Google buys display ads firm AdMeld for US$400m

10 Jun 2011

Google is making a strategic shift to take a greater share of the display advertising market, which is beginning to surpass search advertising. That explains the company’s sixth largest acquisition to date: AdMeld.

Google has acquired AdMeld, an advertising optimisation platform for publishers. It is understood to have spent US$400m on the company formed by a former News Corp executive, Michael Barrett.

AdMeld recently raised US$30m in venture capital from Foundry Group, Spark Capital, Norwest Venture Partners and Time Warner Investments.

The acquisition is Google’s sixth largest to date and will give the company considerable edge in the display advertising business.

AdMeld works on behalf of publishers by trying to get the best prices for their inventory from different ad networks.

There is a strategic reason for Google buying AdMeld and maximising opportunities in display advertising – display advertising is back on a growth curve and is surpassing search advertising.

Digital display advertising overtakes search advertising

According to figures just released by IAB Europe, there was a revival in digital display in 2010. With an average growth rate of 21.3pc, display overtook search advertising as the fastest-growing online ad format in Europe.

Search, which has been the catalyst of online advertising growth in recent years, increased 15.1pc in the same period across the 25 markets measured. Video, mobile and social media all contributed to the powerful performance of display.

IAB Europe’s annual AdEx survey shows the online advertising market accelerating at a growth rate of 15.3pc in 2010 – outperforming the overall European advertising market which grew 5.0pc in the same period.

Total online ad spend was €17.7bn in 2010, compared to €15.3bn in 2009. Market growth ranged from 37pc in Russia and 24pc in the Czech Republic, to 14pc in Denmark and 7pc in France.

Recent research from eMarketer revealed that social networking site Facebook is set to overtake Yahoo to take the largest revenue share of the US online display advertising market this year, according to estimates from eMarketer.

The digital research company said Facebook’s share of the US display ad market, which will be worth US$10.1bn this year, will grow to 21.6pc, up from a 13.6pc share in 2010 and a 7.3pc share in 2009. Facebook’s display ad revenues are expected to amount to US$2.19bn in 2010 and US$2.87m in 2011.

Display revenues at Yahoo, meanwhile, are expected to grow 16pc to US$1.65bn in 2011, after the company saw 13.1pc growth in display in 2010. Yahoo’s share of overall display revenues is expected to increase to 16.4pc this year, after three straight years of losing market share.

Google’s share of the market has grown from 3.6pc in 2009 to 9.6pc last year and is set to reach 12.6pc in 2011. eMarketer is predicting that Google will also overtake Yahoo next year to have a 16.7pc share of US online display revenue. eMarketer estimates the company will bring in US$1.28bn in US online display ad revenues in 2011, up 49.2pc from US$855m in display revenues in 2010.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years