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Experts say the mobile ad market is too immature, small and fragmented for antitrust regulators to try to quell Google’s bid to buy mobile ad exchange AdMob.
When Google bid to buy AdMob for $750 million in stock Nov. 9, the search engine made sure to position the buy as a complement to its existing mobile search ad offerings, and compared it to purchases that rivals AOL, Yahoo and Microsoft have made.
Google, whose moves regarding search are always closely watched because it has 65 percent of the worldwide search market, went so far as to launch this special AdMob Website, looking to convince the Department of Justice, the Federal Trade Commission and any other parties that have turned a piercing eye to the search engine that the deal is good for the mobile ad space.
Google referred to AOL’s purchase of Third Screen Media, Microsoft’s acquisition of ScreenTonic and Yahoo’s buy of Actionality, clearly trying to point to the fact that the market is quite lively on the competition front.
Maybe so, but AdMob is a large mobile ad provider. IDC analyst Karsten Weide told Bloomberg and eWEEK that AdMob could give Google 30 to 40 percent of the mobile ad market overnight if the deal passes muster. Given that position, it’s tempting to think antitrust groups would be concerned with this buy.
But Weide and other authorities in the mobile ad space said no. Weide broke it down thusly: The top five players in the mobile ad market are Google, Yahoo, AdMob, Millennial Media and Quattro Wireless, and all of them have 15 to 20 percent market share. Add any two together and you arrive at the 30 to 40 percent figure Weide quoted.
That’s not enough to merit antitrust concerns, Weide said. “I don’t think there’s an antitrust concern because in the search market Google has 60 percent market share and no one cares there either,” he explained. “So, I don’t really see that it’s going to trigger any antitrust activity. I think it’s just going to pass as it is.”
Google’s search share bothers Microsoft and Yahoo, but Weide has a point. The government may have rejected Google’s overture to partner with Yahoo, but they have largely left the search engine giant alone.
Kelsey Group analyst Michael Boland agreed, arguing that the Google-AdMob deal may have woken the mobile ad market from its recession-induced slumber:
““Advertisers were scared away by mobile. Two years ago, the mobile Web was growing, there were more users, more devices such as the iPhone and then the economy tanked. Mobile advertising was attractive, but advertisers backburnered it. As we emerge from recession, and mobile Web grows, mobile marketing will ramp. By buying AdMob, Google makes it easier for advertisers.”“
No Antitrust Scrutiny for Google-AdMob Deal
Moreover, Google just doesn’t have the dominance in mobile that it does online, Boland said. The mobile ad market is too young and fragmented, with vendors focusing on different areas such as mobile search, mobile display or in-app ads.
“While it’s definitely growing and ramping, the mobile ad market is not currently big enough to consider that Google is applying a monopolistic pressure,” Greystripe CEO Michael Chang told eWEEK. “Also, there is enough fragmentation-not only enough ad networks but enough media companies themselves in terms of selling their own mobile ads.”
Chang feels it’s still anyone’s game, and added that Google was smart in pointing out buys by AOL, Yahoo and Microsoft in the AdMob Website it launched.
Still, on the day of the launch, Steven Burke on Channel Web turned Google’s AdMob site against the company and wrote a harsh indictment of the deal, imploring the DOJ to step in:
““Google is right. There are more than a dozen mobile ad networks in the U.S. with companies like Quattro Wireless, Millennial and JumpTap. What do you think will become of those healthy competitors when the company that has a virtual stranglehold on the online search advertising market uses all its might and muscle to shut mobile advertising display competitors down? The smartphone and mobile advertising market is just developing. We don’t need a monopoly ad power player coming in and wreaking havoc on an industry that is still in its infancy.”“
Yet leadership at Millennial and JumpTap roundly praised the deal in public statements. They don’t seem to mind that Google will double up market share on them. Why is that? IDC’s Weide had a theory: They are preparing for big paydays.
Weide said Yahoo showed interest in Millennial and Quattro a year ago, but the recession hit, squashing those deals. He talked to executives at both companies about the Google-AdMob deals, and both were very excited. And why not? Weide believes Google is paying 10 times what AdMob’s annual revenue was.
Moreover, these deals tend to happen in bunches. Expect Yahoo, Microsoft and/or others to follow by snapping up some of the other attractive mobile ad startups.
But how long will these vendors wait to buy mobile ad providers and how much of a mobile ad lead will Google have by that time? Will Google be able to cultivate a mobile ad monopoly, as Burke said?