Big Move: How Google’s Acquisition of AdMob Changes the Mobile Advertising Landscape

Google announced today it is buying leading mobile ad network AdMob for $750 million. That’s a hefty sum for a medium still considered to be emerging, although it’s still half of what Google paid for YouTube and pocket change for a company with as big a war chest as Google’s. Then again, Google tends to put its money where the market is (or, alternately, the market goes where Google puts its money, even if in the case of YouTube, ad dollars didn’t follow as quickly as Google would have liked).

Either way, Google’s acquisition sends a strong signal about the importance of mobile advertising in general and its growing centrality to the marketing mix. The move also indicates that as on the desktop, the twin bill of search and display will be the big driver of ad spending on mobile as well, a trend I identified in my recent “Mobile Advertising and Marketing: Change Is in the Air” report (full version of this report is available here to eMarketer Total Access subscribers only).

In the report, I predict that US mobile display spending will grow more than fivefold between 2009 and 2013 and mobile search will increase sevenfold. Looking at it another way, search and display represent 45% of US mobile ad spending in 2009, but by 2013, they’ll account for 72%. Key factors behind these big shifts are growing smartphone penetration and increased Web and application usage, as indicated in the following report excerpt:

A number of factors likewise point to steeper growth for display advertising. One is greater use of the mobile Web. eMarketer predicts that 36% of mobile subscribers will be accessing the Internet from their devices at least monthly by 2011, up from 26% in 2009. More surfing means more exposure to ads.

Another factor is increased usage of mobile applications, specifically free, ad-supported apps. All the available data suggests they will continue to become a more central facet of the mobile ecosystem, meaning that in-application display advertising will likewise grow in importance.

A third factor is the increasing array of attractive inventory options available to marketers. These include interstitials, takeovers and rich media interactive ads.

With respect to search, the logic behind predictions for its increasing primacy is clear enough: On the desktop Web, search ranks as one of the top online activities. As mobile devices mimic desktop PCs more in their capabilities, search will grow in importance on the mobile Web as well.

The AdMob acquisition comes at a time of renewed (or perhaps redoubled) marketer enthusiasm for mobile. Millennial Media, another leading mobile ad network, recently released the findings of its “state of the industry” study, conducted with online knowledge base DM2PRO, which indicated two key trends for 2010: more marketers planning on employing mobile advertising in the year ahead, and bigger budgets, especially among the brand marketers surveyed. All told, good news for the mobile ecosystem, especially for ad networks, which are now in play even more than before.