SAN FRANCISCO (Reuters) - Google Inc said on Monday that it was acquiring of AdMob, one of the largest mobile advertising networks, for $750 million, widening its bet that cell phone advertising could become the Internet’s next-big money maker.
Google’s agreement to buy AdMob in an all-stock deal would give it a key asset as it seeks to extend the reach of its online advertising business from the tethered world of PCs to the smartphones that consumers increasingly use to access the Web while on-the-go.
Google’s free Android operating system already provides the basic software that powers many of the newer phones, including the recently released Motorola Inc Droid, and which compete with Apple’s popular iPhone.
Privately-held AdMob makes technology for serving graphical, display ads on mobile phones and maintains a network that allows advertisers to place display ads on mobile Web sites and directly within specialized smartphone applications.
The current revenue opportunity is still modest by Google’s standards - J.P. Morgan analyst Imran Khan pegged AdMob’s annual revenue at $45 million to $60 million - but analysts said the deal underscores Google’s belief that the market is set to grow.
“They’ve made it pretty clear that mobile is one of the biggest opportunities they see,” said UBS analyst Brian Pitz.
The deal appears to represent the third largest acquisition in Google’s history, behind the 2008 acquisition of DoubleClick for $3.1 billion and the Google’s 2006 acquisition of YouTube for $1.65 billion.
In an interview with Reuters, Google executives declined to say whether the deal would have a positive or negative impact on Google’s profitability, or provide details about revenue expectations.
“We expect this will accelerate our growth in this space,” said Google Vice President of Corporate Development David Lawee.
Google, the world’s No.1 Internet search engine, does not disclose how much of its revenue, which totaled nearly $22 billion in 2008, comes from mobile ads.
Last month, Google said its mobile searches increased 30 percent quarter-over-quarter in the third quarter.
Google executives said they expected the acquisition to be subject to regulatory review, though they said they don’t foresee any concerns blocking the deal, which the company said it expects to close in the next several months.
Google Chief Executive Officer Eric Schmidt recently said that the company was interested in resuming its acquisition efforts, after taking a breather during the worst of the economic downturn. Schmidt said Google would acquire on average one company a month.
AdMob, which counts more than 15,000 mobile websites and applications in its network, is among the top two or three mobile ad networks measured by the volume of ads served, said Mike Wehrs, CEO of the Mobile Marketing Association.
The company competes with Quattro Wireless and Velti and analysts said that Microsoft Corp, Yahoo Inc and Time Warner Inc’s AOL had all acquired companies with mobile advertising technology in recent years.
Wehrs said his group expects the overall mobile ad market to increase 28 percent to 33 percent next year to between $2.3 billion and $2.4 billion. He said his figures included revenue for all forms of mobile advertising including text message ads.
While search is an important component of mobile ads, Wehrs said that ads that run inside smartphone apps are particularly popular at the moment.
“The first thing a company asks for when they go to an ad agency is how fast can you get me on an iPhone app,” said Wehrs.
Google’s shares finished Monday’s regular trading session up 2 percent at $562.51.
Reporting by Alexei Oreskovic; editing by Andre Grenon and Carol Bishopric