When the long-expected development of smartphones and handheld devices into primary computers reaches maturity, Google wants to make sure it occupies just as strong a position on the small screen as it does on the big one.
Google set the stage for that future Monday when it announced a $750 million all-stock deal to acquire AdMob, which is considered one of the strongest ad network providers for the mobile-computing world. It's a familiar strategy; just as Google bought DoubleClick in 2007 to blend search ad expertise with display ad expertise, so it plans to add AdMob's network of partners to its own mobile search ad efforts.
For all the work Google does in other areas--Google Apps, Android, Google Voice--advertising has always been, and will likely remain, its most important source of cash. It dominates the most lucrative segment of online advertising (search) and wants to expand its efforts in display advertising as well with a revamped DoubleClick Ad Exchange and increased efforts to court the major advertisers of the world.
But unlike the PC-based Internet, the mobile Internet-advertising business is still very small and very fragmented, with dozens of companies claiming to play a leading role. AdMob founder and CEO Omar Hamoui said he had no idea how much market share his company had in the business of providing mobile ads to Web site publishers, although AdMob is considered by outsiders to be one of the strongest companies in this area due to its work with ad units for iPhone applications.
Google's AdMob deal is about blending the respective advertising strengths of the two companies in a fast-growing market.
(Credit: Google)Few doubt the staying power of mobile computing, however. Even with mobile advertising accounting for just a fraction of overall online advertising in 2009 ($416 million out of a total online spend of $24 billion according to eMarketer figures quoted by Google), AdMob has been cash-flow positive for about a year as advertisers show increasing interest in trying out mobile ads on smartphones like the iPhone and Android-based devices.
Google said it thought getting AdMob's 140-person team inside its company was "a pretty unique opportunity," said Vic Gundotra, vice president of engineering at Google, in an interview following the announcement of the deal. Gundotra and Hamoui both cited the cultural fits between the two companies as helping to streamline a deal; San Mateo, Calif.-based AdMob counts three Google veterans among the 10 executives listed on its management page.
It's not clear yet how Google will integrate AdMob into its existing structure. Google already operates DoubleClick Mobile, an ad delivery service that allows publishers to sell mobile ads directly to advertisers through a variety of ad networks, including AdMob's. What it doesn't have is its own display ad network with the reach and heft of AdMob's 15,000 and growing name-brand advertisers, which allows mobile publishers to essentially outsource their ad sales.
AdMob's success with iPhone ad sales has gotten it to this point.
(Credit: AdMob)It's also not clear whether AdMob will now become "the" ad network for DoubleClick Mobile customers, but that might exclude a lot of business: Google lists its own AdSense, the MBrand and Decktrade networks from Millennial Media, and AdMob as just some of the ad networks if offers for DoubleClick Mobile customers.
In addition, Hamoui said AdMob would continue to sell ads across many different types of phones, rather than focusing on Google's Android. The whole reason AdMob has grown to the level it has was because it was able to separate its technology from specific phones like the iPhone or Android, which gives advertisers a much broader reach than if the ad network focused on any one phone, he said.
Google is now positioned to offer a one-stop shopping experience for companies interested in online advertising, combining search and display ad possibilities on both regular Web sites and mobile sites and applications. As has been the case for so many Google products and initiatives this year, that will likely raise an eyebrow among federal regulators.
As such, Google said while it doesn't expect to encounter significant regulatory issues with the AdMob purchase, "closer scrutiny has been one consequence of our success. On that basis, we wouldn't be surprised if there were some regulatory review before the deal closes." Google said it hoped to wrap up the deal "in the next several months."
Google took great pains Monday to point out how small a deal this was in the grand scheme of the advertising market. It created a Web site devoted to the deal where it quoted competitors in support of its point that mobile-ad budgets are tiny at the moment compared to the overall amount of money spent on online ads.
But Google's willingness to cough up $750 million in stock--making this its third-largest acquisition once it's finalized--shows just how important it thinks this market will become over the next decade.
When asked how quickly Google might see a return on this deal, Gundotra emphasized the future possibilities over short-term financial concerns.
"Getting that group of talented people into our company is an unbelievable return," he said. "It's likely lead to products and innovations we haven't even thought of yet."
Updated at 9:53 a.m. PST with additional details. See subsequent story for more analysis on the buy.
Google's back on the acquisition front, spending $750 million in stock Monday to acquire mobile display ad company AdMob.
AdMob founder Omar Hamoui
(Credit: AdMob)AdMob is perhaps best known for serving display ads on iPhones, but it also recently started a business unit focused on ads for Android phones. The start-up would appear to fit well into Google's advertising business model, giving Google a leg up in the still-small but fast-growing world of mobile advertising.
