Google's AdMob Deal Analyzed

We’ve spent some of today canvassing opinions from various parts of the mobile marketing business concerning Google’s acquisition of AdMob for $750 million, announced yesterday.
The consensus seems to be that the move is a welcome one, and not just for AdMob. Mick Rigby, Chairman of mobile media and strategy agency Yodel Digital, says he had mixed emotions when he first read about the deal, but concluded that it is a good move.
“AdMob is a great business providing an excellent service and my initial thoughts were that they would completely get swamped by Google and become a faceless monolith,” he says. “In retrospect, however, I think this is both a good move for AdMob and for the mobile business as whole. For AdMob, they will be able to tap into all the global Google relationships and grow rapidly. The mobile advertising business gets a huge shot in the arm of increased credibility. Google has said that in the future it believes it will be making more money from mobile than from the fixed line Internet. In buying AdMob, Google has shown massive commitment to mobile advertising and by the nature of this relationship, it will accelerate the growth of the sector.”
Adhish Kulkarni, Managing Director of B!Digital, says the acquisition is an important step in validating mobile as a sustainable, profitable advertising medium at a time when other mobile advertising brands have exited the market.
“Admob being primarily linked to CPC (cost-per-click) performance marketing still leaves the premium space open - one of the reasons B!Digital recently launched our own mobile advertising marketplace,” says Kulkarni. “Given the rapid expected growth of the medium, we feel there is lots of room for competition to thrive as long as you keep focus. Finally, this move cements Google’s strategic emphasis on mobile, which also means they may be looking to fill other gaps in the mobile advertising marketplace such as SMS marketing, which are today out of scope for Admob.”
Mark Slade, Managing Director of 4th Screen Advertising, also draws a distinction between AdMob’s CPC-based, ad-exchange model, where advertisers can “buy inventory blindly and cheaply on a CPC basis, with the price being dictated by the ad-network provider or buyer” and premium ad networks.
“Using Google’s muscle AdMob will no doubt be able to increase its share of this sector considerably, which means some tough times ahead for many of its direct competitors,” he says. “However, premium mobile ad-networks such as 4th Screen offer advertisers the ability to provide a highly engaging experience that can deliver a precise and targeted campaign at premium inventory, that draws on advanced handset features and an array of mobile marketing techniques.”
Slade concludes that the Google/AdMob deal can only serve to increase the value brands place in mobile advertising per se, and that the industry will experience a benefit at both the CPC and premium ends of the market.
Zohar Levkovitz, Founder and CEO of Amobee, which delivers advertising solutions to mobile operators, says that the move signals to operators developing their own mobile advertising offerings that there is no time for complacency.
“The marriage between Google and Admob is a clear indicator that the mobile advertising industry has a bright future. Industry innovation will also stand to benefit from Google entering the competitive mix,” says Levkovitz. “While operators still own the mobile market in terms of reach, and the subscriber in terms of trust, billing relationships, user demographics and targeting information, it is undeniable that Google’s acquisition is a game changer.
“Nevertheless, there are still challenges to overcome and fragmentation continues to be a stumbling block. In order for mobile advertising to have a strong, viable future, we believe that the solution must be more centralized around the unbeatable assets of the mobile operators. Major brands and media buyers want a one-stop shop solution and access to the operator’s premium inventory. An operator-centric approach will play a key role in making this possible and further accelerate adoption.”
Xen Mendelsohn, Product Marketing Manager at Comverse Mobile Advertising, echoes these views. She says:
“Many of today’s mobile campaigns use mobile display banners offered by mobile ad networks, such as AdMob and others. However, bypassing the operator in the mobile advertising value chain provides advertisers with inferior results.
“Ad networks, like Google Analytics over the web, can provide information about the OS and handset used to display the ad, the amount of time that the ad was displayed, the country, IP address, etc. But they’re unable to provide real information about who the users are and surely no indication of their interests and habits.
“Mobile operators hold key assets of great value that can’t be replicated by any other player, not AdMob or Google or even the two combined. Operators know their users and their interests – information can be tailored accordingly to reduce the risk of spam and irrelevant ads. Operators can also offer incentives such as free or reduced-price mobile services in return for receiving ads on your phone. And operators also have access to more channels than pure mobile internet display ads, from ringback tones, to P2P SMS/MMS, visual voicemail, video etc. The options are almost limitless."
Mendelsohn notes that while many operators have acknowledged the growing activity in the mobile advertising arena and their unique assets, they have been hesitant to jump in with both feet; mostly due to a lack of knowledge of how to turn into a media company that sells ad space.
“The size of the Google AdMob deal shows the advertising web giant sees huge potential in this domain,” she says. “And it will certainly reassure and encourage operators that there is big business for them in the mobile advertising market; especially when the latter are in possession of unique assets that trump the off-deck mobile advertising framework.”
Jo Wall, Mobile Advertising Specialist at Acision, says the purchase of AdMob will strengthen Google’s mobile advertising position, which to date, she feels, has been limited, predominately focusing successfully on mobile search.
“Linking the capabilities of the two companies should produce more innovation within this space, hopefully this will be more than just mobile Internet advertising,” says Wall. “The multi-channel potential from mobile Internet, messaging, on-device, games, applications and more is what makes mobile advertising exciting. However, for mobile advertising to flourish it is critical that privacy, preference and permissions are at the heart of any solution going forward. It will be interesting to see how Google’s Ad Preference Manager will be extended to the AdMob’s Ad Network capabilities to benefit both the advertisers, by providing greater targeting data for more effective campaigns, and the end users by ensuring more relevant ads are received.”
Mark Curtis, CEO of online and mobile dating service Flirtomatic, says the move is very good news for mobile overall.
“I’m not surprised,” says Curtis. “Admob had been very clever at setting up a system that, like Google Adwords, was super easy to use from anywhere in the world to buy placement anywhere in the world. It also marks out how very serious Google is about the mobile space. What I'm hoping for now is innovation in mobile advertising and there is a strong chance Google will drive this.”
And Stephen Upstone, VP Sales Business Development at Velti Plc, says he believes that Google’s investment in AdMob is a strategic play for the Android ecosystem and the ambition to quickly scale Android to become much larger than Apple and, longer term, Nokia’s Symbian.
“The strategic value here is how AdMob will help make revenue flow to application developers and handset manufacturers using the Android Operating System,” says Upstone. “This strategic importance could have had an influence on the valuation in the deal, especially if there was competition from other potential buyers.”
Ben Tatton-Brown, Managing Director of mobile media planning and buying agency RingRing Media, describes the acquisition as “a milestone for our industry, that highlights the potential of the mobile advertising market.”
Tatton-Brown says he believes the valuation is justified regarding the size and the growth of the market.
“I am very confident for the future of mobile advertising,” he says. “Especially since RingRing Media is now spending in excess of $1 million a month buying advertising for our clients and seeing significant month on month growth.”
And Mike Wehrs, CEO and President of the Mobile Marketing Association (MMA), says that if there remained any doubters of 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,” says Wehrs. “These characteristics have shown already the incredible impact on a company's marketing efforts that embracing MMA guidelines and best practices in their Mobile Marketing efforts can have.”
And what do we think? Well for what it’s worth, with no axe to grind and no vested interests, we agree with Mick Rigby that it’s a deal that gives the mobile marketing business increased credibility at a time when there is still much frustration in the air that budgets are still small, brands still ignorant of what mobile can do for them, and the very act of buying mobile media is still far too difficult. As David Fieldhouse, Head of Mobile at media agency Mediacom put it at an event last week:
“When you can spend £1m online in an afternoon and it takes three days to spend £50,000 on mobile, there’s your answer.”

