FTC Clears Google Purchase of Mobile Ad Service

Associated Press

 

Google Inc.'s $750 million acquisition of mobile ad service AdMob cleared its final hurdle Friday with a boost from AdMob's jilted suitor, Apple Inc.

The Federal Trade Commission said it unanimously decided to approve Google's AdMob deal mainly because of Apple's recent push into the $600 million mobile advertising market in the U.S. The ruling closes a six-month antitrust investigation.

The emergence of another deep-pocketed competitor eased the FTC's concerns that Google would be able to use AdMob as a springboard for extending its dominance into the nascent field of wireless devices.

"The presence of Apple made it for hard for the commission to construct a merger challenge that it felt it could win," said Jeff Shinder, a New York antitrust lawyer who is a former special counsel to the FTC.

Apple's role in persuading the government to sign off the deal is a weird twist because the maker of the iPhone and iPad was negotiating to buy AdMob before Google swooped in with a higher bid last November.

Shortly after the AdMob snub, Apple bought a smaller mobile ad service, Quattro Wireless, that is providing the technology for the iAd platform that persuaded the FTC to sign off on Google's deal.

Now that it has regulators' blessing, Google said it will take over AdMob within the next few weeks.

This marks the second time in three years that the FTC has launched an extensive investigation into a Google acquisition aimed at expanding its share of the digital ad market. The FTC spent a year examining Google's $3.2 billion acquisition of online ad service DoubleClick Inc. before approving it in March 2008.

The government scrutiny reflects the widening worries about the power Google has amassed over the past decade as its search engine became the Internet's main gateway and its advertising network became the Web's richest gold mine.

"How this possibly can be construed as promoting competition is incomprehensible," said John Simpson of Consumer Watchdog, a strident Google critic. "What it demonstrates is Google's clout in Washington."

Google has ramped up its government lobbying efforts in part to convince regulators and lawmakers that it faces robust competition from a phalanx of fierce rivals that include Microsoft Corp., Yahoo Inc., Facebook and its one-time ally, Apple.

Google had strongly indicated that it would have gone to court had the FTC tried to block the AdMob deal.

The company believes advertising on mobile devices eventually will be as lucrative as marketing on computer screens, and it considers AdMob to be a key piece in its strategy to make more money from people on the go.

AdMob, launched four years ago by Omar Hamoui, runs a network that delivers targeted advertising to websites and to online applications tailored for smart phones, including Apple's iPhone and devices powered by Google's Android software.

The FTC had feared that a combined Google-AdMob would thwart competition and possibly have a ripple effect on the mobile phone applications that rely on ads.

Combined, Google and AdMob will have a 21 percent share of the U.S. mobile ad market followed by Millennial Media at 12 percent, according to the most recent statistics from International Data Corp. Yahoo is next at 10 percent followed by Microsoft at 8 percent and Quattro Wireless at 7 percent.

U.S. spending on mobile advertising is expected to approach $600 million this year and increase to nearly $1.6 billion in 2013, according to eMarketer. That's still smaller than spending for online ads delivered to laptops and desktops, but growth there is expected to be slower - to more than $33 billion by 2013, from a projected $25.1 billion this year.

The big question now is whether Google and Apple will be able to leverage their advertising networks and widely used platforms for mobile applications to create an effective duopoly in the market.

Industry analysts and mobile ad executives are skeptical and predict that other major companies will try to muscle into the market with acquisitions of their own. Other mobile ad services still in play include JumpTap, GreyStripe, Mojiva and Mobclix.

Microsoft and even some magazine publishers developing applications for mobile devices may emerge as buyers, said eMarketer analyst Noah Elkin. "A lot of molds have been broken in terms of who might try to get into this space," Elkin said. "Everyone wants access to this mobile audience."

As Google puts one regulatory investigation behind it, Apple could be wrestling with one of its own.

Apple is also facing increased regulatory scrutiny in Washington. Officials at the FTC and the Justice Department are currently sorting out which agency will examine whether the company is violating antitrust rules by requiring software developers to use Apple programming tools to create applications for the iPhone and iPad.