"I'm excited because I believe this will be an important moment for everyone involved in producing, consuming, or monetizing engaging products on mobile," wrote AdMob founder and CEO Omar Hamoui in a blog post Monday. "The truth is that the mobile industry has had no shortage of creative energy, amazing products, and talented entrepreneurs. But until now, it has always felt like those of us involved in this space played second fiddle to our online brethren. I believe that time is over."
AdMob was founded in 2006. The company runs its Mobile Advertising Network across thousands of Web sites, serving up ads from big names such as Ford and Coca-Cola. It also collects and publishes data on mobile trends gleaned from the traffic it manages.
"Despite the tremendous growth in mobile usage and the substantial investment by many businesses in the space, the mobile Web is still in its early stages," wrote Google's Susan Wojcicki, vice president of product management, and Vic Gundotra, vice president of engineering, in Google's own blog post. "We believe that great mobile advertising products can encourage even more growth in the mobile ecosystem. That's what has us excited about this deal."
Representatives from Google and AdMob are expected to talk about the deal in greater detail later on Monday. This is a friendly takeover, as both companies have already approved the deal, they said in a press release.
It should come as no surprise that Google is back in a buying mood, after several weeks of talk from CEO Eric Schmidt and other company executives about Google's renewed prospects now that the company believes the worst of the advertising recession is past. At $750 million, the acquisition would rank as one of Google's largest deals, trailing DoubleClick at $3.1 billion and YouTube at $1.6 billion but edging out Postini's $625 million selling price.
Google's stock was up 1.81 percent to $561 on news of the deal.
Google updated AdSense this week, adding desktop-style ad support for high-end smartphones like the iPhone 3GS. The change led to Google's insertion of advertisements, alongside search results, into the iPhone Maps application.
Local iPhone map searches now display sponsored listings in the view and list modes of the Maps app.
We discovered examples of these ads on Monday, while searching for a Verizon Wireless store. We should also note that this is the first time ads have appeared within one of the iPhone's default apps, rather than in something we've downloaded for free or purchased from the App Store. Our search for "Verizon" resulted in the following list view:
Maps app search--"Verizon"
Tapping the white arrow in the top blue circle brought us to the "Sponsored Link" screen, which contained some additional information about the business under its name emphasized in italics, such as phone number, Web address, and physical address. In addition, there are options to get directions to or from the business, add it to one's contacts, share it with others, or bookmark it.
Sponsored Link results page.
A mobile AdSense ad appears at the bottom of the Boy Genius Report's mobile site.
(Credit: Google)The march of the ads from the PC to the smartphone took another step Monday with the launch of Google AdSense for high-end phones.
Web publishers can now design AdSense ads--groups of Google AdWords text ads displayed by third-party publishers on their Web sites--with the HTML browsers used by smartphones in mind, Google announced Monday in a blog post. Advertisers had been able to run smaller mobile ads that older mobile phone browsers could handle, but they'll now have an option of showing a more sophisticated ad on a more sophisticated browser like those used by the iPhone, the Palm Pre, and Android phones.
One of the more interesting stories for Google over the next several years will be whether it can replicate its dominant position in PC-based search and search advertising onto the mobile device. Any way you slice it, smart mobile devices are expected to grow at dizzying rates over the next several years and have already evolved to the point where they pack substantial computing power.
As people spend more and more time online with those smaller screens, there will be an opportunity for advertisers and Google to make some money. Google also offers its advertising partners the chance to display AdWords ads on mobile search or AdSense ads in mobile applications for the iPhone and Android devices.
Android and iPhone developers looking for an extra source of revenue will soon have an advertising option, sponsored by Google.
Google's AdSense program--in which it sells and distributes ads to third-party publishers--is coming to mobile devices as a beta program, the company announced Wednesday. A small group of developers have been testing this program but now anyone can apply, said Susan Wojcicki, vice president of product management, in a blog post.
Mobile apps are one of the hottest topics in software development these days, as Apple's App Store continues to grow and other developers roll out their own app stores in response. Plenty of money is being made simply on the sales of the applications themselves, but additional revenue streams are starting to emerge, such as Apple's addition of in-app purchases with the release of iPhone OS 3.0.
Google, naturally, would like to get in on the action. There are other companies offering this kind of service, such as AdMob's strong presence in iPhone apps, but Google is an advertising freight train.
Still, AdSense growth has slowed this year amid a plunge in advertising spending around the world, and moving into mobile provides additional room for the company to grow. Last year Google offered AdSense for games, another step outside its usual comfort zone.
There are a few catches if you want to participate in the beta. Your application must generate 100,000 page views a day, and it must be free. Google is taking applications here.
Google is testing a new ad format that could shake up the familiar look and feel of a Google search page.
A select group of Google advertisers in the U.S. is being given the opportunity to try out so-called "product ads" that will let them put an awful lot more information in their ad than fits inside the current text-ad boxes on Google search pages. The Wall Street Journal reported Friday that Google has confirmed the testing, which won't replace text ads but could allow Google to test the effectiveness of a different bidding system for advertisers.
