Google is somewhat new to the mobile operating system and mobile device markets, but one market it understands, arguably better than any other entity, is online advertising. So, there is reason to raise an eyebrow when Google throws down $750 million to purchase a company like AdMob that is focused on mobile advertising.
Mobile advertising is a nascent market, but Google is placing a pretty hefty bet on its continued success. AdMob has built a solid reputation among the emerging mobile ad competitors, serving ads to both the iPhone and Android platforms. The purchase keeps Google a step ahead of the competition and provides it with an opportunity to help define the market as it has defined the online search advertising industry.
Google developed the Android mobile operating system as a license-free open source project. Now that Android is gaining a significant stake among mobile phones with devices like the Motorola Droid, Motorola Cliq, Samsung Behold II, and HTC Droid Eris, Google is ready to cash in. The purchase of AdMob provides Google with a revenue stream it can use to capitalize on the popularity of Android.
Google has made other purchases this year, like On2, reCAPTCHA, and the rumored purchase of Gizmo5. Those purchases pale both in the investment made by Google and the potential impact they have on Google's business model and revenue.
You have to do a double-take when any company invests three-quarters of a billion dollars to purchase another. Whatever Google's plan is, you can bet that it has mapped out the strategy for recovering the investment. Google wouldn't spend $750 billion without a pretty solid plan for leveraging the purchase and turning it into a lucrative revenue stream.
The AdMob purchase is sort of the mobile advertising equivalent of Google's $3.2 billion purchase of DoubleClick a few years ago. Google had begun developing an in-house solution with AdSense for Mobile, but why waste time and money reinventing the wheel when AdMob already has a successful platform for serving feature-rich ads across mobile platforms.
Google is preemptively pleading its case against any potential claims of antitrust concerns. Google is quick to point out that the availability of mobile advertising that can be embedded in apps like those found in the Apple App Store and Google's Android Market help developers deliver a more diverse selection of functionality for mobile devices.
There are more mobile devices in the world than computers, and as those mobile devices have evolved to become portable computing platforms complete with broadband web access, search engine advertising like that provided by Google and Bing has to evolve as well.
The AdMob purchase is almost guaranteed to have a ripple effect, with Google competitors either expediting their own competing services, or purchasing an AdMob competitor to get in the game as quickly as possible like Google is doing.