile display ad technology provider, for $750 mn (~Rs 3375 cr) in stock. The deal is similar to mobile advertising acquisitions that AOL, Microsoft, and Yahoo have made in the past 2 yrs. Though Google offers many forms of mobile advertising, its focus to date has been on mobile search ads, while AdMob's focus has been on mobile display ads and in-application ads.

It marks Google’s third-largest acquisition after DoubleClick and YouTube and is a very solid exit for AdMob and its investors, which have pumped in $47 mn into the business. But more importantly, the acquisition also lends credibility to the struggling mobile advertising space, which is always being characterized as being around the corner from taking off.

Benefits to Google

• AdMob brings to Google immediate scale in display advertising as well as ads on applications that next-gen phones like the iPhone, Nokia N97 and a number of Android phones have made popular
• Although the mobile ad market remains tiny, with less than $200 mn in total revenues in 2008 and little adoption by large brand advertisers, Google is betting that in the long-term, mobile advertising will become a blockbuster play.
• Owning one of the biggest mobile advertising networks will give Google lots of data helping it understand what works on iPhones. This will help Google better challenge Apple with Google's own Android operating system and its flagship Droid handset. The AdMob deal may not help Google's bottom line for several years, but it could give the company critical insights into how to compete with Apple to entice Droid users to consume more Internet time and use more applications.

Google acquisition history

• The AdMob buyout is the 3^rd by Google this year. First was a $106 mn purchase of video compression company On2, which could help Google more efficiently deliver video (Google owns YouTube through a $1.6 bn buyout in 2006). The second deal Google made this year was for ReCAPTCHA, which brings Google some cool authentication technology that it can use to accelerate its massive effort to scan tens of millions of books and periodicals.
• Google’s 1^st public buyout was in Feb 2001 when it acquired Deja.com’s Usenet Discussion Service, including the domain names déjà.com and dejanews.com, just 3 years after the Google started.
• Among the deals that have expanded the company far beyond search, include 2003’s buyout of Pyra Labs (Blogger’s creator) and 2004’s purchase of Keyhole, whose technology now powers Google Earth. In 2006, Google bought a company called Writely, a word processing software maker whose technology became the basis for Google Docs
• While many of Google’s buyouts have been relatively small, it has hit $1 bn a few times, including for a chunk of AOL and for online advertising company DoubleClick ($3.1 bn).
• Many of Google’s newer products have either emerged from the company’s acquisitions or at least have benefited from them. Google Voice, for instance, is based on technology from Grand Central, which Google gobbled up in 2007 for $45 mn.