FTC May Attempt Block of Google AdMob Deal

Business Week

The Federal Trade Commission may be preparing to challenge Google's planned acquisition of AdMob on antitrust concerns, a news report said Tuesday.

The FTC has built a litigation team as part of a potential bid to block the purchase of the mobile advertising provider, The Wall Street Journal said, citing people familiar with the matter. The FTC has also told Congress about its concerns and asked several AdMob rivals to testify about the effects of the proposed acquisition, the report said.

The FTC has not already decided to try to block the deal and Google lawyers could still reach an agreement with the agency to protect the deal, the report said.

Google has said it does not see any regulatory issues with the acquisition and argued that the mobile ad space is highly competitive.

AdMob provides mobile display and in-application ads that Google has said would complement its own focus on mobile search ads. AdMob ads appear on devices including the iPhone and phones with Google's Android operating system.

At least two consumer groups have urged the FTC to block Google's $750 million purchase of AdMob, which the company announced late last year.

Google Sharpens Aim On Mobile Marketing With AdMob

AP

Four years ago, Omar Hamoui was just another ineffectual entrepreneur trying to spruce up his resume in graduate school.

Now, he's poised to become Google Inc.'s newest weapon as the company aims to extend its dominance of online advertising from computers to mobile devices.

Google is buying Hamoui's expertise in a $750 million acquisition of AdMob, a network for ads on iPhones and similar gadgets. He launched the business while struggling to support his wife and children as a student at the University of Pennsylvania's Wharton School.

Hamoui, 32, changed his life by setting up a system for advertising on mobile devices. Though that sounds simple, it was a breakthrough because Hamoui's network got around stifling controls that wireless carriers had imposed on the content their customers could see on their phones. The crack that AdMob opened in the carriers' "walled gardens" made it easier for independent programmers to profit from applications planted on mobile phones.

Users tend to click on mobile ads five to eight times more often than they do on PC ads

"It took a lot of guts because (the carriers) were the gatekeepers of the industry," says Rich Wong, an AdMob investor and board member who is with Accel Partners. "Back then, it was sort of like if you said no to the Godfather. Bad things could happen."

More than a year after Hamoui ignited the fuse, Apple Inc. blew up the status quo with the June 2007 introduction of the iPhone - which created a platform for applications chosen by users.

That has spawned more than 100,000 mobile "apps" for doing everything from bird watching to cooking poultry. The revenue from AdMob's ad network is one of the main reasons application developers can give the programs away or just charge a few bucks.

"Omar was absolutely the tip of the spear in this mobile media revolution," says Jason Spero, general manager of AdMob's North America operations.

If Google's proposed acquisition is approved by the U.S. Federal Trade Commission, Hamoui thinks he and AdMob's 150 employees will be in an even better position to turn mobile phones into moneymaking magnets.

Google is banking on it.

Drawing upon the more than $20 billion in revenue that it generates from Internet ads, Google has been investing aggressively in mobile technology. The Internet search leader has developed a free software system, Android, that runs mobile devices and is experimenting with its own phone, called Nexus One, that could be sold directly to consumers.

Google believes explosive growth in mobile advertising will justify its spending. For now, the market remains relatively small, with U.S. mobile advertising revenue expected to reach $416 million this year, according to the research firm eMarketer Inc.

AdMob has delivered nearly 140 billion ads on mobile Web sites and applications since its inception. That has helped AdMob double its revenue this year after tripling it last year. Hamoui won't be more specific, leaving it to analysts to estimate that AdMob's revenue this year will range between $45 million and $60 million.

That's less revenue than Google generates in a day. Nevertheless, AdMob's early lead in mobile advertising could trouble antitrust regulators already concerned about Google's growing power. The Federal Trade Commission has asked for more information about the deal - a sign that regulators want to take a closer look at how it will affect competition in the mobile ad market, which is expected to quadruple in size during the next four years.

