Google and Apple are increasingly bitter competitors, but with federal regulators on Friday approving Google’s $750 million purchase of the mobile advertising company AdMob, a thank-you note from Mountain View to Cupertino might be in order.
Surprising many observers who expected the deal to be blocked, the Federal Trade Commission will allow Google and AdMob to combine after a six-month investigation, despite its concerns about the loss of competition between what are now the two largest mobile advertising companies. The primary reason, the FTC said, was Apple’s acquisition in December of the third-largest mobile ad network, Quattro Wireless, and Apple’s subsequent launch of its own mobile ad network, iAd, as part of its iPhone applications package.
"The Commission has reason to believe that Apple will become a strong mobile advertising competitor," the FTC said in a statement on the AdMob deal. "Apple not only has extensive relationships with application developers and users, but also is able to offer targeted ads (heretofore a strength of AdMob) by leveraging proprietary user data gleaned from users of Apple devices."
The FTC said Apple’s actions "should mitigate the anticompetitive effects of Google’s AdMob acquisition," particularly with the potential for other mobile advertising competitors to emerge.
Analysts said the decision is a major business win for Google, giving the search giant a clear market lead in the nascent smartphone advertising market. But the 5-0 FTC vote drew strong protest from consumer advocates and persistent Google critics, some of whom questioned whether Google’s increasing spending on lobbying in Washington had contributed to the outcome.
"I’m really incredulous," said John Simpson of Consumer Watchdog. "What they are saying is the No. 1 and the No. 2 can combine, and it’s not a problem because there is a No. 3 over there that is now owned by Apple. I find that incomprehensible."
Others, however, said the FTC’s decision was proper given the fact that the young smartphone advertising market is so unformed. "I think on balance that this is a proper position, for the FTC to be very, very watchful and be suspicious but not to jump too quickly," said Bert Foer, president of the American Antitrust Institute, a nonprofit group that advocates for competition in business.
Apple, Foer said, could turn out to be a bigger threat to mobile advertising competition, if the company were to follow through on the fears of many and use its control over developer license agreements to prevent them from writing applications for competitors like Google’s Android or Research In Motion’s BlackBerry.
If that were to happen, "chances are you’ll end up with a duopoly," Foer said. "You’ll have Apple and you’ll have Google, and it becomes too difficult for developers to write for additional platforms. Then it becomes too difficult for additional ad platforms to develop."
Google on Thursday announced that it has seen worldwide activations of Android smartphones balloon to more than 100,000 a day, from about 30,000 at the end of 2009, one measure of the importance of the AdMob decision.
The FTC decision "is great for Google," said Karsten Weide, an analyst with the research firm IDC who follows online advertising. "In terms of revenue, market share, audience reach and traffic and all those things, it’s going to put Google in a market leadership position."
Google said it hoped to close the AdMob deal in the "coming weeks."
"The decision is great news for the mobile advertising ecosystem as a whole," Susan Wojcicki, Google vice president of product management said in a writtenstatement. "This was reflected in the widespread industry support for our
Indeed, the FTC reached out to many Silicon Valley mobile software developers sometimes under subpoena in recent weeks to quiz them about the impact of the AdMob deal.
Chika Watanabe, vice president for business development with Mountain View-based Echofon, which writes software applications for the iPhone but not Android, said she spent at least five hours on the phone with FTC lawyers, arguing that the Google-AdMob deal could be an important counterbalance for Apple.
"The industry is just morphing so quickly," she said Friday, adding that with the approval of the deal, "the counterbalance is there" for Apple.
Many other developers, Watanabe said, made a similar argument to the government. "As a whole, maybe we had influence on their decision," she said.
Contact Mike Swift at 408-271-3648 or [email protected]. Follow him at Twitter.com/swiftstories .