Google and AdMob were kind enough to chat with us for a few minutes about today’s deal.
After the conversation, we’re more comfortable that Google hasn’t gone stark-raving mad. In fact, we think it’s probably a smart bet.
Our basic questions were:
- What’s AdMob’s revenue?
- Is that gross revenue or net revenue?
- What is the revenue split between AdMob and publishers?
- Why did Google pay stock instead of cash, thus giving up boatloads of future upside?
- How could AdMob possibly be worth $750 million?
- How long are AdMob’s deals with its 15,000 publishers?
- What future scenario could justify this purchase price?
Here are the answers:
What’s AdMob’s revenue? No comment. (We’re therefore going to assume that the $45-$60 million numbers that everyone’s using are reasonable.)
Is that gross or net? No comment. (We’re therefore going to assume that the $45-$60 million is probably gross. AdMob’s share of that revenue–after paying the publishers–is likely about $20-$25 million, or 40% of the total.)
What is the revenue split between AdMob and publishers? 60% to the publishers, 40% to AdMob.
Why did Google pay stock instead of cash, thus giving up boatloads of future upside? Answer: Because AdMob wanted stock. (Fair enough. No humongous capital gains tax and future upside. Could be extra expensive for Google, though, if the stock keeps going up.)
How could AdMob possibly be worth $750 million? Last financing round was $300 million at the end of last year. Google’s rich. They wanted us. We knew a sugar daddy when we saw one. We took ’em for all we could get. (Our take on AdMob’s diplomatic response. Fair enough).
How long are AdMob’s deals with its 15,000 publishers? No contracts. (This means that any of the publishers could leave at any time. Which means that Google needs to do a lot better job with AdMob that it has done with, say, Feedburner.)
What future scenario could justify this purchase price? Mobile’s going to be huge, iPhone users spend hours online, we wanted to jumpstart our mobile efforts, AdMob’s developers rock, etc.
OUR TAKE: This is Google using its market cap and wealth to take a big swing at a fat pitch. Google needs to add some big businesses to complement the maturing search business–and this could be a really big one. We’re not yet sold on the fact that mobile ads are going to be anywhere near as big a market as most people think, but the iPhone certainly makes this scenario more likely than it used to be. $750 million is chump change for Google. So, why not?
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