The fact that, despite all this, Google feels that this a market worth being in can only get more brands to take mobile seriously. Perhaps even the mobile operators too. On the subject of which, for those following our attempts to get more information out of O2 about their marketing database of O2 subscribers which they are making available to brands, we followed up our email of last Thursday with another this morning, asking all the same questions. Still no reply, but we’ll share all the details with you as soon as we have them. Perhaps, hopefully, they’re too busy talking to Google.

Footnote:
We’ve received a couple more opinions about Google and AdMob, which we thought were worth sharing.
Sponge CEO Dan Parker says:
“I think this is a game changer. Like many, Google CEO Eric Schmidt has evangelised about mobile for some time, saying he believes it will outgrow internet advertising, which in the UK will over take TV this year.
“To date, the evangelists at media groups, agencies and brands have done little to back their rhetoric. Mobile budgets are modest at best and closer to non-existent at most companies.
Now the smartest and most successful company in new media have backed their rhetoric with action. Google has paid a very big price to get a strong position in mobile. This is not going to go unnoticed by every advertiser, agency and media owner. I believe it will be a landmark event in the growth of our sector.”
And at YOC, Christian Louca, UK Country Manager and Head of Publishers, says Google's acquisition of Admob makes perfect sense. 
“The purchase demonstrates the search engine giant's ambitions extend beyond the desktop and into the mobile space,” says Louca. “Adding mobility is a natural extension of what Google does already.
“The news sends a clear message to any people who might have doubted that mobile ad networks are able to create a sustainable and profitable model. Previous attempts by other players in the market may not have been so successful and somewhat premature, (but) the mobile industry is now in a boom state. Companies such as Google understand the market dynamics. They understand that even the most expert mobile specialists cannot fully appreciate the full potential mobile offers as it is simply too massive. Google is in the best position to keep driving the industry forward whilst being able to unlock its true potential by developing personal, creative and innovative user experiences. This is a big wake-up call for the industry.
“I think we will start to see a significant increase in the speed of the development of the entire market and this is certain to open up opportunities for other investors looking to take part in such an exciting and lucrative industry.”