When Google announced its proposed $750 million acquisition of AdMob earlier this month, there was little question that the deal would create a powerhouse in mobile display advertising. But exactly how strong a position the combined companies would have was more difficult to quantify.
Now, a new analysis estimates that Google and AdMob together would account for nearly a quarter of the total ad revenue generated by the top U.S. mobile ad networks. Based on their combined 2009 mobile ad revenue of $68 million, market research firm IDC estimates the two companies would have a 24% market share.
While the AdMob acquisition would give Google a leading position in mobile display advertising, it would be unlikely to trigger an antitrust action, according to IDC.
The next-biggest player would be Millennial Media, with $51 million in mobile ad revenue, or an 18% market share, followed by Yahoo, at $32 million (11%); Microsoft, at $23 million (8%); Quattro Wireless, at $21 million (7%); JumpTap, at $11 million (4%); and AOL, at $7 million (2%). All others combined would make up the remaining 26%.
The figures were based on the number of ad impressions served by the networks multiplied by an estimated average CPM rate (which was not disclosed). What it all adds up to in IDC's view is that Google's chief rivals must pursue their own deals to keep pace in the emerging mobile ad arena.
"What remains is that both Yahoo and Microsoft cannot afford to not also acquire either Millennial Media or Quattro Wireless, given that Google and Admob's combined revenue will be more than twice that of Yahoo's and three times that of Microsoft's," wrote IDC analyst Karsten Wiede in a research note.
The problem for Microsoft and Yahoo, he added, is that Google's valuation of AdMob is at least 10 times its worldwide revenue this year, setting a benchmark for the two independent ad networks. Millennial, like most of AdMob's other competitors, hailed the proposed acquisition as a "validation" of mobile advertising in general -- no doubt with an eye toward what their own companies might fetch.
IDC estimates that Millennial wouldn't draw quite as high a price -- at $550 million -- as AdMob, because even though it has higher U.S. revenue than AdMob ($51 million versus $40 million), it has less of an international presence. Others have also pointed out AdMob's value in usage data it collects from ads served in iPhone and Android applications.
For its part, Millennial says its network reaches about 80% of U.S. mobile Web users. IDC also projects that Quattro Wireless could expect a valuation of about $400 million.
The AdMob deal would be Google's largest after DoubleClick ($3.1 billion) and YouTube ($1.65 billion). The search giant itself has said it would not be surprised if there was some "regulatory review" of the transaction, given its past experience.