Google's Purchase of AdMob Faces FTC Scrutiny
Google Dec. 23 confirmed that the Federal Trade Commission has asked the search engine for more information regarding its $750 million bid for mobile ad provider AdMob.
Google said the FTC issued a "second request" for information related to the deal, which was announced Nov. 9 and was slated to close in early 2010. The move, a signal that the agency has concerns about the planned purchase, will likely delay the acquisition to later in the year.
AdMob makes a software platform that helps customize digital display advertisements to small screens on smartphones, whose full Internet browsers make them a rich, new playground for mobile ads.
IDC analyst Karsten Weide said AdMob generated some $40 million in 2009, largely thanks to the success of ads running in applications on Apple's iPhone. The startup branched out to support smartphones running RIM, Nokia, Palm and Google's own Android operating system.
Unlike search advertising, where Google leads with some 90 percent of the market, there is no clear cut leader in the mobile ad market, which is very young even by the standards of digital media. Based on IDC's tracking of mobile ad sales, AdMob has 14 percent of the market and Google commands 10 percent.
Should Google and AdMob combine, they will have earned $68 million in mobile ad sales to give them 24 percent of the market, according to Weide, who told eWEEK this shouldn't be enough to warrant serious antitrust scrutiny. Millenial Media has 18 percent of the market, with Yahoo and Microsoft following with 11 and 8 percent shares, respectively.
Several mobile ad specialists lined up to express their support for the Google's attempt to buy AdMob. Supporters from Millenial, JumpTap and Greystripe said the deal validated the industry they toil in, but these companies also recognize the potential of a big payday from Microsoft or Yahoo, both of which could bid for their businesses and pay a fat premium akin to what Google offered for AdMob.
Still, the FTC's request threatens to put a damper on the deal and Google knows it has become a company of interest to regulators. Paul Feng, group product manager for Google, said in a blog post Dec. 23:
"We know that closer scrutiny has been one consequence of Google's success, and we've been talking to the U.S. Federal Trade Commission over the past few weeks... While this means we won't be closing right away, we're confident that the FTC will conclude that the rapidly growing mobile advertising space will remain highly competitive after this deal closes. And we'll be working closely and cooperatively with them as they continue their review."
Whether that hitch is temporary or permanent remains to be seen, but the second request process is an arduous one that requires loads of documentation. According to this primer from the FTC:
"A Second Request combines a burdensome set of interrogatories with a burdensome document request. Responding to the interrogatory specifications of a Second Request may entail tortuous excavation of financial databases that were not originally designed to capture the data sought by the government."
To be sure, Google's dominance in search advertising and expansion into several Web services in recent years have made it a larger target for federal regulators. The company bought video-sharing power YouTube and had to fight to acquire online display ad giant DoubleClick for $3.1 billion.
Google in the last several months came under scrutiny for its Google Book Search proposal, which the Department of Justice urged the New York District Court presiding over the settlement to reject on grounds that it violated antitrust laws.