Is Apple (AAPL) getting into the mobile ad industry by buying mobile ad network AdMob? No — we very highly doubt it.
Why do we ask? Earlier this morning, mobile executive Hadley Harris floated this rumour on Twitter: “Wow, Apple just aquired AdMob for $400M! I was sure it would be Google.” This caused a bit of a flurry as mobile ad executives emailed us wondering what was up.
Our understanding: False alarm. Even the report’s originator has since poured cold water on it.
Hadley, reached by email, says “It was sold to me as a done deal.” But now — on a confidence scale of 1-10, 10 being the most confident that the deal is real, it “sounds like more like a 4,” Hadley says.
We’d say closer to 0. Why? There’s simply no reason for Apple to own a low-margin mobile ad network. Why not?
- Apple’s goal as a company is to sell as many high-margin iPhones (and iPods and Macs) as possible.
- It already sells low-margin (break-even or barely profitable) songs, TV shows, and iPhone apps on iTunes — mostly as a way to drive stronger iPhone, iPod, and Mac sales. There is a side effect of generating more revenue, but it’s mostly to sell hardware.
- We can’t see a low-margin mobile ad business having nearly the same effect on hardware sales — so there’s no reason to own it.
To be sure: Yes, running mobile ads in iPhone apps has become a nice growth story for AdMob. It received 2.6 billion ad requests from iPhone and iPod touch devices in September, up from 130 million in September ’08. And mobile ads do help publishers make more money off free iPhone apps — and therefore, improve the iPhone app ecosystem, which could eventually sell a few more iPhones.
But unless there is a side to AdMob we’ve never heard about, it is simply not a business Apple has to own. The revenue is small and the margins tiny. Instead, Apple is better off letting as many ad networks as possible compete over iPhone publishers, including AdMob, Google, Millennial, and others.
Meanwhile, Apple can support app publishers in other ways — such as its new policy to support in-app purchasing for free apps, while taking a 30% cut.
(For the record, AdMob declined to comment, and Apple hasn’t responded yet.)