Only two of Google's acquisitions have been bigger than the proposed AdMob deal. Regulators quickly approved Google's $1.76 billion acquisition of the Internet's top video channel, YouTube, in 2006 but took a year before signing off on the $3.2 billion purchase of another Internet ad service, DoubleClick Inc., in 2008. (By coincidence, AdMob is headquartered across the street from where YouTube started in San Mateo, Calif.)

Google contends its AdMob acquisition won't hurt competition. Among other things, Google points to other mobile ad networks from rivals such as Jumptap, Mojiva and AOL and argues that mobile ads still don't generate attract enough spending to be considered a distinct market.

Hamoui started AdMob out of frustration a few months after he enrolled in graduate school. He was building a phone-friendly Web site to make it easier for people to share photos with their family and friends, but he couldn't seem to attract much traffic.

To get the word out, Hamoui bought ads that would appear alongside certain search results at Google, Yahoo and other engines. That ended up costing him about $30 per referral, which he couldn't afford. So Hamoui decided to try advertising his site on other mobile Web sites, which are specially designed to work with the small screens and technological restraints of mobile phones.

Hamoui found a mobile Web site willing to run his ad for dramatically less money and wound up paying just 10 cents per referral. The experience resonated with Hamoui's studies on efficient markets, and inspired him to build a network that would make it easier to advertise on mobile devices.

If nothing else, he thought he might be able to turn the ad network into a project that would let him get out of having a conventional internship during his summer break in 2006. As it happened, AdMob created enough buzz that Hamoui dropped out of Wharton in the spring.

One key element of his system is that it lets programmers specify when and where ads can show up while their apps are running on a phone. Advertisers, which range from mass merchants to other app makers, can aim their messages widely - for instance, to everyone with an iPhone. Or ads can be aimed at a particular demographic. An ad for the movie "Fast and Furious" might show up on a mobile game such as "Tap Tap Revenge" that's popular among young men. The targeting frequently hits the mark: Users tend to click on mobile ads five to eight times more often than they do on PC ads, Hamoui says.

Jim Goetz, who joined AdMob's board after his firm, Sequoia Capital, put up the first $4 million of the $47 million in venture capital raised by AdMob, likens Hamoui to some of the other successful entrepreneurs that Sequoia has backed. That group includes Apple's Steve Jobs, Yahoo co-founders Jerry Yang and David Filo, and Google co-founders Sergey Brin and Larry Page.

"Omar is a lot like them," Goetz says. "He has the ambition, the intelligence and that special sparkle."

By selling his startup to a larger company, Hamoui is doing something those other entrepreneurs didn't. His investors say he didn't do it for the money - AdMob still had plenty in the bank, and Hamoui doesn't seem to be driven by striking it rich. He still drives a lime-green Toyota Camry that elicits good-natured gibes around AdMob's offices. When he splurges, he does so frugally. AdMob's holiday party is being held next month when the prices are cheaper.

"It just seemed like we would be able to do the things we want a lot faster and a lot better with the resources we will have at Google," Hamoui says. "We already have achieved a big part of what we wanted to do - getting mobile seo advertising going and making it possible for people to start a mobile company without having to do a deal with a carrier first."

Antitrust Regulators Examining Google's Purchase Of AdMob

USA Today

Antitrust regulators are taking a closer look at Google's proposed $750 million purchase of mobile phone marketer AdMob, the latest sign of greater government vigilance as Google tries to expand its advertising empire.

The Federal Trade Commission sought more information about the deal this week, according to a Wednesday post on Google's blog.

This so-called "second request" doesn't mean regulators intend to block Google's AdMob deal. Most other acquisitions that go through this stage end up getting approved.

But the FTC's action shows regulators are watching Google (GOOG) more carefully as the company tries to build upon its dominance of the Internet's lucrative search advertising market. Google is expected to pull in more than $22 billion in revenue this year, mostly from ads shown alongside search results and other Web content.

