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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[Thanks to MacDailyNews Reader “GetMeOnTop” for the heads up.]

22 Comments

  1. the yankees win world series a little more often than once every ten years; most recently it has only been nine years. having or not having a farm system is irrelevant; a baseball team, or any other business, can be mismanaged in lots of different ways.

  2. Does “In-app advertising” mean that we’ll be seeing ads in the Calculator or Notes or Stanza? Already the last version of Le Monde forces me to look at a Dior ad for 5 seconds before I can read the articles… I’d much prefer paying 1$ or 2$ or even 5$ to get ad-free apps. If that’s the way apps will be working there”ll be a lot of deleting…

  3. @Dave

    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.

    zing!

    I wonder if R&D;is put in a position to compete with these newly acquired properties, or made to feel inadequate because they were unable to deliver, management was forced to buy the tech instead?

    I also wonder whether directors play both sides against the middle to motivate employees.

    When you buy another company, you’re getting a lot more than just their flagship products.

  4. Mergers & Acquisitions are interesting. You need both homegrown and acquired products and services. Sometimes you need to buy because of market presence, footprint, etc. eBay tried to build their own payment system … but PayPal had already established itself as the standard. eBay was was correct to purchase PayPal if they were to play in the auction/online payment game.

    Building internally is good when you can… which is what most companies do most of the time. But the NIH (not invented here) mentality is dangerous… it leads to blindness too.

    But, in my experience, the one thing most M&A;folks don’t consider is how much is that company worth *in* my company post-acquisition. Take Dell, for example. The market says they’re worth ~$30B (US). Dell is worth different amounts depending on if they were sucked into Cisco, IBM, Oracle, EMC, or Apple. Some of those companies would run them into the ground (to zero value) and some would make more out of it.

    So, the value depends on how Google can executive on that new asset. Hopefully, NIH antibodies don’t resist them… but rather embrace what AdMob is.

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