If authorized, the acquisition would provide Google (GOOG) with a essential set of technologies to expand its advertising business beyond search related text ads that produce up the bulk of revenue. "Google could have built this itself, but this gives them a head start," says mobile analyst Greg Sterling of Sterling Market Intelligence. "It will thrust Google into the forefront of mobile display ads." Google has already pushed into the wireless market by backing the evolution of Android, an operating system used in smartphones such as Motorola's (MOT) new Droid, run by Verizon Wireless.

Google's third largest acquisition to date, AdMob would give its new proprietor the ability to serve display ads, the pictorial banners that are the chief revenue source for most Web sites, to cell and other mobile devices. Google last June introduced a programme called AdSense for Mobile in a bid to bring display ads on mobile phones, related to its AdSense program, which situates ads on conventional Web sites.

But Sterling said AdSense for Mobile was still "fairly undeveloped." By contrast, he says, AdMob has richer advertising formats, especially ads inside mobile applications. These mini programs have become tremendously popular, and developers have hatched more than 100,000 of them for the iPhone. Software programmers are speeding to create apps for other smartphones, including those from Palm (PALM) and Research In Motion's (RIMM) BlackBerry. Some 12,000 are available for Android. Ads are seen as the key revenue driver for many of these apps.

Courtesy : BusinessWeek