Google buys AdMob – putting it in context and asking the experts

Google, we salute you: the mobile Internet/marketing fraternity is jubilant. The world’s biggest search-engine company has put its money (or shares) where its mouth is, paying US$750 million for mobile advertising network AdMob. Google has always been a strong advocate and investor in the mobile Web, but it takes a blockbuster (as WSJ.com describes it) takeover of a start-up, largely unknown outside mobile, to show the world that a) mobile Web is different to online Web, and b) it is going to be massive.

In the opinion of mobile experts – see the quotes below from leading analysts, mobile marketers, bloggers and other mobile ad networks – this is brilliant news for the business. Before we come to that, though, mobiThinking would just like to address a few myths about mobile ad networks.

What is a mobile ad network?
AdMob is a mobile ad network – that is an automated system that enables marketers to advertise their goods and services on a variety of mobile sites (and more recently in downloadable applications), without having to deal directly with each publisher. The network takes a healthy percentage of what the advertiser pays.
They work on a similar model to Internet ad networks, such as DoubleClick, purchased by Google in 2007, aQuantive purchased by Microsoft in 2007, and Advertising.com purchased by AOL in 2004. Mobile devices are different from PCs, they work better with mobile Web sites and with made-for-mobile ads (they are much smaller for a start), hence they need a different type of network to serve ads. That’s why Google, AOL and Microsoft have all bought mobile ad networks – yes, that’s right, Google isn’t the first.

So AdMob isn’t the only one?
mobiThinking knows of 20 or so mobile ad networks, which means there are probably lots more, as this is a highly fragmented market. The mobiThinking guide to mobile ad networks profiles in detail all the leading networks. As you see from this guide, they all offer different services and operate in different markets.

Is AdMob the biggest? Are all mobile ad networks created the same?
As no network releases revenue figures (any income figures you may read are pure guess work), comparing sizes of mobile ad network is a futile exercise. AdMob is a significant player, but even in the US (which accounts for nearly half its market) no one can say for certain that it’s the biggest. It will have more publishers or advertisers than another network because it is high volume and low price model (AdMob is a blind network, so advertisers can’t choose where ads are placed), but does that make it bigger than a network that focuses on placing high-value ads on a few prestige sites and operator portals? See mobiThinking guide to mobile ad networks for the difference between blind, premium blind and premium networks.

So Google isn’t the first heavy-weight to buy an ad network? Will there be more?
By mobiThinking’s reckoning Google is the fourth heavy-weight to buy a mobile ad network – though this is the biggest acquisition to date. Nokia purchased mobile advertising pioneer Enpocket, AOL purchased Third Screen Media and Microsoft purchased Screen Tonic. All these acquisitions took place in 2007. Nokia, AOL and Microsoft’s mobile networks focus more towards the premium end of the market, as well as being the ad sales team for each company’s extensive mobile properties.
Note: you may see commentators scratching their heads at rumors that Apple was also bidding for AdMob – when you look at Nokia Interactive Advertising that’s not as crazy as it sounds (though arguably AdMob would not have not be the best match for Apple).
With AdMob, Google, like AOL and Microsoft can now offer a package of PC and mobile display advertising (as well as PC and mobile search advertising) to both advertisers and publishers. You should expect that other Internet advertising companies are also considering investing in mobile and there are plenty of mobile-only networks out there.

Nothing here is meant to take away from what AdMob founder Omar Hamoui has achieved in three years – after all he is one of our Top Ten mobiThinkers [read Hanoui’s full profile] – building up AdMob and then selling it (with considerable assistance from AdMob’s venture capitalist investors, no doubt) to Google at a great price.

Though one cynical question remains – now that AdMob is in bed with Google, will it continue to produce the part of Mobile Metrics Report that journalists routinely misinterpret causing them to write misleading tales of the market dominance of Apple’s iPhone. iPhone is a competitor, to Google’s Android operating system.



What the experts tell us (these are printed verbatim – some are straight from the heart, others are clearly prepared statements – and in alphabetical order):
Daniel Rosen, managing director, AKQA Mobile (mobile marketing agency)
It was a natural move for both parties that made sense on a number of different levels. First and foremost the AdMob product and Google’s Internet ad network AdSense are very similar so there were obvious product synergies allowing Google to extend its network of mobile publishers seamlessly and much faster. Secondly, there was a probably a defensive element to it – if AdMob had been bought by one of Google’s competitors, such as Yahoo! for example, then it would have made life much more challenging for Google’s mobile advertising proposition.

James Briggs, chief executive officer, Briabe Media (mobile marketing agency)
On the surface this is excellent news for mobile marketing and most definitely for the AdMob folks. AdMob has done an excellent job of differentiating its offerings and keeping competitors on their toes and deserves to be rewarded for its efforts. Additionally, from an industry perspective, this deal will force a lot of other folks to take a really close look at the mobile marketing industry to better understand the impact that it is about to have on the broader advertising industry.
I do have to admit that there are reasons for concern, given Google’s history as of late. The company is definitely a very strong proponent of the ‘free’ business model and if it finds away to give mobile display advertising away just as the industry is taking off, this could mean trouble for a lot of companies trying to gain their footing in a nascent industry. Therefore, it is important that regulators ensure that no one player is able stifle competition or development in an industry that could be the source of thousands of jobs in the US alone.