"We know that closer scrutiny has been one consequence of Google's success," Paul Feng, a Google product manager, wrote in Wednesday's blog posting. Echoing previous management comments, Feng said the company remains confident its AdMob purchase, announced last month, will be approved.

Google's huge lead in Internet search triggered a 2008 government investigation that scuttled its plans to enter into an advertising partnership with rival Yahoo, which runs the second most-popular search engine. Yahoo plans to work with Microsoft instead, beginning next year if those two companies can gain regulatory approval.

Since its inception nearly four years ago, AdMob has built a thriving network that sells and delivers ads on applications and websites designed for the iPhone and other mobile devices. It's still relatively small with estimated annual revenue of $45 million to $60 million, but regulators apparently want to understand whether its technology and advertising contacts would give Google an unfair advantage in its quest to sell more mobile phone ads.

Google management has indicated that it believes mobile marketing eventually may become bigger than advertising on Internet-connected computers. That tipping point still appears to be many years away, with U.S. mobile advertising expected to total $416 million this year, about 2% of overall Internet ad spending in the country.

The FTC's decision to take more time digging into the AdMob deal means Google probably won't be able to take over the company for several more months, Stifel Nicolaus analyst Rebecca Arbogast wrote in a Wednesday research note. It took a year for the FTC to approve Google's $3.2 billion acquisition of Internet ad service DoubleClick, which was completed in March 2008.

Google's first big deal, a $1.76 billion acquisition of the video site YouTube, was cleared by regulators in a month in 2006.

Google Buys AdMob, Invests In Mobile Advertising

PC World

Google's mammoth $750 billion purchase of mobile advertising company AdMob signals a new era in online advertising. Google is looking to take its online search advertising success to its Android mobile platform and create a new lucrative revenue stream.

Google is somewhat new to the mobile operating system and mobile device markets, but one market it understands, arguably better than any other entity, is online advertising. So, there is reason to raise an eyebrow when Google throws down $750 million to purchase a company like AdMob that is focused on mobile advertising.

Mobile advertising is a nascent market, but Google is placing a pretty hefty bet on its continued success. AdMob has built a solid reputation among the emerging mobile ad competitors, serving ads to both the iPhone and Android platforms. The purchase keeps Google a step ahead of the competition and provides it with an opportunity to help define the market as it has defined the online search advertising industry.

Google developed the Android mobile operating system as a license-free open source project. Now that Android is gaining a significant stake among mobile phones with devices like the Motorola Droid, Motorola Cliq, Samsung Behold II, and HTC Droid Eris, Google is ready to cash in. The purchase of AdMob provides Google with a revenue stream it can use to capitalize on the popularity of Android.

Google has made other purchases this year, like On2, reCAPTCHA, and the rumored purchase of Gizmo5. Those purchases pale both in the investment made by Google and the potential impact they have on Google's business model and revenue.

You have to do a double-take when any company invests three-quarters of a billion dollars to purchase another. Whatever Google's plan is, you can bet that it has mapped out the strategy for recovering the investment. Google wouldn't spend $750 billion without a pretty solid plan for leveraging the purchase and turning it into a lucrative revenue stream.

The AdMob purchase is sort of the mobile seo advertising equivalent of Google's $3.2 billion purchase of DoubleClick a few years ago. Google had begun developing an in-house solution with AdSense for Mobile, but why waste time and money reinventing the wheel when AdMob already has a successful platform for serving feature-rich ads across mobile platforms.

Google is preemptively pleading its case against any potential claims of antitrust concerns. Google is quick to point out that the availability of mobile advertising that can be embedded in apps like those found in the Apple App Store and Google's Android Market help developers deliver a more diverse selection of functionality for mobile devices.

There are more mobile devices in the world than computers, and as those mobile devices have evolved to become portable computing platforms complete with broadband web access, search engine advertising like that provided by Google and Bing has to evolve as well.

The AdMob purchase is almost guaranteed to have a ripple effect, with Google competitors either expediting their own competing services, or purchasing an AdMob competitor to get in the game as quickly as possible like Google is doing.