Google might not be getting what they think they’re getting with their $750 million AdMob purchase

New iPod touch 8GB, 32GB & 64GB“Google is looking to grow through acquisitions. Is this good news for investors? Let me offer up a sports analogy. In baseball, the lifeblood of a franchise is the minor league farm system. Producing your own talent produces a success that is more sure than trying to build a winner through free agency. Once every ten years the Yankees might win a World Series with a team built through free agency but I’ll show you example after example of how a team with a solid farm system outperforms,” Jason Schwarz writes for Seeking Alpha.

“Growth through acquisition is akin to a baseball team that abandons their farm system. Google management is sucking the life out of their R&D team each time they purchase a Youtube or an AdMob,” Schwarz writes. “Employees who innovate at Google might get used to the new growth through acquisition model and come to expect it.”

“Google might not be getting what they think they’re getting with their $750 million purchase of AdMob. Don’t get me wrong, AdMob is exploding right now with their 80% share of in-app advertising for the iPhone, but is it sustainable? Their success lies at the mercy of Steve Jobs,” Schwarz writes. “The only barrier holding Apple back from taking over the ad business of App Store offerings is themselves. It’s one Steve Jobs decision away. Eric Schmidt has already soured the Google relationship with Apple and I don’t anticipate Jobs will allow Google to make a killing off the App Store advertising.”

Full article here.

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22 Comments

  1. Patrick A. Tassos,

    I use the MDN app on my iPhone all day long and it works great for me. Which iPhone are you using? Are you accessing via EDGE or some other slow type of connection?

    The MDN app is fast, pretty much ad-free, and does everything I want it to do. Plus, the user-defined push notifications are excellent. I even like the MDN app’s unique push sound!

  2. @ Superior Being

    Thanks for telling me about MDN App has Push. I installed it once but didn’t see any real advantages to just launching from Safari so I deleted it. It was just another app to take up screen space. But with Push, I just reinstalled and am posting with it now.

  3. Great analogy. Well thought out article, and its true.

    Apple will probably take this business away from Google. Be watching ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

  4. Definitely a good buy for Google, its in their interest to buy up competing advertising models especially for a new and exploding platform. As for the whole ruining internal R&D;that is crap, its the advertising income that allows Google to fund their R&D;and all the great free services.
    Seems like there is a rash of poorly thought out stories and posts from supposedly “in the know” journalists lately.

  5. Terrible article.

    This IS beans to Google and does represent their farm community in this analogy. Every firm does a cost/benefit analysis for what it would take to build vs. buy. I can guarantee that Google did exactly this and made the correct decision. Google has a huge farm league and actually brings more to the table via R&D;than most companies. They’re simply plugging the wholes where it makes sense. This is business 101 people. Apple did the exact same thing with PA Semi.

  6. Google’s products are ubiquitous.

    Their advertising reminds me of the monthly tests of the broadcast system… aggghhhh, aghhhhh, aghhhhhh, this has been a test, blah blah blah.

    I’m not arguing the merits of such a system, but simply saying I equate google with that system.

    Google advertising also reminds me of the banners that remain fixed on the bottom of my television screen (network television, especially), that encroach on my viewing experience.

    And it’s really annoying when the networks insist on advertising upcoming shows while a frickin’ movie is still in progress, its pathetic! Its one thing to break for commercials, but quite another to slap your logos on everything and annoy your viewing public because you believe your offering a public service with your banner advertising.

    Offer me the ability to turn the crap off, will ya’?! Or better still, if someone can invent a device that sits between the signal and the screen that can remove ALL advertising, they’d become instant billionaires overnight.

    </rant>

  7. 1 Apple already has trouble vetting applications. It’s unlikely they will want to suddenly start vetting/distributing ads that are possibly offensive and/or malware…

    2 If Google buying other companies to expand market share kills their internal R&D;department, then that totally explains why Microsoft is unable to do anything unique.

  8. G4Dualie,

    I share your anger over commercials, but the networks are coming under increasing pressure to actually deliver on those ads. Before TiVo, all commercials ran during normal commercial slots, and your programme was free of overt advertising. Then came TiVo (and the derivative DVRs from cable providers), and these regular commercials no longer delivered customers they used to. In order to charge the usual amount of money for airing those commercials, networks must be able to deliver the number of views/conversions (buyers), which they no longer can, and the problem is getting worse. We all now skip through the commercials on our DVRs, so the only way to actually advertise something now is using these “banners”. Since the banner space is obviously not quite adequate for advertising someone else’s product, the networks have pulled ads for their own shows from the usual commercial time slots and transformed them into these “banners”, freeing up the time for third-party (paying) advertising.

    Ad-supported entertainment will continue to exist as long as there are people who are not willing to pay for ad-free entertainment. Unlike few of us on these forums, vast majority of population most of the time does NOT want to pay extra for news and entertainment. They will occasionally rent a movie, or go to a concert, or a theatre, but most often, they’ll put up with the ads in order to watch their “Will and Grace”, or “Law and Order”. Realistically, most of network TV entertainment is not worth paying for. In other words, if I had to pay for it in order to be able to watch it, even if it WERE commercial-free, I wouldn’t want to pay. I’d still rather put up with the interruptions, or not watch it at all (which is what most often happens). I have a feeling vast majority of population prefers putting up with the commercials.

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