×

Why Google is Paying $750 Million for Ad Mob

Google Headquarters
AP
Google Headquarters

Today Google announced it's paying $750 million in stock for AdMob, a three-year-old start up that delivers and targets ads to mobile devices.

This is a strategic move for Google in the growing mobile ad space, and could be a key way for Google to expand its search business.

There's no question AdMob is one of the most innovative companies in the advertising space, allowing advertisers to access real-time data about the success of their ads — i.e. how effectively they drive people to websites etc — and quickly and easily adjust where and how they advertise.

Back in June I profiled the company, interviewing CEO Omar Hamouiand examining how Ad Mob's technology has helped a company like Armani with its mobile ad strategy. AdMob has over 15,000 mobile web sites and applications in its publisher network, and thousands of advertisers, from movie studios, to retailers. AdMob has the scale to help marketers reach just the right demographic, and the specific metrics to show exactly how consumers are interacting with the ads.

The real potential for Google and AdMob is in smart phones and the billions of dollars that will be spent on ads for these devices over the next few years. The more smart phones out there, the bigger the potential market for Google and AdMob.

The mobile ad market is still nascent: eMarketer estimates mobile ads were responsible for just $416 million in 2009 revenue, a tiny piece of the $24 billion online advertising pie. But mobile ads are expected to be one of the fastest growing categories as smart phones become pervasive. Google's AdSense for Mobile was never as sophisticated or cutting-edge as AdMob, so this seems like a smart buy, even if Google paid more than the entire mobile ad market is worth.

Questions? Comments? MediaMoney@cnbc.com