Earlier this week Google made a $750 Million purchase of Admob a company specializing in mobile advertising. It surprised the market in two ways. It was Google’s 3rd largest acquisition (behind DoubleClick and YouTube) ever. The mobile advertising industry is fairly small at this time. However, Google is moving into mobile in a variety of ways. It has a mobile operating system (Google Android), mapping/GPS applications (Google Maps/ Latitude), phone applications (Google Voice), and I’m sure a few thing that I’ve missed.
So what does this have to do with me? I have worked for two mobile phone start-up companies in the past. When it was time to move on from them, I had to decide whether to buy my stock options or surrender them. This is often a difficult decision with a start-up company. If the company goes out of business, you get nothing. If it becomes successful, you can make a great deal on your investment. Complicating matters, it’s very difficult to sell private stock. There are a lot of rules like having to offer it back to the company before you can sell it to others. After much thought on my first company, I made a very risky investment and put around $2000 into buying the stock of the company. Roughly one year later, I found myself in similar position when I left my next mobile phone company. I made the same decision and plunged around $5000 into that stock. That’s a good deal of cash out there.
Fortunately the Google purchase puts me in good position. Google put out Google Facts about Google’s acquisition of AdMob and their chart shows that they now have mobile ads covered in: search ads, web display ads, and application display ads. Google points out a glaring omission, they have no SMS advertising. As fortune would have it, the company that I bought $5000 of private stock is probably the unquestioned leader in SMS advertising. Like Admob, the company is a Silicon Valley company like Google and would easily fill the SMS advertising gap. Probably the only thing holding back Google from buying them at this point is that regulators may hassle them if they went too crazy on the mobile advertising front at one time.
The other company that I worked for does location-based software. If you wanted to know where your friends are or where the nearest Starbucks is, you’d use this software. I worked for this company when I was in Boston. Google doesn’t need this company as much as it’s own Google Maps and Google Latitude does something similar. Also, Boston is not very close to Google’s Mountain View headquarters. If Google was to buy something in that area, they’d probably go with Loopt, a Silicon Valley company that does a similar thing. The only thing that really helps my old Boston-based company is that it is starting to move into location-based advertising. The holy grail of this type of advertising is this: You go to Starbucks’ website and sign up your phone to receive special offers. When you walk by a Starbucks, they might send you an SMS notification that you are eligible for a discount on coffee for the next half hour. If you were on the fence, would a savings of a dollar get you to go in and make a purchase? If it does, it’s a big win for Starbucks’ business. That kind of experience is the thing that a lot of businesses would pay for. And you better believe that Google would love to add that location-based component as a great complement to all it’s mobile advertising models.
I had almost forgotten that I own stock in these companies because it seemed like there would never be an event to make my stock liquid. They’ve gotten a lot more interesting lately though.
kosmo @ The Casual Observer says
The SMS company you worked for kicks ass. Maybe I can get a paycheck for the word of mouth advertising I give them :)
Interesting post. I recently bought a HTC Eris, which inspired me to write about Google’s mobile strategy on my own blog. Anyway, one of the main points I raised is that Google would have a difficult time monetizing their mobile advertising because mobile advertising doesn’t convert as well as traditional search advertising. Now after reading your example about the Starbucks, my opinion has changed. I definitely agree that companies would be willing to pay for location based coupons, and as a consumer, I’d be up for that too.
I did some shopping today, and used a barcode from a coupon in my email all on my Eris. I’m sure in a couple years when everyone has an internet enabled mobile device, these types of ideas will really bring in the $$$.
Investing 101 says
I went to the Content Revenue Strategies conference last week, where Google was one of the sponsors. They really are committed to mobile advertising. Kento Sugiura, the Adsense Online Mobile Specialist, made a very interesting presentation about where they’re headed, and how publishers can participate and get their slice of the pie. So when I saw the news of the acquisition, I was absolutely not surprised…
Financial Samurai says
Lazy – It’s a great time to be isn’t it? I live in the Bay Area too, and it’s just PUMPING right now!
Google at $550/share is single handedly rescuing us… actually, Apple, Facebook, Youtube, Twitter, Digg ain’t doing too bad themselves!
Gluck in your investment! I’m sure you’ll do great.
I love Google Voice. There SMS feature truly got me into it. I am able to send off free text messages to Bangladesh, India, and USA. It saves me good money on my texting program from Verizon Wireless because I can use that to text. I think Google always does a wonderful job of giving users what they want and need. I have discovered in the future they are integrating Voice with the Android. Plus they purchased a new VoIP company which they will mix with the other two to give some excellent features. I need to get myself an Androind now haha.