Regulatory pressure on Google's $750 million acquisition bid for AdMob is mounting after a U.S. senator raised questions about the proposal in a letter to the Federal Trade Commission.
Sen. Herb Kohl, chairman for the subcommittee on antitrust, competition policy and consumer rights, wrote that the deal raises concerns about competition that need to scrutinized by the Federal Trade Commission.
AdMob, which Google offered to acquire in November 2009, makes mobile ad technology that Google wants to combine with its own mobile ad assets to improve the delivery of ads on smartphones and the applications that run on them.
IDC has said Google and AdMob combined would command 24 percent of the market, hardly a monopoly position, but it would certainly make Google the leader in the space. Google is accustomed to this role, drawing on its massive 65 percent search share on U.S. desktops to make billions from keyword-based ads.
Mobile providers such as Millennial Media and Jumptap cheered the AdMob deal, but Google was prepared for naysayers, arguing that the mobile ad market is young and there are plenty of competitors in the sector.
Apple, which reportedly also bid for AdMob before Google swooped in with a larger offer, validated Google's claim by moving to buy Quattro Wireless. Apple will reportedly unveil its mobile ad platform April 8, further supporting Google's picture of a competitive market.
Reportedly, the FTC asked Google rivals for their reaction to the AdMob bid. The FTC and Kohl apparently fear Google will duplicate its desktop domination on mobile phones. Kohl wrote in the April 6 letter, addressed to FTC Chairman Jonathan Leibowitz:
""Critics of this transactions worry that this deal will allow Google to merge with one of its biggest rival mobile advertising competitors, and leverage its dominance of PC-based search advertising market into the emerging mobile advertising market, particularly with respect to advertising embedded in smart phone applications.""
The nascent mobile ad market promises the opportunity to generate billions of dollars for those who successfully enter it in a short period. Consumers are using smartphones such as the iPhone and Android-powered devices such as the Motorola Droid and Nexus One to surf the Web, network with friends and play games. The more time users spend accessing the Web from their mobile devices, the greater the opportunity for Google, Apple and others to put advertising in front of them.
"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 smartphones," Kohl said. "Allowing any one firm to dominate this market could result in higher prices for mobile advertising on the Internet and with respect to smartphone applications, and also could result in lower revenues realized by applications developers."
Kohl also cautioned that if Google gets AdMob it will have access to data about millions of smartphone users' Web activities, including search and product preferences.
This is exactly what makes AdMob so valuable to Google, potentially allowing it to better tailor ads to owners of iPhones and Android-based smartphones. Kohl urged the FTC to make sure Google will adequately protect user privacy if the group opts to approve the deal.
Kohl's letter reads like preaching to the choir, if a report from the Wall Street Journal is to be believed. The Wall Street Journal reported that the FTC has built a litigation team (paywall) for if the agency chooses to block the deal, and has briefed Congress on the merger.