Mobile-Ad M&A Frenzy May Continue

Google's purchase of mobile-ad company AdMob could be the first of many deals in this hot sector

By Olga Kharif

Michael Bayle has been fielding a lot of phone calls in the two months since Google bought mobile-ad company AdMob for $750 million. Bayle is a vice-president at Amobee, also in the business of placing ads on wireless handsets. "Our phone has been ring-ringing off the hook," Bayle says. "We are speaking to a number of parties."

Startups that specialize in mobile advertising are getting a lot of phone calls these days. Possible acquirers are gunning for a slice of an industry that according to ABI Research may generate $1.14 billion in sales this year, almost four times the $297 million spent in 2008. "Mobile ads are [one of] the hottest areas in technology right now," says M&A expert Tom Taulli.

There's especially high demand for so-called mobile-ad networks, such as Amobee, which act as middlemen between advertisers and wireless service providers to broker the placement of ads in games, videos, and other mobile content. Then there are mobile-ad exchanges, such as RingRing, which often get involved earlier in the process, helping connect advertisers with mobile-ad networks.

On Jan. 20, mobile Web browser software provider Opera bought ad exchange AdMarvel. Earlier this month, Apple (AAPL) snapped up mobile-ad network Quattro Wireless for $275 million to $300 million, according to published reports. AdMob was Google's (GOOG) third-biggest acquisition to date. Other mobile-ad companies may fetch far less than $250 million, Taulli speculates. Still, the dealmaking is far from over.

Analysts say potential targets include ad networks Millennial Media, Jumptap, Greystripe, and Tapjoy, and ad exchanges such as Mobclix. "The AdMob acquisition blew the roof off [valuations]," says Sunil Verma, co-founder of Mobclix, which soon expects to close a funding round. "It validates the market size and potential, and that's sparked a trickle-down effect on others." Verma declined to discuss funding details. To date, Mobclix has received $4 million to $5 million in angel funding from investors, including Verma and three other founders.

De Rigueur for Many Advertisers

Millennial Media is the largest of the potential targets. It received a $16 million funding round in November and aims for an initial public share sale in 2011 or later but would consider a buyout sooner for the right price, Millennial Media CEO Paul Palmieri says.

After years of overoptimistic projections, advertisers are finally boosting spending on mobile ads as consumers step up purchases of smartphones that are better-equipped than cell phones for Web surfing. Jumptap's revenue last year increased five times over its 2008 figure, says CEO Dan Olschwang. "More [advertisers] now treat mobile as a must-have component in their media mix," he says.

In November 2009, 61.5 million U.S. users accessed the Internet via mobile devices, up from 46.6 million a year earlier, according to Nielsen Mobile. Within five years, more people will access the Web via mobile devices than personal computers, Morgan Stanley (1 2 Next Page

Business Exchange

Track and share business topics across the Web.