Google AdMob Buy Beckons Answers from Microsoft, Yahoo
After all, anything Google does that involves search and/or advertising is heavily scrutinized today.
IDC analyst Karsten Weide told me Google wouldn't face regulatory opposition, noting that the top five players in the mobile ad market are Google, Yahoo, AdMob, Millennial Media and Quattro Wireless, and all of them have roughly 15 to 20 percent market share.
Even with AdMob, Google wouldn't have enough of a concentration of power to warrant a monopoly in the mobile ad market.
Weide put more wood behind his argument in a Nov. 23 research note, where he dialed down his estimate of Google and AdMob's combined 2009 U.S. mobile ad revenue market shares to 24 percent, making Google the leader, "yet making antitrust actions unlikely."
Should Google and AdMob combine, they will have earned $68 million in mobile ad sales to give them 24 percent of the market. Here is gross mobile ad revenue (including traffic acquisition costs) for the major mobile ad players. In parentheses are market shares based on the revenue numbers:
- Millennial Media: $51 million (18%)
- Ad Mob: $40 million (14%)
- Yahoo: $32 million (11%)
- Google: $28 million (10%)
- Microsoft: $23 million (%8)
- Quattro Wireless: $21 million (7%)
- Jumptap: $11 million (4%)
- AOL: $7 million (2%)
A collective of companies, including Greystripe, Crisp Wireless and others, combine for the remaining 26 percent of mobile ad sales. The revenue numbers are based on the number of ad impressions served by these entities multiplied by an estimated average CPM rate.
Clearly, the mobile ad space is nascent, with a nice egalitarian distribution of market power.
The question is: How long until the party of eight big players consolidates down to three? Because Weide said Google's purchase of AdMob makes it incumbent on Microsoft and Yahoo to acquire some of the competition in order to keep up with Google, the new mobile ad market leader.
He said Yahoo and Microsoft need to acquire either Millennial Media or Quattro Wireless, given that Google and Admob's combined revenue will be more than twice that of Yahoo's and three times that of Microsoft's.
But, he said, they will pay a premium. At $750 million, Google is paying at least 10 times AdMob's 2009 worldwide revenue of $40 million. Millenial and Quattro could be headed for huge paydays, Weide noted:
They could expect valuations of at least $550 million and $400 million, respectively. (Millennial Media's valuation would be lower than Admobs even though it has a higher U.S revenue because it has less of an international presence than AdMob has.) When Millennial hailed the Google-Admob deal as a validation of the mobile ad business, they were not paying their envy-colored respects through clenched teeth - they actually meant it, and then went on to pop those champagne corks.
When Google bid $750 million for AdMob, it essentially put the long tail in a position to get fat and flush with cash.
Google also just bought Teracent, boosting the value quotient for display advertising even more. Teracent rivals Dapper and Tumri must be giddy.
Meanwhile, it will be worth watching to see if Microsoft and Yahoo pull the trigger on Millenial, Quattro, JumpTap or any combination of players before or early in 2010.
These deals tend to happen in bunches; Google has triggered the mobile ad grab, so the buys could start coming fast and furious.