Google has reached an agreement to buy mobile advertising network AdMob for $750 million.
The all-stock deal would bring Google one of the leading companies for selling mobile advertising on the iPhone and other platforms. AdMob has run campaigns for the likes of Coke, Ford and Procter & Gamble. Its publisher network includes AccuWeather, BluePulse and CBS Mobile, as well as applications that run on the iPhone and Google’s Android operating system. In September, it served over 10 billion mobile ads, according to the company.
AdMob’s ads consist of both banners and text links. Google has until now concentrated its mobile ad products on search.
The deal marks the third-largest acquisition in Google’s history, trailing only the $3.1 billion paid for DoubleClick and $1.65 billion paid for YouTube. AdMob was founded in 2006 and is based in San Mateo, Calif.
Google derives most of its revenue from search advertising. With DoubleClick, it hopes to extend that into display, video and other forms.
Company executives have said mobile advertising has the potential to be a huge market for Google, which invested heavily in Android as an iPhone platform competitor.
“The main thing that’s changed in the last few years is the development of high-end devices,” said Susan Wojcicki, vp of product management at Google, in a statement. “It’s an opportunity for much richer content for the user. Ads are just another form of content.”
The big purchase is a clear endorsement that Google sees enormous potential in a market that’s still small. Despite the never-ending prediction of “the year of mobile,” the market has grown by fits and starts. According to eMarketer, advertisers spent just $320 million on mobile ads last year, a figure that’s forecast to increase to $416 million this year and reach $1.6 billion in 2013.
“I think part of the challenge is perception, said Omar Hamoui, AdMob’s founder and CEO. “People are used to online and this massive market and they want to see it as that massive market today. We’re at the beginning, and it’s frankly growing a lot faster than online did.”
Wojcicki said AdMob would enable Google to find the right formula for advertising on mobile platforms. To date, most of the ads, from banners to search links, are variations on Web ads.
“The one challenge is understanding the right formats that will work for advertisers,” she said. “When you see an ad on a phone, you’re on a phone. You might want to call the person advertising. That’s an example of how the experience and the formats can be different. There’s also an opportunity to serve more local ads.”
Google is following the cue of its competitors in adding a mobile ad network. Yahoo has developed one. Microsoft bought European mobile network Screentonic in 2007. AOL acquired Third Screen Media the same year.