Many reporters are talking about Google’s purchase of AdMob as a logical step to ‘further their strategy in mobile advertising’ but it was nothing of the sort. It was simply buying its ticket onto the boat that it missed. Google’s forays into mobile advertising have been nothing short of mediocre, trying to duplicate their web search advertising model onto mobile without fully understanding the real issues of device fragmentation and small screen size. Writing a google mobile ad (no banners here) forced you to split your call to action into two ugly halves; an 18 character (2-3 word!) headline and an equally short subtext. Add the url onto the end and you get a half-screen size unreadable text ad on anything other than a smartphone (with dumbphones still at 60% of the ad market). Response rates were understandably poor. I once met a Google representative at a mobile advertising workshop and spent 5 minutes explaining to him why Admob’s approach was so much better, including their %phn% innovation that inserts the user’s own phone model into the ad text itself. He’d never heard of it, because he hadn’t even checked out the competition for himself.

Admob, on the other hand, just went for simple and mobile-ready and grew it from there. It also took a leaf from Google’s book and offered a free mobile analytics tool to help advertisers and publishers make more sense of their forays into mobile, something which Google only just got round to last month. With their recent push into iphone and android in-app advertising, real revenues more than doubling every year, their Google-like ‘open’ positioning, and their knowledge and ability to generate constant buzz and keep the top spot in mobile marketing globally, Admob was in the right place for Google.

Was $750m the right price? Admob currently serves around 10bn ad impressions a month, at click through rates of say 1-3%, average CPC $0.05-0.10. They get a 40% cut of adspend. Take away 140 employees salaries and tech costs, and you end up with between $17m and $127m yearly EBITDA. At a valuation of a multiple of 6-8 times profits, this puts Admob somewhere in the range of $100m to $1Bn. I suspect their revenues were at the lower end of the scale, but frankly Google’s need under the circumstances was great. Given the growth potential of mobile advertising, the $750m price tag for Admob looks like an excellent deal.