Nov. 9 (Bloomberg) -- Google Inc., owner of the world’s most popular Internet search engine, agreed to pay $750 million in stock for AdMob Inc., a mobile-phone advertising startup backed by Google investor Sequoia Capital.

The deal shores up Google’s position in the mobile- advertising market, helping decrease its reliance on desktop Internet ads, where growth is slowing. AdMob, which sells ads displayed on wireless devices, has benefited from the popularity of smart phones, such as Apple Inc.’s iPhone and Research In Motion Ltd.’s BlackBerry. The U.S. mobile-ad market should reach $2 billion to $3 billion by 2013, up from less than $1 billion now, according to Sanford C. Bernstein & Co.

“It’s right in the area where Google is looking for growth,” said Jeffrey Lindsay, a Bernstein analyst in New York. He has an “outperform” rating on Google’s shares, which he doesn’t own. “It’s probably a great acquisition by them.”

AdMob raised venture capital from Sequoia, Accel Partners, Draper Fisher Jurvetson and Northgate Capital. Sales should more than double this year, AdMob Chief Executive Officer Omar Hamoui said in an interview today. The company will benefit from Google’s resources, including its engineering teams and technology.

“We chose Google, and we chose that over an independent path; and we chose that over other options,” Hamoui said. “We’re very excited about getting to Google. We feel like we’re going to be like kids in a candy store.”

Moved Quickly

The purchase is subject to certain closing conditions, the companies said in a statement. Both parties have approved the acquisition.

“There’s a couple of areas that Google is very focused in. One of them is mobile, another is display,” Vic Gundotra, vice president of engineering, said in an interview. “AdMob really brings both of those together.”

The company was founded in 2006 in Hamoui’s dorm room at the University of Pennsylvania’s Wharton School. AdMob initially just sold Web links, before branching out into graphical ads about a year later.

AdMob helps place ads from companies such as Toshiba Corp. and Volkswagen AG on mobile applications and Web sites.

Sales of such ads probably won’t eat into Google’s current revenue, Bernstein’s Lindsay said.

“The one fear that people had was that mobile advertising might be cannibalistic,” he said. “By and large, it’s all incremental money.”

Largest Player

With this acquisition, Google becomes the largest player in the mobile-advertising industry with an estimated 30 percent to 40 percent market share, said Karsten Weide, an analyst with IDC in San Mateo, California. Other players include Yahoo! Inc. and Microsoft Corp.

The market has been doubling or more in size annually, Weide said.

“As always the advertisers follow the eyeballs,” Weide said. “The expectation is that it’s going to be very effective advertising because it’s right in front of your face and you can’t ignore it.”

The purchase of AdMob comes more than a year after Google’s $3.2 billion acquisition of DoubleClick, a display-advertising company that shows and manages ads on desktops. Display advertising includes banner ads that contain pictures and other graphical elements.

Working Together

The purchase “enables us to accelerate both mobile and display,” Susan Wojcicki, Google’s vice president of product management, said in the statement. “I think there will be opportunities” for DoubleClick and AdMob to work together, she added.

Google, based in Mountain View, California, rose $11.41 to $562.51 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares had gained 79 percent this year before today.

Google CEO Eric Schmidt said last month that the company is again focused on acquisitions after pulling back on spending during the financial crisis in 2008.

“We’re open for business, making strategic acquisitions, both large and small,” Schmidt said in a conference call with analysts.

To contact the reporter on this story: Brian Womack in San Francisco at Bwomack1@bloomberg.net

Last Updated: November 9, 2009 16:11 EST