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FTC May Sue Google Over AdMob


When Google (GOOG) offered to buy privately-held mobile advertising network provider AdMob for $750 million, the California-based start-up took the money. That was last November, not long after AdMob had turned down a rumored offer from Apple (AAPL).

Whether or not Apple did in fact try to buy AdMob, the iPod/iPhone/iPad maker did buy another mobile advertising company, Quattro Wireless for a reported $275 million shortly after Google’s acquisition of AdMob.

These were pretty heady numbers, then, for two companies that were making scant amounts of money. As is often the case, though, the potential is huge. AdMob and Quattro provide an advertising platform that serves ads to mobile phones and other devices, like Apple’s iPad.

Apple’s deal for Quattro didn’t cause any regulatory waves because Apple didn’t rely on advertising for any of its revenue. That is not the case with Google’s purchase of AdMob. Google’s revenue virtually all results from advertising, and adding another platform to its business caught the attention of the Federal Trade Commission.

There are reports today that FTC staff are preparing a recommendation that the FTC sue Google to stop the purchase of AdMob. The reports also note that the agency is assembling a team of litigators to go after the deal on anti-competitive grounds.

In an effort to drum up support for the acquisition, Google has reportedly been offering licensees of its Android mobile operating system a share of the advertising revenue generated by mobile users. The market for mobile advertising is almost vanishingly small — about $1.4 billion worldwide in 2009. That’s less than 0.3% of the global advertising spend. So who cares?

Well, in the early days of the web, web advertising was a vanishingly small portion of the total advertising spend, and look where it is now. A well-managed company with a lot of cash in its pocket could spend some of that cash on mobile advertising and get a huge payday down the road.

Still, should the FTC be able to kill Google’s acquisition of AdMob just because it could pay off big? That hardly seems just. Cell carriers and many other companies have been trying for at least five years to generate advertising on the tiny screen. Now that two well-heeled players who know how to make things happen are finally invested in the field there’s no reason to say that one’s play is anti-competitive and the other’s isn’t.

The FTC should not get to declare a loser before the battle even starts. Let Google and Apple and anyone else who wants to play fight it out in the market.

Tell us what you think here.

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