Tag: Adobe

Is mobile advertising back?

-Contact Thomas Rasmussen

In a clear sign that mobile advertising has grown up, Google spent a whopping $750m in stock on Monday to pick up San Mateo, California-based AdMob in what we hear was a contested process. This transaction goes a long way toward securing control of mobile display advertising for Google and comes just days after the launch of Android 2.0. Although we’ve been projecting dealmaking in the mobile advertising market for quite some time, we’re nonetheless floored by the rich valuation for AdMob, a three-year-old startup that’s raised just shy of $50m. We estimate that the 140-person firm pulled in about $20m in gross revenue in 2008 and was on track to double that figure this year (we surmise that this translates to roughly $20m on a net revenue basis).

The double-digit valuation for AdMob reminds us more than a little bit of the high-multiple online advertising deals that we saw in 2007. Viewed in that context, Google’s purchase of AdMob stands as the third-largest ‘new media’ advertising purchase since 2002. Of course, like many of those transactions, this was not based on revenue, but instead on technology and market extension, which is consistent with Google’s strategy of acquiring big into core adjacencies.

Looking forward, AdMob’s top-dollar exit is sure to have a number of rival mobile advertising startups excited. One competitor that’s preparing to raise an additional sizable round of funding quipped at the near-perfect timing of this transaction. This is an industry that has seen its ups and downs over the past few years. When we first wrote about AdMob back in May it was in the backdrop of fire sales and failed rounds of funding. If nothing else, this deal will dramatically change that.

Microsoft has been actively playing catch-up to Google in advertising and search, and is sure to follow it onto the mobile device. As are many other niche advertising shoppers such as Yahoo, Nokia, AdKnowledge, Adobe-Omniture and traditional media conglomerates such as Cox. AOL has already made its move, reaching for Third Screen Media two years ago. (We would note that AOL’s $105m purchase of Third Screen is a rare case of that company actually being ahead of the market.)

Startups that could benefit from this increasing focus on the sector include AdMarvel, Amobee, InMobi, and Velti’s Ad Infuse. However, we suspect that some of the major advances – and consequently the most promising targets – are likely to come from players that are just now getting started, with fresh and profitable approaches to location-based mobile advertising.

Some recent mobile advertising deals

Date announced Acquirer Target Deal value Target TTM revenue
November 9, 2009 Google AdMob $750m $20m*
September 14, 2009 Nokia Acuity Mobile Not disclosed Not disclosed
August 27, 2009 AdMob AdWhirl Not disclosed Not disclosed
May 21, 2009 Limelight Networks Kiptronic $1m $2m*
May 12, 2009 Velti Ad Infuse <$1m* $1.3m*
March 11, 2008 Qualcomm Xiam Technologies $32m Not disclosed
August 21, 2007 Yahoo Actionality Not disclosed Not disclosed
May 15, 2007 AOL Third Screen Media $105m $3m*

Source: The 451 M&A KnowledgeBase *451 Group estimate

Will Adobe-Omniture marriage prompt online video M&A?

-Contact Thomas Rasmussen, Jim Davis

When Adobe Systems and Omniture announced the details and rationale behind their $1.8bn tie-up in mid-September, some interesting items emerged. Highlighted was the obvious benefit from a combination of Adobe’s popular Flash video platform and Omniture’s analytics capabilities. As the Web analytics market has become more saturated, Omniture has recently been expanding into higher-margin niches such as online video analytics. Combining online video content management with analytics is an area in which some early startups have carved out a profitable niche over the past few years as video has finally started to move to the Web.

However, if the newly bulked-up Adobe truly moves into the space – as we suspect the company will – it will undoubtedly present an enormous challenge to an industry previously dominated by a few well-funded startups. As a consequence of other larger players wanting to get a piece of the booming sector and startups being more inclined to strengthen their position, we believe consolidation in the market is inevitable. With that as our premise, who might be buying, and who are the potential prime targets?

Among a slew of startups in the space, the two primary ones we think could be in play in this scenario are market leaders Move Networks and Brightcove. The two have each taken in roughly $90m in venture capital. It is worth noting that both Microsoft and Cisco are strategic investors in Move Networks, and we think the company would make a great fit for either one since both have a strong focus on video moving forward. Meanwhile, both IAC/InterActive and AOL are strategic investors in competitor Brightcove. While we don’t think AOL is in a position to make an acquisition like this now, we would not put it past IAC. Google with its more consumer-oriented YouTube makes a logical acquirer as well, particularly as a way to add a business-friendly enterprise offering.

And finally, we might put forward rich content delivery networks (CDNs) such as Akamai and Limelight Networks. These vendors have been buying their way into premium verticals recently to escape the rapid commoditization of their core business and would be wise to consider acquiring into the space. From the estimated $40m or so in revenue that we understand Brightcove brings in, a large part of that comes from reselling bandwidth through CDNs.