The mobile advertising market was supposed to be asleep right now.
Conventional wisdom runs that mobile ads – tantalised by claims that this would be the “year of mobile” for roughly the last decade – would take a sideline in the recession as experimental ad budgets were squashed even more than everything else.
So the timing of Google’s $750m all-stock acquisition of Admob is interesting.
Microsoft and AOL made their moves into the space in May 2007, buying ScreenTonic and Third Screen Media respectively, just months after Steve Jobs unveiled the iPhone. Perhaps they moved too soon – only now, two years later, are other phone makers’ full responses to the iPhone arriving, with devices such as Motorola’s Droid.
But that early consolidation left Admob – which can be seen in many of the iPhone’s most popular ad-supported apps – as by far the largest standalone prize left in the market. Google’s knockout price shows how far that market has come, even in the last six months.
At the $750m value Google puts on the deal, it is paying nearly twice the entire revenues of all mobile advertising companies this year, according to eMarketer. Jim Goetz, partner at Sequoia Capital, an Admob investor, says that that Admob was “approaching $100m” in annualised billings, based on its recent performance – that’s advertising revenues before they are split with publishers or app makers. Admob would likely keep 40 per cent of that.
Yet we hear from one person not directly involved in the deal that Google still had to up its offer from around $600m. It ended up paying over 18 times Admob’s revenues, making it Google’s largest deal since DoubleClick, another display advertising network.
“Google clearly wants mobile,” says Jonathan Nelson, chief executive of Omnicom Digital, the ad agency group. “They are ready to pay.”
The last six months has seen a slew of responses from mobile makers to Apple’s iPhone, he notes, which is finally providing large-screen handsets that can show display ads. Google’s new “one-stop shop” of mobile search and display ads, plugged into its wider ad network, is a “convenience factor… [that] makes it easier to move dollars in that direction,” he says.
Mark Read, chief executive of WPP Digital, another marketer, says that the iPhone has “changed how clients think about mobile”, driving more enquiries but not yet “significant” spending.
Larger screens and apps mean that there is a wider range of services available on mobiles that users can click through to purchase, he says, rather than just the ringtones and wallpaper of devices in the recent past.
But more interesting is the fact that Google is now “thinking about the mobile extension of everything that they do”, Mr Read says.
“We’ve seen a lot more focus from Google on the mobile side in the last year and even more the last six months,” he says. “They view this as the next dislocation in the industry, from the internet to the mobile internet. They are very determined to succeed.”
If anything can shake mobile advertising from its slumber, it’s the full light of Google’s attention.
