Google's proposed buy-out of AdMob may have hit its first serious hurdle, as the US Federal Trade Commission (FTC) gears up for what looks like the beginning of an antitrust challenge to the deal, writes Martin Conway. It has emerged that the FTC has asked two of Google's competitors, both as yet unnamed, to submit sworn declarations to this effect, amid concerns that the AdMob acquisition could grant Google an unfair advantage over its rivals in the US.
Although the requests for declarations are being conducted privately, the Internet was awash with speculation this week, with some mobile sector commentators rumouring Apple to be one of the two companies cooperating with the FTC.
The FTC's proposed investigation will hardly come as a shock to many, least of all to Google. When the AdMob deal was announced in November 2009, Google's own blog somewhat presciently stated: "Closer scrutiny has been the consequence of our success [and], on that basis, we wouldn't be surprised if there were some regulatory review before the deal closes."
Both parties remain tight-lipped on the situation, although Google's mood appears fairly upbeat, with Google spokesperson Adam Kovacevich claiming to be "confident that [the FTC] will conclude that the rapidly growing mobile advertising space will remain highly competitive after this deal closes." Similarly, Russell Buckley, Vice President of Global Alliances at AdMob, tells Mobile Marketing: "This is nothing we didn't expect – we're just going through the normal approvals process."
The AdMob acquisition, valued at $750 million (£495 million), is Google's most significant foray into the mobile advertising sector to date, and represents the third largest purchase in its history, following its acquisition of DoubleClick in 2008 ($3.2 billion) and of YouTube in 2006 ($1.65 billion). Should the deal now be allowed to progress, it is estimated that Google and AdMob would jointly command a 21% share of the US mobile advertising market. AdMob's publisher network currently boasts more than 15,000 mobile websites and applications for iPhone, Android and webOS.
The question now is whether the investigation will constitute a temporary setback or a major headache for the Internet search giant. Readers may recall that Google faced similar accusations of anti-competitive practice while concluding its acquisition of DoubleClick, although that deal was eventually cleared by both US and European legislators. However, the threat of an antitrust law suit, issued by the US Department of Justice, was enough to scupper the group's 2008 plans to forge an ads-search partnership with Yahoo.
Julien Theys, Analyst at research company Screen Digest, believes that the FTC's investigation is a "nice compliment" to Google's position in the market, while simultaneously being bound to "make Google's competitors very happy". Realistically, he opines, such scrutiny is just a "sign of the times". He tells Mobile Marketing: "Google's going through the same regulatory hassles that Microsoft has encountered for years. I'm not sure that this move will be a major setback, and I don't think it's likely that the deal will be stopped, as there are so many other big players in the US market. From the mobile end, it's very scattered in terms of marketplace, and there isn't yet one predominant force."
On the other hand, Greg Sterling, Founding Principal of research and consulting firm Sterling Market Intelligence, claims that while the intensified scrutiny does not necessarily equal a formal challenge to the deal, it is too uncertain to make a call either way, and that the investigation should be taken seriously. "I don't think it's a tempest in a teapot," he comments. "There are a number of industry watchers, privacy advocates and commentators who are genuinely concerned about Google's strength and power, and who would like to prevent anything that might enhance it further, even if this particular deal does not technically fall foul of the US antitrust rules."
However, like Theys, Sterling doesn't see a challenge to the deal as being in the mobile advertising industry's best interest. "Most of AdMob's immediate competitors have cheered the deal because they see it as validating and raising the profile of their businesses as well," he says. "They would all like to be bought like AdMob, and the Google deal has helped that possibility. The US, European and Asian mobile advertising markets will remain very competitive if the deal is approved, though it would make Google a formidable company in mobile."
Although the requests for declarations are being conducted privately, the Internet was awash with speculation this week, with some mobile sector commentators rumouring Apple to be one of the two companies cooperating with the FTC.
The FTC's proposed investigation will hardly come as a shock to many, least of all to Google. When the AdMob deal was announced in November 2009, Google's own blog somewhat presciently stated: "Closer scrutiny has been the consequence of our success [and], on that basis, we wouldn't be surprised if there were some regulatory review before the deal closes."
Both parties remain tight-lipped on the situation, although Google's mood appears fairly upbeat, with Google spokesperson Adam Kovacevich claiming to be "confident that [the FTC] will conclude that the rapidly growing mobile advertising space will remain highly competitive after this deal closes." Similarly, Russell Buckley, Vice President of Global Alliances at AdMob, tells Mobile Marketing: "This is nothing we didn't expect – we're just going through the normal approvals process."
The AdMob acquisition, valued at $750 million (£495 million), is Google's most significant foray into the mobile advertising sector to date, and represents the third largest purchase in its history, following its acquisition of DoubleClick in 2008 ($3.2 billion) and of YouTube in 2006 ($1.65 billion). Should the deal now be allowed to progress, it is estimated that Google and AdMob would jointly command a 21% share of the US mobile advertising market. AdMob's publisher network currently boasts more than 15,000 mobile websites and applications for iPhone, Android and webOS.
The question now is whether the investigation will constitute a temporary setback or a major headache for the Internet search giant. Readers may recall that Google faced similar accusations of anti-competitive practice while concluding its acquisition of DoubleClick, although that deal was eventually cleared by both US and European legislators. However, the threat of an antitrust law suit, issued by the US Department of Justice, was enough to scupper the group's 2008 plans to forge an ads-search partnership with Yahoo.
Julien Theys, Analyst at research company Screen Digest, believes that the FTC's investigation is a "nice compliment" to Google's position in the market, while simultaneously being bound to "make Google's competitors very happy". Realistically, he opines, such scrutiny is just a "sign of the times". He tells Mobile Marketing: "Google's going through the same regulatory hassles that Microsoft has encountered for years. I'm not sure that this move will be a major setback, and I don't think it's likely that the deal will be stopped, as there are so many other big players in the US market. From the mobile end, it's very scattered in terms of marketplace, and there isn't yet one predominant force."
On the other hand, Greg Sterling, Founding Principal of research and consulting firm Sterling Market Intelligence, claims that while the intensified scrutiny does not necessarily equal a formal challenge to the deal, it is too uncertain to make a call either way, and that the investigation should be taken seriously. "I don't think it's a tempest in a teapot," he comments. "There are a number of industry watchers, privacy advocates and commentators who are genuinely concerned about Google's strength and power, and who would like to prevent anything that might enhance it further, even if this particular deal does not technically fall foul of the US antitrust rules."
However, like Theys, Sterling doesn't see a challenge to the deal as being in the mobile advertising industry's best interest. "Most of AdMob's immediate competitors have cheered the deal because they see it as validating and raising the profile of their businesses as well," he says. "They would all like to be bought like AdMob, and the Google deal has helped that possibility. The US, European and Asian mobile advertising markets will remain very competitive if the deal is approved, though it would make Google a formidable company in mobile."
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