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With congratulations to the AdMob team, Sequoia and Accel, since yesterday I have been trying to make sense of the price tag on Google's acquisition of AdMob. $750MM is an eye-popping number for a company at that stage that is probably still losing money.

This morning the nickel dropped.
Google (NASDAQ:GOOG) is repeating the same strategy in mobile that gave it dominance in the search ad business. It is buying distribution relationships with mobile publishers at a loss in same way it bought search and Adsense distribution on the web. Big payouts to AOL (NYSE:TWX), MySpace (NASDAQ:NWS), Ask.com (NASDAQ:IACI) and others brought liquidity to their ad marketplace and a large volume of searches that led to dominance in the search and text ad business. On the web, Google bought the network of publishers with ad sharing revenue. They bought the big ones by using their balance sheet to conclude whopping business development deals, and they bought the small ones through automated web sign up and simplicity.
When it came to Mobile, Google may have faced a dilemma. There are not one or two whopping business development deals that can move the needle, and automated sign up is still challenging. They therefore concluded that the best way to jump start a network of mobile publishers is to buy it, which is what they did with AdMob. Time will tell if the same strategy that worked on the web will work on Mobile.
This points to a bigger trend: As the web fragments (which it is doing at an accelerated pace partially because of Google search), value is moving to those who own and maintain distribution. Distribution comes in three forms on the web and mobile: A high traffic home page like Yahoo (NASDAQ:YHOO), Facebook and Google; a deep vertical site like Edmunds or Zillow (full disclosure: Benchmark investment) or A NETWORK OF PUBLISHERS. The tail is increasingly valuable from a distribution perspective and there are not many companies that can boast a network of publishers for either content distribution or social purposes. Admob had such a nework in Mobile, but the number of independent web networks is small.
I have had a first hand look at the value of the Network of Publishers through our investments in Gigya and Conduit. Gigya has recently announced that it crossed 2500 publishers on its Gigya Socialize network. Another portfolio company, Conduit, has over 200,000 publishers on its very large Network of Publishers. Conduit's publishers such as MLB, Greenpeace and, my personal favorite, www.buysellcows.com have over 60,000,000 combined users that can also help each other through the Conduit Marketplace. When the network works, it is very powerful for all involved.
What is interesting is that Facebook gets this, which is why it is pursuing Facebook Connect. Google gets this, which is why it bought AdMob, developed Adsense etc., and Twitter has this through its open strategy. However, Microsoft and Yahoo do not seem to playing in this game for some reason.
Jason Calcannis had an interesting blog post on how Bing can take 10 points of market share from Google in 6 months.

Essentially, I put forth a simple strategy for Microsoft to pursue with Bing in which they would go to content providers like the New York Times or Wall Street Journal and offer them 50% more revenue then they are currently getting from Google search referrals to be exclusively indexed in Bing.

Here is another approach: Microsoft can buy a network of publishers or a number of them. They need this reach out onto the long tail of the web to get their brand in front of others and to get liquidity.
Source: Making Sense of Google's AdMob Acquisition