Google + AdMob may have reduced competition in 2009, but not today, says FTC
Members of the US Federal Trade Commission said indeed, they were concerned that the acquisition of mobile ad platform AdMob by global Web advertising leader Google, announced last November, would result in the elimination of at least one competitive relationship in the marketplace.
But commissioners literally credited Apple with filling that gap, in a 5-0 decision today in favor of the acquisition that might not have ended up that way had Apple not decided to launch its own iAd platform last month.
"Google's proposed $750 million acquisition of AdMob necessitated close scrutiny because the transaction appeared likely to lead to a substantial lessening of competition in violation of Section 7 of the Clayton Act," reads this morning's statement from the FTC explaining the decision (PDF available here). "Those companies generate the most revenue among mobile advertising networks, and both companies are particularly strong in one segment of the market, namely performance ad networks. The Commission's six-month investigation yielded evidence that each of the merging parties viewed the other as its primary competitor, and that each firm made business decisions in direct response to this perceived competitive threat."
That should have wrapped the matter up, with Bloomberg News reporting FTC staff members were urging commissioners there to oppose the deal, and Senate Subcommittee on Antitrust Chairman Herb Kohl (D - Wisc.) urging FTC Chairman Jonathan Liebowitz last month to carefully scrutinize the deal before reaching a decision.
"The importance of this transaction is heightened because of the likely importance of the smart phone advertising market in the future. Sales of smart phones are undergoing explosive growth. Consumers are increasingly using these phones to search the Internet and to make use of the applications downloaded onto these devices. Smart phones are a uniquely powerful method for advertisers to reach consumers, because most consumers with smart phones carry them most of the day, and frequently use them to access and search the Internet," Sen. Kohl wrote. "It is therefore of vital importance to be wary of any transaction that would create undue market dominance of search or application-based advertising on mobile devices such as smart phones. Allowing any one firm to dominate this market could result in higher prices for mobile advertising on the Internet and with respect to smart phone applications, and also could result in lower revenues realized by applications developers."
But that was before Apple produced iAd, FTC commissioners said today, and that changed everything.
"During the investigation, Apple acquired the third largest mobile ad network, Quattro Wireless, in December 2009 and then introduced its own mobile advertising network, iAd, as part of its iPhone applications package," the FTC's decision reads. "The Commission has reason to believe that Apple quickly will become a strong mobile advertising network competitor. 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 mobile devices. Furthermore, Apple's ownership of the iPhone software development tools, and its control over the developers' license agreement, gives Apple the unique ability to define how competition among ad networks on the iPhone will occur and evolve.
"As a result of Apple's entry," commissioners continued, "AdMob's success to date on the iPhone platform is unlikely to be an accurate predictor of AdMob's competitive significance going forward, whether AdMob is owned by Google or not. This is particularly important given that AdMob's revenue and market share are derived largely from the iPhone platform."
The very fact that there are now two likely principal competitors for iPhone advertising traffic -- iAd and AdMob -- is giving other investors reason to form even more competitive platforms, commissioners concluded. So just because the competition is getting bigger does not mean, in this case, that competitors are getting fewer. Thus the deal was given the FTC's blessing.
And in a statement this afternoon, Sen. Kohl gave the FTC's review his blessing as well: "While the FTC concluded that this merger would not harm competition, its review underscores the need for ensuring robust competition in markets of new and emerging technology so that consumers reap the full benefits of innovation."