Profile: Admob

Google sharpens aim buys Admob

2009-12-29 10:03

California – Four years ago, Omar Hamoui was just
another ineffectual entrepreneur trying to spruce up his resume in
graduate school.

Now, he’s poised to become Google Inc’s newest
weapon as the company aims to extend its dominance of online
advertising from computers to mobile devices.

Google is buying Hamoui’s expertise in a $750m acquisition of AdMob,
a network for ads on iPhones and similar gadgets. He launched the
business while struggling to support his wife and children as a student
at the University of Pennsylvania’s Wharton School.

Hamoui, 32,
changed his life by setting up a system for advertising on mobile
devices. Though that sounds simple, it was a breakthrough because
Hamoui’s network got around stifling controls that wireless carriers
had imposed on the content their customers could see on their phones.
The crack that AdMob opened in the carriers’ "walled gardens" made it
easier for independent programmers to profit from applications planted
on mobile phones.

"It took a lot of guts because (the carriers)
were the gatekeepers of the industry," says Rich Wong, an AdMob
investor and board member who is with Accel Partners. "Back then, it
was sort of like if you said no to the Godfather. Bad things could
happen."

‘Mobile media revolution’

More than a
year after Hamoui ignited the fuse, Apple Inc blew up the status quo
with the June 2007 introduction of the iPhone – which created a
platform for applications chosen by users.

That has spawned more
than 100 000 mobile "apps" for doing everything from bird watching to
cooking poultry. The revenue from AdMob’s ad network is one of the main
reasons application developers can give the programs away or just
charge a few bucks.

"Omar was absolutely the tip of the spear in
this mobile media revolution," says Jason Spero, general manager of
AdMob’s North America operations.

If Google’s proposed
acquisition is approved by the US Federal Trade Commission, Hamoui
thinks he and AdMob’s 150 employees will be in an even better position
to turn mobile phones into moneymaking magnets.

Google is banking on it.

Drawing
upon the more than $20bn in revenue that it generates from internet
ads, Google has been investing aggressively in mobile technology. The
internet search leader has developed a free software system, Android,
that runs mobile devices and is experimenting with its own phone,
called Nexus One, that could be sold directly to consumers.

Google
believes explosive growth in mobile advertising will justify its
spending. For now, the market remains relatively small, with US mobile
advertising revenue expected to reach $416m this year, according to the
research firm eMarketer Inc.

AdMob has delivered nearly 140
billion ads on mobile websites and applications since its inception.
That has helped AdMob double its revenue this year after tripling it
last year. Hamoui won’t be more specific, leaving it to analysts to
estimate that AdMob’s revenue this year will range between $45m and
$60m.

‘Won’t hurt competition’

That’s less revenue
than Google generates in a day. Nevertheless, AdMob’s early lead in
mobile advertising could trouble antitrust regulators already concerned
about Google’s growing power. The Federal Trade Commission has asked
for more information about the deal – a sign that regulators want to
take a closer look at how it will affect competition in the mobile ad
market, which is expected to quadruple in size during the next four
years.

Only two of Google’s acquisitions have been bigger than
the proposed AdMob deal. Regulators quickly approved Google’s $1.76bn
acquisition of the internet’s top video channel, YouTube, in 2006 but
took a year before signing off on the $3.2bn purchase of another
internet ad service, DoubleClick Inc, in 2008. (By coincidence, AdMob
is headquartered across the street from where YouTube started in San Mateo, California.)

Google
contends its AdMob acquisition won’t hurt competition. Among other
things, Google points to other mobile ad networks from rivals such as Jumptap, Mojiva and AOL and argues that mobile ads still don’t generate attract enough spending to be considered a distinct market.

Frustration

Hamoui
started AdMob out of frustration a few months after he enrolled in
graduate school. He was building a phone-friendly website to make it
easier for people to share photos with their family and friends, but he
couldn’t seem to attract much traffic.

To get the word out,
Hamoui bought ads that would appear alongside certain search results at
Google, Yahoo and other engines. That ended up costing him about $30
per referral, which he couldn’t afford. So Hamoui decided to try
advertising his site on other mobile websites, which are specially
designed to work with the small screens and technological restraints of
cellphones.

Hamoui found a mobile website willing to run his ad
for dramatically less money and wound up paying just 10 cents per
referral. The experience resonated with Hamoui’s studies on efficient
markets, and inspired him to build a network that would make it easier
to advertise on mobile devices.

If nothing else, he thought he
might be able to turn the ad network into a project that would let him
get out of having a conventional internship during his summer break in
2006. As it happened, AdMob created enough buzz that Hamoui dropped out
of Wharton in the spring.

One key element of his system is that
it lets programmers specify when and where ads can show up while their
apps are running on a phone. Advertisers, which range from mass
merchants to other app makers, can aim their messages widely – for
instance, to everyone with an iPhone. Or ads can be aimed at a
particular demographic. An ad for the movie Fast and Furious might show up on a mobile game such as Tap Tap Revenge
that’s popular among young men. The targeting frequently hits the mark:
Users tend to click on mobile ads five to eight times more often than
they do on PC ads, Hamoui says.

‘That special sparkle’

Jim
Goetz, who joined AdMob’s board after his firm, Sequoia Capital, put up
the first $4m of the $47m in venture capital raised by AdMob, likens
Hamoui to some of the other successful entrepreneurs that Sequoia has
backed. That group includes Apple’s Steve Jobs, Yahoo co-founders Jerry
Yang and David Filo, and Google co-founders Sergey Brin and Larry Page.

"Omar is a lot like them," Goetz says. "He has the ambition, the intelligence and that special sparkle."

By
selling his startup to a larger company, Hamoui is doing something
those other entrepreneurs didn’t. His investors say he didn’t do it for
the money – AdMob still had plenty in the bank, and Hamoui doesn’t seem
to be driven by striking it rich. He still drives a lime-green Toyota
Camry that elicits good-natured gibes around AdMob’s offices. When he
splurges, he does so frugally. AdMob’s holiday party is being held next
month when the prices are cheaper.

"It just seemed like we would
be able to do the things we want a lot faster and a lot better with the
resources we will have at Google," Hamoui says. "We already have
achieved a big part of what we wanted to do – getting mobile
advertising going and making it possible for people to start a mobile
company without having to do a deal with a carrier first."

– AP

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