Alistair Hill, analyst, comScore
It was just a matter of time really. AdMob is basically a mobile version of Google’s AdSense / AdWords, so it makes perfect sense and gives it a huge head start on any of its rivals, such as Yahoo and Microsoft.
Microsoft purchased ScreenTonic a couple of years ago to get a head start in mobile advertising, but this was much lower key than Google’s AdMob purchase.
The next question is who will buy 4th Screen, BuzzCity, InMobi, etc.


Noah Elkin, analyst, eMarketer
Anytime Google steps in to make an acquisition of this magnitude, it reverberates across the whole ecosystem. Google tends to put its money where the market is (or, alternately, the market tends to go where Google puts its money. But either way you look at it, this is a big move that provides validation for mobile advertising in general and for display in particular. It also signals that Google intends to be a leader in mobile display, just as it is the outright leader in mobile search. And because AdMob has a strong presence in the iPhone market, both in the US and around the world, it also gives Google access to a very attractive demographic with a footprint that complements its own global reach. All told, having Google as a major player in mobile advertising helps raise the channel's profile and this should benefit the mobile ecosystem as a whole.


Kirsten McMullen, director of marketing, 4INFO (mobile content provider)
This is exciting news! This is great for the mobile industry, as it reflects the momentum and growth that we've seen in the past few years. It's good to see the economy is turning around. It will be interesting to see how this will impact iPhone and Android developers, as Google will be able to influence a greater focus on supporting Android mobile apps.
We’re pleased to see 4INFO’s primary shortcode (44636) used on the SMS Ads picture on Google’s information page about the acquisition. This reinforces the fact that SMS is a critical part of the mobile marketing.


Henry Stevens, director of media and entertainment, GSM Association
The GSMA believes Google’s acquisition of AdMob demonstrates a major commitment to, and confidence in, the potential of mobile to become a major medium, supporting advertising, marketing and transactions. This, in turn, will underpin the development and distribution of an ever-growing range of mobile products and services for consumers and businesses.


Michael Ahearn, vice president marketing and communications, iLoop Mobile (mobile marketing agency)
Google's acquisition of AdMob proves that one of the most valuable marketing/advertising channels now and in the future is mobile. Google sees mobile ad serving, and smart context-relevant advertising in the mobile channel, as mission critical. Not only is the mobile search/contextual advertising critical, but what happens after the click through in the mobile channel will be equally critical. Google/AdMob are leaders in the click, while companies like iLoop Mobile help provide the after click consumer experience. AdMob was clearly perceived as a valuable player in this space with core business expertise that would benefit Google's advance in the technology of mobile display advertising.


Jon Mew, head of mobile, Internet Advertising Bureau
Google’s acquisition of AdMob is further indication that mobile advertising is becoming a key part of the marketing mix. The deal seems to make sense, Google and AdMob seem to complement each other very well as businesses – Google is focused primarily on search and AdMob on mobile display. More advertisers deal with Google on a daily basis than any other media owner in the world, so I’m hopeful that this is something that will open the door to more advertisers coming to mobile. When Google make a move as big as this people tend to sit up and take notice.

Paran Johar, chief marketing officer, Jumptap (mobile ad network)
The announcement is causing tremendous excitement, as it validates the enormous potential of mobile advertising. We predicted consolidation in the industry and AdMob’s broad high-volume business model is highly synergistic for Google. The industry front runner will be determined by who can deliver the most advanced targeting capabilities for better ROI for advertisers and publishers.



Windsor Holden, principal analyst, Juniper Research
This tells us a number of things about Google, AdMob and mobile advertising per se. This move is a clear indication of Google’s confidence that mobile will become a key channel through which advertising revenue can be generated in the medium term. Secondly, it recognized that AdMob had become perhaps the dominant mobile-only ad network, with a global presence and top-of-the-range analytics, and was anxious to add AdMob’s assets and expertise to its own portfolio as a means of enhancing its own mobile offering. Thirdly, this acquisition will consolidate Google’s position as the dominant player within both mobile search and mobile advertising.


Andrew Grill, blogger, London Calling
I’m kind of surprised as Omar kept saying he would not sell out.
Given Google's track record of investments (Jaiku anyone?). I wonder if Google will really make this work and integrate AdMob deeply into its mobile offerings… or not.


Paul Palmieri, president and CEO, Millennial Media (mobile ad network)
What happened today is astounding. Google’s perspective has always been that mobile is just the Internet. Today Google validated what many companies to include Millennial have thought for years – that mobile is a different market with a huge potential for advertising; possibly a bigger opportunity than online media. As the clear leader in mobile brand advertising, Millennial Media is happy to see a player like Google bring economies of scale to the performance advertising space in mobile.


