The New Advertising Age / Meet Omar Hamoui, the entrepreneur who channeled innovation and frustration to build a mobile advertising network Google couldn't live without.

The New Advertising Age

Meet Omar Hamoui, the entrepreneur who channeled innovation and frustration to build a mobile advertising network Google couldn't live without.

By Jason Ankeny Entrepreneur Magazine - March 2010

The story behind the startup that grew to become the biggest mobile technology acquisition in Google's history begins five years ago in a small dorm room on the campus of the University of Pennsylvania. At the time, Omar Hamoui was pursuing an MBA degree at Penn's prestigious Wharton School while struggling to kick-start fotochatter, a mobile social networking startup that lets users share photos with friends. The challenge was reaching consumers: Online advertising for a mobile service was not only impractical, it was also prohibitively expensive--Hamoui calculates that the time and money spent marketing the company translated to customer acquisition costs of $30 per user. So he turned to the emerging mobile web instead, paying sites a penny per click to promote the fotochatter solution. "About 10 percent of people who clicked the mobile ad signed up for the service," Hamoui recalls. "Our customer acquisition cost dropped from $30 to 10 cents overnight."

The lessons Hamoui learned from marketing fotochatter led to the January 2006 launch of AdMob, a mobile platform that allows advertisers and publishers to navigate the discovery, branding and monetization complexities hampering their own efforts to target wireless subscribers.

"I was a single individual trying to do something in mobile," says Hamoui, CEO of the company, which is based in San Mateo, Calif. "I became frustrated because I didn't have a deal with an operator or a handset maker. I needed a way to connect with users. AdMob was started to help people with interesting ideas bring them to fruition."

AdMob now serves more than 10 billion banner and text ads each month across more than 15,000 mobile websites and applications, with a client list that includes Coca-Cola, Procter & Gamble, Adidas and Paramount Pictures. In early November, Google announced an agreement to acquire the firm for a staggering $750 million in stock, the digital services giant's third-largest deal ever, behind Internet advertising solutions provider DoubleClick ($3.1 billion) and video aggregator service YouTube ($1.6 billion).

Privately held AdMob doesn't disclose revenues, but J.P. Morgan estimates that the company generates between $45 million and $60 million annually. Based on those figures, the Google deal was priced at a multiple of as much as 16.7 times revenue--the kind of valuation that evokes the gold-rush heyday of the dotcom era.

Research firm IDC estimates that together, AdMob and Google control a

21 percent share of the U.S. mobile advertising market. AdMob's closest competitor, mobile advertising network provider Millennial Media, accounts for 12 percent, followed by Yahoo at 10 percent and Microsoft at 8 percent.

Most analysts agree that the AdMob deal not only signals validation for the mobile advertising segment as a whole (research firm Gartner reports mobile ad spending worldwide increased 74 percent in 2009, to $913.5 million), but that it's also likely to set off a wave of me-too acquisitions as Google's rivals look to balance the scales. Apple was the first to respond, scooping up mobile ad network Quattro Wireless in early January for a reported $275 million.

While mobile still represents just a fraction of advertiser budgets--research firm eMarketer estimates that U.S. mobile ad spending reached $416 million in 2009, compared with $24 billion for online marketing--Hamoui contends that businesses of all shapes and sizes must now give the channel their undivided attention, especially with more traditional advertising mediums on the decline.


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