Admob about to “mint money”

In an article published yesterday Venturebeat is saying that Admob, the mobile ad company is about to “mint money”.

They Say:

Admob, is showing impressive results according to interviews and an investigation into the overall ad market. Admob puts ad banners on mobile web pages run by companies like ESPN, CBS and Weather Underground. Based on its current performance, the company is getting gross annual revenues $42 million in revenues, according to our back-of-the-envelope math.

Here’s how I approximate the $42 million for Admob’s annual run-rate:

1) Costs: Admob has about 80 employees. The cost of a fully loaded employee is somewhere between $150,000 and $200,000 in Silicon Valley, once you consider salary, healthcare, laptops, their share of server costs, etc. Let’s assume $180,000 for Admob, as it’s backed by the respected venture firm Accel Partners. That gives you a cost of about $1.2M a month. Now, we’ve also heard on solid sourcing that the company has just “broken even.” That suggests the company is making about $14.4 million for itself, and making $42 million or so in topline.

What’s so good about $14 million? Well, in part, it’s because the industry is by most accounts about to embark on break-neck growth. The U.S. market for mobile display advertising is expected to more than double each year through 2011, exploding to $1.2 billion by 2012, from about $100 million this year, according to Yankee Group analyst Linda Barrabee.

However, to be sure, let’s triangulate the costs with what we know about revenue.

2) Revenue, based on public data, and conservative assumptions: Admob publishes its monthly impressions. In the U.S. they’re at about 1.5 billion. Also, we know that overwhelming majority of impressions are direct response, that is, paid only if someone click through, not on a CPM basis. Let’s assume a click-through rate of about 0.75 percent, which is a fair assumption in the U.S. Let’s estimate a revenue per click (CPC) of 18 cents, which is also ballpark considering U.S. norms. That gives the company about $2 million a month in revenue. However, there’s a caveat. A portion of those AdMob’s impressions are paid on CPM, and that does tend to pay better. I’ll assume, based on what I’ve heard, that Admob gets about 20 and 30 percent of its U.S. business on this basis. So you do some subtraction, and then some addition back in, and we’re at about $2.2 million in the U.S. give or take. Meantime, the U.S. only makes up 45 percent of total impressions. To achieve the annual $42 million topline estimated above, Admob would need to get global monthly revenue of $3.5 million, which is quite conceivable. We’re hearing rates in UK are actually better than in the U.S., though Asian rates are still a fifth or sixth of the U.S. (The company’s latest stat report provide notable perspective on global trends: U.S. impression for Admob grew a meager 1 percent in May, compared to April, while impressions in Indonesia roared by 46 percent, as Admob turned on ads for Friendster, the largest social network in Asia.)

Admob declined to comment on the article according to Venturebeat.

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