Unlike standard ads, advertisers in this program will bid on the commission they wish to pay Google for actual sales that occur on the advertiser's Web site, rather than what they want to pay when a potential customer clicks on that ad. The ads will be submitted in the same way companies submit free listings to Google Product Search or Google Shopping through Google Base, but unlike those listings Google says it will provide "prominent placements" for ads submitted through this program.
Google Blogoscoped has the full e-mail sent to potential advertisers, which identifies the program as a "beta" and describes the ads as such: "Google product ads will feature product specific information directly in the ad such as price and product image. During the beta program, Google will be testing to identify the most effective ad formats."
A Google representative did not immediately return a call seeking comment.
Google's love-hate relationship with the advertisers that pay its bills could hit another rocky patch following its latest AdWords policy change.
Google announced Thursday night that starting next month it would begin allowing certain companies to purchase advertisements that use trademarks--even ones they don't own--in the text of their ads on Google search results. Previously, Google hadn't allowed anyone but the trademark owner to use a trademark in the text of an ad, but the search giant reversed course, saying "we believe that this change will help both our users and advertisers by reducing the number of overly generic ads that appear across our networks in the U.S."
But the move could anger companies who are already sensitive about the use of their trademarks as keyword triggers in searches, the subject of two lawsuits pending against Google. According to an industry group called the Alliance Against Bait and Click, which includes companies such as 1-800 Contacts and Starwood Hotels, "this (policy change) further exposes the self-interest guiding Google's advertising policies, which permits dishonest marketers to mislead consumers," it said in a statement.
In some ways, the decision makes an awful lot of sense. Some third-party resellers, for example, were not allowed to use the trademark for goods they were authorized to sell in their Google ads if the trademark holder objected.
Google compared the policy shift to turning its ads into the online equivalent of a grocery store ad circular in a Sunday newspaper, where no one raises a trademark eyebrow if Safeway advertises a sale on 12-packs of Coca-Cola. Google said it would limit the use of trademarks in text ads to three types of companies: resellers, component sellers (buy memory for Hewlett-Packard laptops here!), and information providers.
That brings Google's policies in line with those of Yahoo, which allows trademarks to be used in text ads with similar restrictions. In the past, advertisers have been more willing to sue Google over trademark disputes because the search giant said it wouldn't allow trademarks in the text of ads, but such trademarks would appear anyway from time to time on certain ads, said Dave Kelly, a trademark lawyer with Finnegan.
"This policy is better than what they were doing before," Kelly said. "This means there is an editorial policy and the number of misleading ads should be smaller than under their policy before."
Still some groups, such as the Alliance Against Bait and Click, believe it's possible that the move could grant deceptive advertisers looking to trick searchers onto click farms or e-mail harvesting sites an additional weapon to deploy.
For example, a company could theoretically sell just a single iPhone case on its Web site, advertise under searches for "iPhone cases," and redirect ad clicks to sites that mostly sell competitive smartphones or consumer electronics gadgets. Or, it could force a visitor to provide his or her e-mail for more information before revealing that flashy iPhone case.
More money
What's more likely, however, is that companies interested in preserving their brands could be forced to pay more in Google's ad auction process to make sure their legitimate ads appear on those searches.
Winning Google's keyword auction process involves a combination of the maximum amount an advertiser is willing to pay per click as well as an ad quality score. Without the ability to use a trademark in the text of their ads, third-party retailers were forced to write generic ads that likely didn't see as high a click-through rate as ads with the trademark, hurting their quality score.
But if the playing field is leveled on the quality score side of the equation, then the maximum bid has to go up. AdAge reported that branded advertisers now feel they'll have to increase the maximum amount they are willing to pay per click in order to ensure ads with their trademark appear above ads from companies that don't own that trademark.
Financial analysts who follow Google agree. "Advertisers will likely bid more if the ad can have product names and brands that will help drive CTR (click-through rate) conversions," said Ben Schachter of Broadpoint AmTech in a research note Friday. Combined with Google's announcement last week that advertisers in many parts of the world can now bid on keywords that involve trademarks, Schachter said "these two changes will be positive revenue drivers when allowed and into 3Q and beyond, however, we believe trademark holders will undoubtedly, and loudly, raise legal challenges."
Kelly, who has followed issues with Google and trademarks very closely for years, isn't so sure.
"Although the updated policy may not affect those trademark owners who want to sue Google simply because they object to the act of Google selling their trademarks as keywords, it should reduce the amount of litigation over the appearance of Google's keyword-triggered sponsored ads," he said. That's because Google is now responsible for reviewing the content of the ads to make sure trademarks are being used properly.
