Let’s look at the Google AdMob acquisition, which is pending approval by regulators. I didn’t initially cover this topic because AdMob is primarily a display media platform, not a paid search mobile ad platform, and Google already has that. However, I changed my mind because Google rolled out its own Nexus One Android phone, and it’s likely that keyword-targeted text ads may become important in mobile devices in the same way they have become an important part of many search campaigns where advertisers have opted into contextual targeting (not just pure search within AdWords).
Additionally, strategic reasons for the acquisition are tangential to search and haven’t necessarily been reported or discussed. So, what the heck, we’ll cover them here. Some of the numbers I use are illustrative and hypothetical. However, they aren’t outside the realm of possibility and plausibility.
It’s far too early to determine all the reasons why Google was willing to offer $750 million for a company with a reported annual revenue that’s significantly under $100 million. Most analysts’ data I found estimated AdMob’s trailing 12 month revenue between $30 million and $60 million. Project those revenues forward into a healthy economy in which mobile catches the marketer’s fancy and perhaps one could imagine a forward annual revenue number of $100 million. This puts the acquisition at a high revenue multiple by anyone’s accounts: 7.5 times revenue.
AdMob’s earnings? Let’s imagine the scenario that gives it earnings before interest, taxes, depreciation, and amortization (EBITDA).
AdMob raised $47.2 million over the last few years and has probably burned through a significant chunk of it by now. Perhaps the iPhone and other smartphones were the catalyst bringing the company to cash neutrality.
Remember, AdMob is essentially an ad network for mobile advertising. Ad networks in a non-cluttered environment enjoy profit margins as high as 50 percent. As more competition heats up, these margins tend to fall. Google’s AdSense ad network has about a 15 to 20 percent margin by most accounts.
If AdMob’s annual revenue is in the $50 million range, then at best it could have made $25 million in gross profit after paying its publishers. With 140 employees (even if many of them are highly paid engineers), it’s feasible that the company has some earnings. Even if it does, the EBITDA multiple on the purchase is extremely high. With a payback period (assuming we think of the transaction in cash terms rather than stock), this could take many years.
Google’s reasons for wanting the company are strategic. Google apparently believes that the market for mobile advertising is important enough to acquire rather than deploy its talented engineers to build a platform similar to AdMob’s. These reasons include:
- Growth in mobile display: Clearly, brand advertisers interested in following certain consumer segments to where they spend their time must consider buying at least some mobile advertising (if for no other reason than to not look stupid when the CEO asks if the company is “tapping the mobile opportunity”). Direct response advertisers will be less likely to be drawn to mobile display (with the exception of certain segments like ringtones and other mobile-centric purchases). Most consumers transact less frequently on their mobile devices, even when researching products and services.
- AdSense for mobile: Contextual links could work on a mobile device. They are low bandwidth and formats could be arrived at that make them consumer-friendly. Consumers may click through on content placements.
- Loss leader: Maintaining leadership in mobile display could be a sound strategic investment, even if the ROI (define) doesn’t show up as direct advertising profits. Google must ensure its ad sales teams are always welcome at agencies and by marketers. The curiosity about mobile advertising will persist for many years, guaranteeing Google many sales visits where up-sell and cross-sell opportunities exist (even if the meeting doesn’t end with an IO for mobile display ads). On the consumer side, the acquisition ensures that Google can position itself as “cool and cutting edge.” Consumers spending a lot of time online (the important consumers for any search or display publisher) already see “Ads by Google” messages all over the place. These messages provide free advertising for Google in the form of reminders. AdMob has already served 143 billion ad impressions, and the next 200 billion impressions may include “Ads by Google.”
If you’re a brand marketer and willing to experiment with mobile advertising, you have a couple of choices. You can go with display advertising (AdMob, Smaato, Ad Infuse, InMobi, Mojiva, BrandPort, Rapid Mobile, and others) or use paid search within mobile. Google AdWords has allowed marketers to select mobile as one of its ad distribution channels for some time. If you aren’t sure if you’re on or off of mobile, log into your AdWords account and check your campaign settings.
Google sparked a small firestorm last week as reports surfaced that its intelligent assistant device Google Home delivered an unsolicited advertisement to unsuspecting owners.
On February 28, 2017, ClickZ presented the webinar 'Still using .com? Here’s why 50% of all Fortune 500 companies are about to use .brand' in association with Neustar.
In part one a few weeks ago, we discussed what brand TLDs (top level domains) are, which brands are applying for them and why they might be important. Today, we’ll take an in-depth look at the potential benefits for brands, and explore the challenges brand TLDs could help solve.
In 2017 it is essential that SEO professionals secure the buy-in they need from their business leaders so they can accomplish their professional goals.