Google to Acquire AdMob for $750 Million in Stock

By: Brian Womak Bloomberg, Nov. 9, 2009

Nov. 9 (Bloomberg) -- Google Inc., owner of the world's most popular Internet search engine, agreed to pay $750 million in stock for AdMob Inc., a mobile-phone advertising startup backed by Google investor Sequoia Capital.

The deal shores up Google's position in the mobile- advertising market, helping decrease its reliance on desktop Internet ads, where growth is slowing. AdMob, which sells ads displayed on wireless devices, has benefited from the popularity of smart phones, such as Apple Inc.'s iPhone and Research In Motion Ltd.'s BlackBerry. The U.S. mobile-ad market should reach $2 billion to $3 billion by 2013, up from less than $1 billion now, according to Sanford C. Bernstein & Co.

"It's right in the area where Google is looking for growth," said Jeffrey Lindsay, a Bernstein analyst in New York. He has an "outperform” rating on Google's shares, which he doesn't own. "It's probably a great acquisition by them."

AdMob raised venture capital from Sequoia, Accel Partners Draper Fisher Jurvetson and Northgate Capital. In an interview in June, AdMob Chief Executive Officer Omar Hamoui said the company was growing faster than projected, even amid the broader slowdown in online advertising. The San Mateo, California-based company expected to have 160 employees by the end of 2009.

Moved Quickly

The purchase is subject to certain closing conditions, the companies said in a statement. Both parties have approved the acquisition.

"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," Susan Wojcicki, Google's vice president of product management, said in the statement.

AdMob was founded in 2006 in Hamoui's dorm room at the University of Pennsylvania's Wharton School. The company initially just sold Web links, before branching out into graphical ads about a year later.

AdMob helps place ads from companies such as Toshiba Corp. and Volkswagen AG on mobile applications and Web sites.

Sales of those kinds of ads probably won't eat into Google's current revenue, Bernstein's Lindsay said.

"The one fear that people had was that mobile advertising might be cannibalistic," he said. "By and large, it's all incremental money."

Google, based in Mountain View, California, rose $9.24 to $560.34 at 1:02 p.m. New York time in Nasdaq Stock Market trading. The shares had gained 79 percent this year before today.

To contact the reporter on this story: Brian Womack in San Francisco at Bwomack1@bloomberg.net

Last Updated: November 9, 2009 13:19 EST