Is GOOG's $750m AdMob Buy Strategic Or Dumb? An alternate view...
Niki Scevak, a serial entrepreneur, is good at analyzing mergers and often has insightful things to say that others often miss. [Please see: "Twitter's $100m Investment Will Make It Tough On Staff Recruitment" ]
He's not a fan of Google's $750m acquisition of AdMob, the mobile ad network because:
- Few people will use mobile phones to research and search for products to buy because the form factor is limited.
- Sites get about 10% of traffic from mobile search compared compared with about 30% from desktop search. [This is actually on the low side it can easily be 60% or more for many sites.]
- Mobile ads will never be as impressive or immersive as they are on desktop/laptops because of the limited form factor. This won't improve.
AdMob is an ad network. They currently get 40% of the revenue because it is a nascent industry (their net revenue is about $25-30m). That will pretty quickly move to 10-20% cut as the industry scales. We saw it in search advertising (Overture) and display advertising (AdSense). The economics will get worse for the business.
- He estimates AdMob generating about $10m/month on about 10bn ad impressions which works out to a measly $1 CPM.
I would probably quibble about some of Mr Scevak's math and be a bit more generous in some of his estimates. Either way it would still add up to a very large premium Google has paid for the AdMob business.
The fact remains that Google has yet to show that any of its acquisitions have proven their value. And this is yet another one to add to the list.
I think it would be more strategic for Google to look at diversifying from its reliance on Internet advertising. For example, MSFT has many business lines, Google does not.
Google needs an open Internet to succeed long term. What better way to guarantee unobstructed access than to own a telco? How about AT&T?
That's what I call a strategic acquisition. AT&T brings in $31bn a quarter and has a billing relationship with tens of millions of households and businesses. The market values [GOOG] higher than [T].
Can you imagine a combined GOOG and AT&T platform? You could drive lots of new Internet services and ads in a myriad ways.
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Bronte Media: Google's Strategic AdMob Mistep