A flurry of mergers and acquisitions is on the cards next year in the mobile ad industry as media players are encouraged by Google's move in their quest for new revenue streams in the fast-growing area.

Some estimates suggest the market for mobile ads could rocket to $10 billion over the next four years, although expectations vary widely.

Given traditional advertising in mediums such as broadcast television is on the decline, companies such as Microsoft Corp and AOL Inc may have to be prepared to pay premiums similar to what Google lavished for AdMob, a company with an estimated annual revenue of just $45 million to $60 million.

Based on that estimate, the acquisition was priced at a multiple of up to 16.7 times sales, the sort of price rarely seen in takeover deals since the heady days of the dot-com boom.

"There will be a period of external growth. You can definitely bet on Microsoft, AOL to make purchases (of mobile ad companies)," Julien Theys, analyst at Screen Digest said.

Players such as unlisted U.S.-based AdMarvel, Millennial Media and Medialets are seen as potential targets, according to Bob Walczak, chief executive of Ringleader Digital, a mobile ad company that has itself received indications of interest.

"There were interesting offers but nothing that our board decided to pursue," Walczak said, adding venture capital firms were back in the game.

Walczak predicted most of the consolidation will take place in the next two years.

Small players such as Germany's YOC YOGC.DE and 12Snap as well as Britain's Velti, which itself acquired Ad Infuse in May, could also be potential targets.

In fact, statements by YOC Chief Executive Dirk Kraus chime with those of Walczak. "It is an open secret that we have been approached on a regular basis by parties that are interested in acquiring us," Kraus said.

On the back burner

YOC may be particularly interesting, Oppenheim Research analyst Marcus Sander said, as it did not experience the share price rise it had hoped for following the AdMob takeover.

"If you ask me whether or not I was hoping for our share price to rise following Google's AdMob acquisitions, I say 'of course'," said YOC's Kraus. Since the takeover, YOC's shares have fallen about 3 percent.

Before consolidation in the sector was put on the back burner because of the global financial crisis and tight advertising budgets, Microsoft and AOL bought ScreenTonic and Third Screen Media, respectively, in May 2007, already betting on a boost in mobile ads with the advent of the iPhone.

Finland's Nokia Oyj, too, ramped up its mobile ad business with the purchase of Boston-based Enpocket.

The price Google paid for AdMob, however, suggests hopes are higher than previously thought.

"I'm not sure why Google has paid that much for AdMob, but it must be due to their view of the mobile ad's market growth in the future," said Oppenheim Research's Sander.

Some studies on the mobile ad market are particularly bullish, with market research company Heavy Reading putting the global revenue figure for the industry at between $10 billion and $15 billion in 2011, up from $1.4 billion in 2007.

Others are more cautious. Kelsey Group expects mobile ad revenue in the United States to hit $3.1 billion in 2013, while a study by Parks Associates found revenue from mobile ads in Canada and the United States is expected to grow to $1.5 billion in that year.

Either way, most companies in the mobile ad sector are relatively small and any premium would be affordable for big media and IT conglomerates, who will rather buy in than find themselves left out when the market takes off.

"The big companies don't want to miss the train, which is why further M&A activity is likely," said Wassili Papas, fund manager at Union Investment.

Whether takeover of mobile ad companies will ultimately pay off in terms of revenue and profits, however, remains a gamble.

Martin Sorrell, chief executive of the world's top ad agency group WPP Plc, said at the Reuters Global Media Summit: "I think there will be more consolidation in mobile (ads) of course (but) proof of the pudding is in the eating."