In a surprise decision, the Federal Trade Commission said on Friday it won’t challenge Google Inc.’s pending $750 million acquisition of mobile advertising company AdMob, clearing the way for the widely challenged deal to move forward.
The commission said in a statement the merger of what it called the two leading mobile ad networks did raise serious antitrust issues, noting their economies of scale grant the companies a major advantage over smaller competitors.
But it added that recent market developments outweighed those concerns. Specifically, it cited Apple Inc.’s acquisition of AdMob competitor Quattro Wireless and its launch of iAd, a system to serve up ads to its popular mobile devices, including the iPhone and iPad. The FTC also noted efforts of other unnamed companies to build or buy smart phone platforms.
“In sum, the commission … lacked reason to believe that the transaction would likely result in a substantial lessening of competition, especially in light of marketplace developments that occurred during the course of its investigation,” the FTC statement read.
The five-member commission voted unanimously to close the investigation, contradicting the outcome predicted in many press reports in recent weeks.
Google’s critics and competitors have argued the acquisition of AdMob of San Mateo would hand the company far too much power over the emerging mobile advertising market, and access to a troubling amount of consumer behavioral data.
Scott Cleland, president of Precursor LLC, a research firm whose customers include a number of large Google competitors, said the decision gives the Mountain View technology giant a total monopoly over the low and middle ends of the mobile advertising market.
“No one can compete with Google’s scale and scope,” he said, arguing that Apple’s mobile sweet spot is primarily the high end. “It’s game over.”
He called it strike two for the FTC, noting it also approved Google’s purchase of online banner advertising company DoubleClick, which he said has only further cemented the company’s hold on the broader Internet advertising market.
John Simpson of Consumer Watchdog said the deal will undermine competition, and could result in higher prices for advertisers and consumers.
Interpretation of data
Many believed the FTC’s decision would turn on how it interpreted mobile advertising market share data. Estimates span the gamut, depending on what exactly is being looked at.
Precursor research found that Google and AdMob together would control 75 percent of the mobile application display market, the area in which AdMob focuses.
But IDC looked at total mobile advertising, which would include things like text ads, and concluded the combined market share would only reach 25 percent. Meanwhile, IAB cast a wider net, looking at the entire U.S. online display market, and found that Google controls just 9 percent and AdMob less than 1 percent.
Language in the FTC’s statement suggests the commission opted for the middle option. It noted the companies “generate the most revenue among mobile advertising networks” and said the transaction warranted scrutiny because it “appeared likely to lead to a substantial lessening of competition in violation” of antitrust law. But it appears Apple’s recent plays in the space ultimately overshadowed those initial concerns.
“The commission has reason to believe that Apple quickly will become a strong mobile advertising network competitor,” it said, noting the company’s extensive relationships with application developers and consumers, and the ability to deliver targeted ads based on data derived from its devices.
Jeffrey Shinder, a manager partner at law firm Constantine Cannon in New York and former special counsel to the FTC, said the commission came to the right decision. Still, he stressed it needs to keep a vigilant eye on the nascent industry.
Keep an eye on sector
“The competitive (concerns) were eviscerated by Apple,” he said. “But I do think and hope that they will continue to watch both Google and Apple closely – and frankly, even more so Apple – because there could be antitrust issues in this sector going forward.”
Omar Hamoui, chief executive and founder of AdMob, said in a statement he was “extremely pleased” with the decision. Susan Wojcicki, vice president of product management at Google, said in a corporate blog that the company plans to close the deal in the coming weeks.
“This benefits mobile developers and publishers who will get better advertising solutions, marketers who will find new ways to reach consumers, and users who will get better ads and more free content,” she said.
Google declined to comment beyond the prepared post.
E-mail James Temple at email@example.com.