Microsoft and Nokia rumoured to be in advanced takeover talks with Millennial Media and Inmobi
The rumor mill in the international mobile advertising space is again at full tilt. Late last year the world’s biggest Internet company Google sent a massive tidal wave of expectation through the industry when it acquired AdMob for a whopping $750m. Apple was quick to follow, picking off Quattro Wireless for an estimated $300m and going for an obvious but snappy rebrand, iAd. Now the two next biggest operators in mobile ads, Millennial Media and Inmobi, are the targets of takeovers by some of the richest technology companies on the planet. Anonymous sources say that Microsoft and Nokia are close to closing a deal, fending off competition from Research in Motion (RIM), the firm behind the BlackBerry, in the race to acquire a major player in mobile ads.
The state of mobile ad networks worldwide
Millennial Media and Inmobi are mobile ad networks, similar to Madvertise in Germany, which give advertisers access to the mobile Internet market. They build the technology to create and place ads on smartphones and mobile phones, so are optimally placed to cash in on the mobile boom. Baltimore-based Millennial is the third-largest player in this segment after AdMob and iAd.
In acquisitions of this sort the target’s valuation is typically based on a multiple of annual turnover. Google set a seriously high benchmark when acquiring AdMob, essentially overpaying for it, with a valuation based on a multiple in the region of 18 or 19. By comparison, Millennial Media is expected to fetch between 10 and 12 times annual turnover.
Mumbai-based Inmobi is the next biggest player, focusing primarily on Japan, the Middle East, the USA and Europe. It recently poached employees from Google and sources say Inmobi is planning to step up activity in Eastern Europe and the USA. The company has a well established network, with a team of 70 developers in India maintaining and developing the platform.
The flurry of takeover activity reflects the fact that mobile ad networks are a sensible acquisition for any global player with a mobile OS. Google and Apple may have been – as in so much else – the first to the trough, but there are still three mobile OS owners in the hunt for their own mobile ad network: Blackberry, Microsoft and Nokia.
Millennial Media and Inmobi both close to a deal
Our sources tell us that Nokia and Microsoft are both well along the way to a takeover. Nokia blundered by integrating mobile advertising as just one component in their own NavTech unit and are looking to regain the initiative with a dedicated platform. According to sources familiar with the situation, the Finnish mobile operator has expressed a strong interest in Inmobi and discussions are already at an advanced stage.
With its promising Windows Phone 7 Series operating system ready, Microsoft is keen to get in on the action and has been in pursuit of Millennial Media since at least April this year. Sources close to the situation say Bill Gate’s tech giant is now in advanced talks with Millennial about a takeover. Paul Palmieri, the CEO, told Baltimore Business Journal in May that the exit of preference was to take Millennial to an IPO within two years, but with Microsoft now insistently knocking at the door priorities may have changed.
Microsoft is not the only potential suitor for Millennial. A couple of weeks back the Wall Street Journal reported that BlackBerry maker Research in Motion was in takeover talks with Millennial, but had balked at the mobile ad network’s Google-inspired valuation of between $400m and $500m.
Millenial’s suitors: BlackBerry and Microsoft
If you believe the Wall Street Journal’s sources, Millennial’s valuation was too rich for RIM. But with Microsoft in advanced discussions it could be that the Blackberry maker digs deep to try and secure the acquisition. The likely outcome there would be a bidding war, in which case Microsoft would hold all the cards. That would leave RIM running out of options. There are not that many global mobile ad networks around – perhaps 20 of them – and most are already strategically aligned with Google and Apple.
Beyond the high price, Millennial’s Apple-App heavy inventory also makes a takeover by RIM less likely, given Apple’s expected opposition to a Blackberry-owned platform. An unhappy Apple could potentially shut Millennial out from all location-based targeting on app inventory. Exchangewire has speculated that RIM could go on a shopping spree instead, buying up a string of small aggregators and ad networks such as Madvertise, Smaato and Adfonic for Europe and the United States, or Zest-Adz and Buzz City for the Asian market.
We spoke to Berlin-based mobile ad network Madvertise and they confirmed that Research in Motion had already been in contact. Startups like Madvertise represent a viable alternative for RIM as they are potentially stronger in local markets than the international players, and acquiring a string of such local operators would give a foothold from which to compete with the global ad networks.