Google (GOOG, Financial) is in talks to buy Indian mobile advertising startup Inmobi recently. Inmobi is a Bangalore, India-based startup working in the area of mobile advertising interface and the US-based search engine giant has a huge user base to offer for mobile advertising. This could be Google’s first deal in India’s startup, taking a cue from Facebook.
It is not certain yet that the Indian company will put itself on sale or not. The companies started discussing the deal in September last year, but the discussions went nowhere. They are now talking formally and the next step is technology due diligence. Things are different for both Google and Inmobi now. Google faces a stiff competition from Facebook Inc (FB, Financial) in mobile advertising; Inmobi has also faced difficulties in raising funds recently. This deal, if successful, will be the biggest transaction in the Indian startup space. Twitter Inc (TWTR, Financial) bought Indian startup ZipDial for around $30 million earlier this year to increase its capabilities in mobile ad space.
Inmobi’s startup journey
Inmobi, currently valued at $2-$2.5 billion, was setup in 2007 by Naveen Tewari and fellow IIT-ians Amit Gupta, Mohit Saxena and Abhay Singhal. It began with the name Mkhoj as a mobile search venture and changed its name and business model and went on to become a startup success story. It is backed by Japan’s Softbank, capital venture firm Sherpalo and other investors. Inmobi makes money by showing mobile advertisements for the biggest brands in the world. 43% of mobile devices on InMobi’s network come from advanced mobile markets in North America and Western Europe. Asia Pacific, which accounts for 38% of InMobi’s audience, is the second largest contributor, while Latin America makes up a further 10%. It targets the right user at the right time to maximize the results. Inmobi has a huge user base and a team of engineers, analysts and data scientists for doing so. Inmobi’s most difficult task is developing analytics to understand users in a better way. Inmobi boasts of around 1 billion users in 200 countries.
Both Google and Inmobi refused to comment on the deal. Both the companies are negotiating on how may unique users Inmobi has. Its competitor being Millennial Media, Admob and Apple’s (AAPL, Financial) iAd service in the mobile advertising world.
Google in the mobile advertising world
Google has already bought Admob for $750 million. This potential acquisition will give Google a stronger presence in the mobile ad space in which Facebook has emerged as a key player. Facebook showing its dominance among mobile web users has larger share of revenue in the Ad space. Mobile advertising accounted for 69% of Ad revenue for Facebook in the fourth quarter. This deal can be Google’s move to parry the competition. Facebook commands a third of mobile display ads. Facebook and Google together command half of it. The promise of mobile advertisements is familiarity. As Facebook knows who we are and Google knows what we want, these two are tough competitors. Twitter, Apple Inc and Pandora Media Inc (P, Financial) are other key players in mobile advertising. Other players fight for just one-fourth of the market.
Conclusion
India has almost 240 million mobile web users, a lot of people access the web only through mobile devices especially since the time smartphones have come into vogue. Mobile advertising is an extremely effective medium in the country. This is one of the reasons for growth of Inmobi’s user base in the country. But recent valuations by investors have not been in favor of Inmobi. The company recently turned to profit in the last quarter of 2014. The skepticism by the investors in the latest round of funding can be a concern for the company. Most investors valued it around $1.5 to $1.8 million. This could be the reason for inception of the deal with Google. On the other hand if Google succeeds in bagging this Indian startup, they will get the required arsenal to counter the competition from the advertising heavy weight Facebook and can draw in sizable ad revenue to paint a better financial picture for its investors. For now, all Google patrons and investors should wait with their fingers crossed and wish that the deal go through in Google’s favour so that they can reap better profits from their stakes in the search engine giant.
