Google enters yet another market with AdMob purchase

Search and advertising giant Google has purchased mobile web advertising technology firm AdMob for $750 million in stock.

The mobile internet experience on mobile phones and PDAs has been improving rapidly, but mobile web access still suffers from interoperability and usability problems. Part of this is due to the small size of the screens of used, as well as hardware limitations. Despite these problems, there are now hundreds of millions of mobile internet users, resulting in a fury of investment as companies seek to exploit this new market.

Apple iPhone and Google Android users browse the internet more often than anyone else, contributing to Google's 5x mobile search advertising growth over the past two years. A quarter of those iPhone and Android users spend nearly 90 minutes per day using applications on their devices, according to Google.

AdMob was formed in 2006 to provide specialized advertising to the mobile web. Although mobile ad spending is only estimated to reach $416 million in 2009, mobile ad spending has been growing in excess of 30% annually. AdMob has already partnered with hundreds of companies, including Ford, Coca-Cola, Electronic Arts, Proctor & Gamble, and Paramount Pictures. Their advertising platform has already served up over 125 billion impressions on the 15,000 mobile Web sites and applications that make up their publisher network.

AdMob also has unique data collection and data mining capabilities that Google may also be  interested in exploiting.

"Mobile advertising has enormous potential as a marketing medium and while this industry is still in the early stages of development, AdMob has already made exceptional progress in a very short time," said Susan Wojcicki, Vice President of Product Management at Google. "AdMob is the quintessential Silicon Valley startup, generating impressive year on year revenue growth, and we're excited to welcome this talented team to Google."

Regardless of the negative connotations of advertising, it remains the primary source of income for content providers who have eschewed the subscription-based business model. Many app developers also rely on advertising revenues to provide their apps for free.

"I think people underestimate how important ads have been to funding the development of innovative content on the internet. Our goal all along at AdMob has been to make it possible for developers and publishers to bring their products and ideas to mobile with the same business model," said Omar Hamoui, Founder and CEO of AdMob.

Google believes that this deal can only help accelerate development of the mobile web. It plans to offer mobile advertising to its massive advertiser base and rapidly increasing the amount of advertising revenue available. They believe this will offer a tremendous incentive to develop content and applications, as they will know that they is an advertising base there for them, allowing them to focus more on their users and less on how to generate revenue.

"We're proud of the progress we've made towards accomplishing this goal, and joining Google will only accelerate this process, ultimately leading to very real benefits for end users around the world. As publishers and developers generate more revenue from their mobile products, they will invest more, and their mobile offerings will become richer, more creative and more robust," added Hamoui.

Google denies any attempt to discourage competition, noting that AdMob is just one of more than a dozen mobile ad networks in the U.S. that have proliferated in recent years. AdMob's smaller competitors include Millenial, JumpTap, and Quattro Wireless.

AOL acquired Third Screen Media in 2007 and runs it as the mobile ad subsidiary of its network. Microsoft bought ScreenTonic in 2007 as well, while Yahoo took over Actionality later that year as part of its mobile push.

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