The Federal Trade Commission is scrutinizing Apple’s mobile business practices amid complaints from Google’s AdMob unit that Apple is prohibiting it from offering its advertising services on the iPhone.
The Wall Street Journal said (paywall) FTC has for weeks been negotiating with the Department of Justice over which agency holds sway over the allegations by companies claiming they are being locked out of the iPhone, which has sold more than 50 million units to help Apple win 28 percent of the U.S. smartphone market.
Apple June 7 revised its developer terms of service for its iPhone and iPad operating system to include language that prevents non-independent advertising technology providers such as AdMob and others from offering ads that run within iPhone applications.
As part of its preparation for the launch of iPhone 4 June 24 and its iAd ad platform July 1, Apple implemented clause 3.3.9, which states applications may not collect data without users’ consent and sell the data to advertisers.
Developers may not use third-party analytics software in their application. Moreover, application data may not be provided to an advertising service provider owned by or affiliated with a maker of mobile devices, mobile operating systems or development environments other than Apple.
That includes AdMob and Google, as well as Microsoft, Yahoo and others in the crowded market for mobile ads. Smaller providers such as Millennial Media, Jumptap and Greystripe appear to be in the clear here.
AdMob founder Omar Hamoui, who spurned Apple’s $600 million offer to sell his company to Google for $750 million, said June 9 Apple’s new terms lock out rivals and threaten to decrease sales for developers who want to use AdMob’s technology to put ads within iPhone apps.
Hamoui built his company by becoming the premier provider of digital ads that launch within applications for the iPhone.
Apple’s new terms of service indicate AdMob cannot serve in-app ads because AdMob belongs to Google, whose Android operating system has 9 percent of the smartphone market and is proving popular among users who don’t want to buy an iPhone.
Is Apple Being Anti-competitive?
Apple’s move paves the way for iAd, which the company fashioned from its purchase of Quattro Wireless after Google poached AdMob, to be the premier provider of in-app ads for the most popular smartphone in the country.
Jefferies and Co. analyst Youssef Squali said Apple’s revised terms aren’t healthy for developers.
“While we were not surprised by the move, we don’t see this as good news for app developers who would need to rely on iAd and other smaller networks to monetize their iPhone apps traffic. While Android-based smartphones still lag behind Apple’s iPhones in terms of U.S. market share, Android has grown 5 times in the last 12 months, indicating strong momentum.
“As such, we expect the Google/Android/AdMob ecosystem to remain highly relevant for app developers. Apple’s blocking move validates what we’ve said repeatedly, that Google’s investment in creating an open-source mobile operating system was a shrewd move as it provided a much-needed insurance policy against any competitive blockade, now becoming a reality with Apple.”
Still, the mobile ad market is so nascent-there is no dominant leader in mobile ads the way Google is dominant in desktop search-that it may be hard for government regulators to successfully make a case versus Apple.
Industry analyst Greg Sterling, who parsed the issue in this blog post for Search Engine Land, agreed and told eWEEK:
“Do you look at impact or intent (behind the moves) or both? Is Apple genuinely worried about competitive information getting out via AdMob (yes)? Is it also trying to block Google in particular (yes)?
“I tend to think that the market still can sort this out, but there is a point when the feds need to get involved. Just don’t think we’re quite there. For example, if Apple were 60 percent of the smartphone market, it might be time. Apple’s visibility in the mobile world is exaggerated relative to its share because its users are the most active.”
Ironically, the FTC nearly sued to block Google from buying AdMob in an effort to curtail Google’s growing power in the ad market.
The agency relented and approved the deal after becoming convinced by Google and other experts Apple’s iAd would keep the market competitive.
AdMob and Google aren’t the only vendors to find themselves on the outside looking in at the iPhone.
Apple has refused to support Adobe’s industry standard Flash video technology on its iPhone and iPad tablet computer. There are also concerns about Apple’s approach to the music business as it prepares to launch a Web-based music service.