Mike Wehrs, president and CEO, Mobile Marketing Association
AdMob has been an MMA supporter and a valued member of the leadership for years. If there remain any doubters to the value of mobile marketing the sale of AdMob to Google at this valuation puts those concerns to rest. Mobile marketing and advertising represent unique capabilities for advertisers and marketers and a new level of information access for consumers.


David Murphy, blogger, Mobile Marketing Magazine
Google’s purchase of AdMob gives the mobile marketing sector a bit more credibility. It’s clear when you attend conferences that along with the hype and the expectation, there’s also a good deal of frustration that things are not moving forward more quickly, that more brands are not embracing mobile, and that budgets are still relatively tiny. There are good reasons for this, not least the difficulty of buying mobile media and the time taken to do so, and the often indifferent attitude of the mobile operators towards mobile marketing. The entrance of Google into this marketplace will hopefully help to raise everyone’s game, and if the company proves as innovative in the mobile space as it has on the Web, we can expect to see some game-changing initiatives going forward.


Ben Tatton-Brown, chief executive officer, RingRing Media (mobile media buying agency)
This acquisition is a milestone for our industry and validates the potential of mobile advertising. At RingRing Media mobile advertising spend levels are increasing month on month and the future is great for everyone involved in mobile advertising.


Mark Hawkins, The Mobile Data Association
The Mobile Data Association believes Google's acquisition of AdMob, and Research in Motion's decision to allow advertising within BlackBerry applications, represent considerable strides that are now being made towards major growth in the mobile advertising space.

Volker Hirsch, blogger, Volker on Mobile
The acquisition of AdMob by Google shows Google's commitment to "mobile, mobile, mobile", which in itself is encouraging for the sector that is – despite a number of larger players evolving and despite the still relatively recent paradigm shift initiated by the iPhone – still fledgling. That in isolation makes it great news for the mobile sector.
From Google's and AdMob's respective business perspectives, it appears to make eminent sense, too (and I am not privy to their numbers): AdMob will be able to bulk up and cement its leadership position in the segment. Its inventory and back-end ad management will be able to dip into Google's vast resources, which is great for them. Google probably realized that AdMob's strength meant that they would be difficult to beat. And who you can't beat, you shall join (or, in Google's case, buy). For Google, it is a smart move giving critical mass in an ad format where it has not nearly been as dominant as for other formats and gives access to a lot of eyeballs.


Carl Howe, research director, Yankee Group
Google's purchase of AdMob signals that Google intends to use the same strategy on the mobile Internet that it employed on the desktop Internet. It will foster its development and profit from contextual advertising.
I liken it to real estate: Google is providing free roads and power for a new mobile Internet city. The catch: Google/AdMob just happens to own most of the billboard space in that city.

So does anyone think that Google’s acquisition of AdMob is a bad thing? Comment below or email editor (at) mobiThinking.com.



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  • Rating for this article:
    0

    Great article.

    I really liked: “Google validated what many companies to include Millennial have thought for years – that mobile is a different market with a huge potential for advertising” from Paul Palmieri.

    I found this online, is this going to change somethiing in the admob acquisition?

    http://www.scribd.com/doc/27062375/Admob-Sued-for-Patent-Infringement

    UNITED STATES
    SECURITIES AND EXCHANGE COMMISSION
    Washington, D.C. 20549

    FORM 8-K
    CURRENT REPORT
    Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
    Date of Report (Date of earliest event reported): February 17, 2010

    KlausTech, Inc.
    (Exact name of registrant as specified in its charter)

    Nevada 333-149405 20-5605395
    (State of incorporation) (Commission File No.) (IRS Employer
    Identification No.)
    101 East Park Blvd
    Plano Texas 75074
    (Address of principal executive offices, including zip code)
    (940) 735-3262
    (Registrant’s telephone number, including area code)
    Former Address if changed since last filing:
    Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

    Item 8.01 Other Events. Litigation.

    On February 17, the Registrant filed a lawsuit, Case Number 6:10-cv-00039, in the Eastern District of Texas Federal Court located at 211 West Ferguson Street, Tyler, Texas, against AdMob, Inc., a Delaware Corporation headquartered in San Mateo, California (“AdMob”).
    According to the lawsuit, AdMob, Inc., is alleged to infringe on the Registrant’s patent rights, specifically, U.S. Patent No. 6.128.651, (“the ‘651 patent”) which is entitled, “Internet Advertising with Controlled and Timed Display of Ad Content from Centralized System Controller”. The lawsuit alleges that AdMob’s products and systems infringe on one or more claims of the ‘651 patent and that the Registrant has been damaged as a result of AdMob’s alleged infringing conduct. The lawsuit requests a jury trial and prays for injunctive relief in addition to adequate compensation for the alleged infringements.

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