AdMob Said to Talk With Apple Before Google Buyout (Update1)

Nov. 13 (Bloomberg) — AdMob Inc. was approached by Apple Inc. about an acquisition before the company accepted a $750 million bid from Google Inc., according to people familiar with the matter.

Apple approached AdMob a few weeks before Google made its offer, said one of the people, who declined to be identified because the negotiations weren’t public. AdMob, based in San Mateo, California, sells ads that appear on mobile phones.

The interest in AdMob highlights the increasing competition in the mobile-phone market between Apple, maker of the iPhone, and Google, the most popular search engine. Google Chief Executive Officer Eric Schmidt resigned from Apple’s board in July after serving for three years. At the time, Apple CEO Steve Jobs said that move was necessary because Google was entering “more of Apple’s core businesses.”

Together, AdMob and Google will be the largest mobile- advertising company, with about 30 percent to 40 percent of the market, according to Karsten Weide, an analyst with researcher IDC in San Mateo.

Buying AdMob would have allowed Apple to expand into online advertising, a strategy that Nokia Oyj is pursuing, Weide said.

“If a lot of traffic goes through my devices, why can’t I become the middleman that serves ads against that inventory?” Weide said. “AdMob would have allowed them to do that quickly.”

Nicole Leverich, a spokeswoman for AdMob, said the company doesn’t comment on “rumor and speculation.” Matt Furman, a spokesman for Google, didn’t return a phone message seeking comment. Apple declined to comment, said Steve Dowling, a spokesman for the Cupertino, California-based company.

Smart-Phone Sales

Apple and Google are expanding in the market for smart phones — devices that can play music, surf the Web and download video. Sales of those devices climbed 27 percent worldwide in the second quarter, even as total mobile-handset sales dropped 6.1 percent, according to researcher Gartner Inc. in Stamford, Connecticut.

Schmidt said in an interview this week that the company bought AdMob to sell ads that appear in the thousands of programs for the iPhone and devices running Google’s Android software. Being able to place ads in mobile-phone applications is as strategically important as selling links next to Web- search results, he said.

“AdMob is clearly the best of its ilk for applications monetization,” Schmidt, 54, said in the interview at Google’s headquarters in Mountain View, California. “We think that’s as strategic as search monetization.”

IPhone Apps

There are more than 100,000 applications available for the iPhone, while Android has more than 12,000.

Apple has made eight acquisitions over the past decade, including last year’s takeover of chipmaker PA Semi Inc. and the purchase of mapping service Placebase Co. this year, according to Bloomberg data.

Apple, which began selling the iPhone in 2007, opened an online store last year to distribute applications for the device. The company has sold more than 30 million iPhones and 20 million iPod Touch media players, which also can run applications.

Apple rose $2.46 to $204.45 today in Nasdaq Stock Market trading. The shares have more than doubled this year. Google added $4.20 to $572.05 and has gained 86 percent this year.

To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net; Brian Womack in San Francisco at Bwomack1@bloomberg.net; Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net.

Last Updated: November 13, 2009 20:26 EST

From : Bloomberg