Google in talks to buy Indian mobile ad firm

Mar 11, 2015, 3:12 PM EDT
Sundar Pichai, senior vice president of Android, Chrome and Apps at Google Inc., speaks during a keynote session at the Mobile World Congress in Barcelona, Spain, on Monday, March 2, 2015.
Bloomberg/Bloomberg via Getty Images

Google is supposedly in talks to buy InMobi, an Indian mobile advertising firm. The Economic Times reports the planned acquisition as being the US-based Internet search behemoth's first in India and part of a strategy to counter Facebook's dominance in advertising on mobile devices. Two sources familiar with the talks said Google would soon initiate a technology due diligence of Bengaluru-based InMobi followed by discussions on commercial terms. Although financial specifics are still to be discussed, InMobi had been looking for a valuation of over $2 billion (Rs 12,500 crore) in its discussion s with investors for its next round of funding.

One person said exploratory talks between Google and InMobi first started last September, went nowhere and had resumed again. "They are now talking formally, the next step is a technology due diligence," said this person. The second source said the impetus for the talks was an increase in competitive intensity, especially from Facebook. "Things were different last year, both for Google and InMobi. While Google was not facing the amount of heat it's witnessing today from Facebook on mobile, InMobi too was confident of raising another funding comfortably," this person said, adding that Ram Shriram of Sherpalo Ventures, an early investor in both companies, had played a role in the talks. Both sources requested anonymity because they were not authorised to talk about the deal. 

InMobi, one of the biggest ad networks in India, offers advertising services on mobile websites based on the profiles and behaviors of users of those sites, notes the Wall Street Journal. The company has offices across 17 countries with more than 900 employees. Founded in 2007 by a former McKinsey & Co. consultant, InMobi is backed by investors Kleiner Perkins Caufield & Byers, Sherpalo Ventures, SoftBank Corp. and is valued at $2.5 billion, according to a Dow Jones VentureSource analysis. InMobi makes money by charging 40% of the fee advertisers pay to mobile Internet sites. The company turned profitable for the first time in the December quarter last year.

Google Capital, the group's investment arm, has set up shop in India's Silicon Valley, but the parent company has yet to invest directly in the country's Internet and e-commerce sector, writes Reuters. "Advertising is a big revenue generator for Google. As people move from browser or desktop searches, mobile advertising is becoming more important," Neil Shah, an analyst at Counterpoint Technology Market Research, said. Google has bought mobile advertising company AdMob for $750 million, getting a green light in 2010 after months of negotiations with the U.S. Federal Trade Commission. In February, InMobi said 43 percent of its users were in North America and Western Europe, while the Asia Pacific region made up 38 percent. In India, the vast majority of Indian Internet users access the web through their phones. There were more than 240 million mobile Internet users in India at the end of 2014, according to Shah at Counterpoint Research.