FTC Woefully Out of Its Depth on the Google-AdMob Bid

By Clint Boulton  |  Posted 2010-05-04 Print this article Print

Few things rattle the cage more than government agencies overshadowing business, sticking their noses in for political prominence under the guise of ensuring fair and free competition.

Yet that is exactly the position we find ourselves in with the Federal Trade Commission's latest pressing of the screws to Google's bid to acquire AdMob for $750 million.

As I reported yesterday, the agency is reportedly close to suing Google to block the deal.

I've covered this issue regularly since the FTC signaled its intent last December. While I've occasionally made comments in which I assumed the FTC was out of its depth in intelligently analyzing and deciding on this matter, a couple of blog posts cleared up any question I had.

Wertago, which makes a mobile app for nightlife, wrote this account of how it spoke to FTC staff officials via phone last week and was a "bit surprised the staff is close to making a recommendation, given how unsophisticated their understanding of the mobile ad market seemed."

The post continued:

There is no way the FTC knows enough to support a decision to block the deal. The staff members we spoke to were not particularly knowledgeable about the mobile ad space they are considering interfering in, or about the technology sector more generally, or about mobile app development and monetization, or about the changes in the mobile advertising sector in the past year, or about the level of competition and pace of change and innovation in the market, however broadly or narrowly you define it.

Wertago went on to say how it doesn't like this sort of government regulation because there are too many what-ifs and variables playing on technology markets such as mobile advertising.

The company betrays some understandable bias; as a mobile upstart it naturally fears government regulation that might affect its growth potential in the market, believing that having giants like Google and Apple in mobile ads will spur innovation from smaller companies who want to vie for those larger companies' affections and get bought up for a big payday.

Search Engine Land's Greg Sterling offers his perspective here, noting that he, too, has spoken with the FTC about this matter and found them to be similarly lacking in wisdom:

The attorney I spoke to was a very intelligent person but had a limited understanding of the mobile advertising market -- at best. I spent a total of about three hours over two conversations trying to help explain and describe the companies operating in the mobile advertising space and the highly dynamic nature of the market.

Worse, Sterling got the idea the FTC wants to shut down Google's action, period. It indicates FTC officials are willing to disregard justice to make names for themselves in a witch hunt.

We already know the Justice Department views Google as the next Microsoft. Christine Varney made the mistake of noting that. Apparently, her comment made it open season on Google, and all of the crackpots are piling on.

Wertago and Sterling were just a couple of the many individuals and vendors the FTC was reported to be seeking counsel with over Google's bid, Google Group Ad Product Manager Paul Feng noted.

According to IDC, a combination of Google and AdMob would give Google roughly 25 percent of the mobile ad market -- hardly enough to constitute a monopoly.

Google opponents argue that market share doesn't count in-application ads, noting that if Google gets AdMob it will have 100 percent of the market for ads running in applications. They argue that mobile search ads are dead and that these in-app ads are the category that matters.

By that logic, Apple shouldn't bother to launch iAd because Google will have already won if the AdMob deal was blessed. Do you think Apple CEO Steve Jobs would enter a market if he didn't think he could win, or at least excel?

Folks, this in-app ad market is just getting started. At worst, if Google gets AdMob and Apple launches iAd to some success this summer, there will be plenty of pie left for the rest of the free market.

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