In what is likely not a coincidence, the decision comes following a quarter in which Google's cost-per-click numbers (the average cost that advertisers are willing to pay for a click) fell for the second-straight quarter while overall click-through rates remained flat. Issues around Google's trademark policies on search keywords have also heated up in recent weeks, with an appeals court's decision to reinstate the Rescuecom case and a new lawsuit filed this week over Google's practice of allowing anyone to bid on search keywords containing trademarks.
Some of Google's partners will hate this decision, and some, such as retailers, will like it. Either way, Google should benefit from the sale of more relevant--and more expensive--advertising.
Google announced Friday that AdSense users will now be able to change the font face of the text in its ad units. According to the company's AdSense engineers, users will be able to choose between Arial, Times, and Verdana in their ads, but they will only be applied to units on pages primarily in Latin-based characters.
To customize the ad units, AdSense users will need to visit the "Ad Display Preference" section in their Account settings and select the custom font they want to use for their ad. Once they pick that font, they can update their account and all of their ads will immediately change, as soon as the updated code is copied to their site.
Online app developer Zugara announced Thursday that it has released a new Twitter app called "Free Twitter Designer," which allows users to create "professional-looking" background images for their Twitter profile. The new app is available now for free on the company's site.
Popular rock band U2 launched its new album on MySpace Music Friday. The album, "No Lone On the Horizon," will be available exclusively on the band's MySpace profile page until March 3, at which time it will be released on iTunes and CD. The songs can only be streamed and they cannot be purchased through MySpace Music's download partner, Amazon. I can't help but wonder if this is a response to Thursday's report suggesting the album has cropped up on numerous P2P sites around the Web.
The OpenID Foundation, an organization that attempts to promote and enable OpenID technologies across the Web, has hired a new executive director. According to the organization, Don Thibeau, who was an independent consultant prior to his new role, has taken the reins.
ProPay, a provider of merchant payment solutions and PayPal competitor, announced Friday that it has launched ProtectPay, an encrypted payment card processing and transmission service that it hopes will provide an "end-to-end secure option for processing credit card payments in real time." The tool is available now on all ProPay accounts.
Google's radio advertising business has become the newest project that didn't pass muster in Google's new financially rigorous era, and up to 40 employees will lose jobs as a result, the company said Thursday. However, the company isn't completely withdrawing from the market, saying it's begun exploring ads for streaming audio instead.
"While we've devoted substantial resources to developing these products and learned a lot along the way, we haven't had the impact we hoped for. So we have decided to exit the broadcast radio business and focus our efforts in online streaming audio," said Susan Wojcicki, Google's vice president of product management, in a blog post Thursday. "We will phase out the existing Google Audio Ads and AdSense for Audio products and plan to sell the Google Radio Automation business, the software that automates broadcast radio programming."
And cuts will come: "We hope to find other roles for the majority of the people concerned and will work to make that happen over the next couple of months. However, given that we are exiting the broadcast radio ad business and selling the Radio Automation business, we expect that up to 40 people may not be able to find other roles at Google."
Google said employees will have about two months to apply for new jobs within the company. The service itself will shut down May 31.
The search giant has more than 20,000 employees, so losing 40 isn't very many in the scheme of things. However, it's bigger than the full staff of a lot of start-ups, and the cut is notable given Google's willingness for years to tackle an immense spectrum of projects.
Google already said it's cancelling its print-ad service, which like radio is a step away from the Internet domain where Google has the home-field advantage over some rivals. The company will continue to invest in its TV ad business, though, Wojcicki said.
One True Media, the parent company of an online video ad creator called SpotMixer, has announced a fresh $9 million in Series B venture funding. The round was led by DAG Ventures, with contributions from NTT Finance and existing investor Kleiner Perkins Caufield & Byers.
Amid widespread financial difficulties (to say the least) in the media business, SpotMixer and its new investors are pitching it as a cost-cutting option for small companies.
"While the market opportunity for video advertising remains well-defined, smaller businesses are more concerned than ever about how to most cost-effectively spend their limited advertising dollars," said DAG managing director Young Chung, who has joined One True Media's board of directors. "SpotMixer has quickly established itself as one of the most innovative and thoughtful solutions that will enable accelerated growth around this major advertising trend."
In conjunction, SpotMixer announced that it has been appointed the first official "authorized reseller" of Google's AdWords service for videos. This means that SpotMixer clients will be able to directly distribute their ads using Google's ad platform in addition to creating them online.
SpotMixer charges clients a minimum of $49 per month for access to its online tools, which are effectively a souped-up version of the many Web-based video "mixing" services out there. Then they can shoot them out across the Web with video embed codes or ad campaigns on the Web or cable TV.
Making the advertising process cheaper and easier is certainly a good pitch during a recession, but there's a flip side, too: Small companies with tightening budgets could easily opt to nix video ads altogether, sticking with the more familiar territory of text or display advertising. SpotMixer, on the other hand, maintains that video ads are more effective
