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Just say “No” to Google’s AdMob acquisition

Google is facing a $22.5m fine for illegally tracking the web usage of Safari mobile browser users

When it comes to the search advertising market, tangling with Google makes David vs. Goliath look like an even fight. Already in possession of the lion’s share of the desktop advertising market, Google is now poised to expand its significant advertising influence in the mobile realm with its proposed acquisition of AdMob.

Fearing that they will be blacklisted in a Google controlled mobile advertising market, many developers and advertisers are understandably hesitant to speak out against the acquisition. However, to ensure a competitive mobile advertising marketplace in the future it is essential that telecoms regulators around the world fully understand the consequences of the potential merger.

If you were to listen to Google representatives talk about the acquisition, you would think that they had not done their homework on the mobile advertising market, relying on third parties who described the market as a “very fragmented” space in which “no ad network is dominant” and “no one really knows what ad network is biggest.” These vague comments are misleading at best, especially considering actual market data directly refutes Google’s claims.

Research clearly demonstrates that AdMob far and away has the largest and most dominant ad network; the numbers are astonishing. According to mobile analytics company Ground Truth’s data for February 7-13, 2010, AdMob placed ads on 374 of the 800 top trafficked US mobile internet sites (46.75 per cent). During the same time period, AdMob’s competitor Millennial Media served ads on 240 (or 30 per cent) of the top 800 mobile internet sites, with AdMob serving nearly six times as many clicks as them. Another AdMob competitor, Quattro Wireless (Apple’s mobile advertising acquisition) placed advertising on 142 (or 17.75 per cent) of the top 800 sites, making AdMob nearly 6.5 times larger than them.

These numbers alone are overwhelming but Google’s alleged recent behavior towards application developers is another cause of significant concern. Inside sources say that Google employees have been contacting app developers and “asking” them to call the Federal Trade Commission (FTC) to give favorable opinions about Google’s proposed acquisition of AdMob. Application developers derive a significant portion of website traffic and income from Google, so turning down Google’s “requests” is not much of a viable option. If these allegations are conclusively proven to be true, the implications are serious considering the FTC may be not getting the real viewpoints of app developers as it conducts its investigation into the proposed deal. The FTC will likely have a very dim view of this conduct since they often use testimony gathered during their investigation from the affected industry as justification for approving a deal and as grounds to avoid any subsequent appeals. If the FTC does begin issuing subpoenas to these developers, which sources say it very well may do, Google’s “requests” could come back to haunt them.

If past behavior is any indication of how Google would use its new dominant position in the mobile advertising market, then there is also significant cause for concern. In early December 2008, Google altered the default campaign settings of its AdWords program and automatically opted all of its advertisers into this change. In addition to running on laptops and desktops, all existing and any new AdWords campaigns were set to automatically run on any mobile device which has a full internet browser. Up until that point, laptop and desktop PCs were the previous default campaign reach. This change in default settings was not just another new feature but a fundamental change to the reach of the AdWords program. By automatically extending AdWords campaigns to include smartphones, Google leveraged its strength in the desktop internet ad serving market to gain a substantial and instantaneous boost to its presence in the mobile advertising market, earning large profits in the process. Google barely publicised the campaign change and in doing so paid little regard to its advertisers who were duped into serving their ads on mobile phones, whether they intended to or not. Google has shown little concern for advertisers on the desktop internet, so there is no reason to believe they have the best interests of mobile advertisers in mind.

Given Google’s strong position in the mobile advertising marketplace, many developers and advertisers assume the acquisition is a foregone conclusion and that they will have to live with the new reality, but this is not the case. The Federal Trade Commission (FTC) is investigating the deal and there is still time for the regulatory agency to stop the online search giant from establishing a virtual monopoly in the mobile advertising market. It is not easy telling one of the most powerful global companies no, but given the evidence, the FTC must have the wherewithal to block the merger and keep mobile advertising competitive.

Simon Buckingham is CEO of Appitalism, Mobile Streams and Zoombak

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4 comments

  1. jMac 08/04/2010 @ 4:30 pm

    Well written article Simon.

    The only two issues I have with it are:

    1. To infer that the proposed merger would make mobile advertising non-competitive is to infer that mobile advertising is entirely about what Admob do today. I’m not sure that’s the entire picture. They are certainly massive – and good luck to them – but I am not sure there is significant evidence that’s the entire future sewn up

    2. I think your viewpoint on Google seems to lead to the previous point of inferred totality. Whilst everyone is entitled to their opinion (and my comments here are not to express mine), I feel that you may gain even more traction for your thoughts if you perhaps made a clearer differentiation between your feelings about Google and your feelings about mobile advertising.

    All the best

    jMac

    • Simon Buckingham 10/04/2010 @ 12:17 am

      Hi jMac

      Thanks for these thoughtful comments.

      Re point 1, I don’t think AdMob is the primary issue. As an entrepreneur in business and a libertarian in politics, I admire AdMob for their success and ability to scale their business, and also wish them continued luck and success.

      My concern is about the market and the competition and innovation within the mobile advertising sector. The other mobile ad networks that have said they support the deal are missing the point since most mobile advertisers- as the desktop market has shown- will never get to the number 2 mobile ad network because Google/ AdMob would be sufficient (particularly since Microsoft and Yahoo don’t offer in-app ad solutions and Google hasn’t even taken its in-app ad program out of beta yet).

      The issue is Google extending its dominant desktop position into mobile, and my concern is the ability for the combined entity to exert market power through control of the supply of mobile ad inventory and control of the demand for mobile ads through an overwhelming ownership of advertiser and customer relationships- combining those of AdMob’s mobile relationships and Google’s advertiser relationships.

      My sense is that Apple is getting more and more closed and Android is going in the opposite direction and proliferating on more and more devices. Therefore, using Apple’s iAd and Quattro acquisition as a reason to justify allowing the proposed Google/ AdMob deal is spurious. Quattro is a fraction of AdMob or Google’s size separately and over time, this won’t help developers- ad rates in the closed system will go up and ad payouts will just go down.

      The mobile market would not be able to heal itself- advertisers won’t have any choices and competition will ebb away and prices through both Apple/ Quattro and Google/ AdMob will increase by many multiples. App ad mediators are already seeing the writing on the wall competing as independent companies and becoming the internal mobile divisions for companies- for example- Tapjoy and Offerpal Media’s combination- what other options would they have?

      Re point 2, I came into this as an advertiser and a customer of Google’s who spent hundreds of thousands of dollars using them as an agency to buy TV, print and online media through them and from them.

      And then I found out that they were taking some of this money from me and retrospectively altering the settings on all my running campaigns. And then I looked more and I found out that some more of my ad dollars were going straight into their pockets. And then I started to talk to advertisers about their experiences in the desktop world and starting seeing how that would likely translate into similar behavior in the mobile market.

      The data and facts are all there and the policies and behavior that Google has adopted to put its own interests ahead of its customers will become clearer and more public over the coming weeks and months and will no doubt cause other people to come forward with other stories and concerns as I have seen happen over the past 3 months.

      Ultimately only governments and regulators such as the FTC in the US and the OFT in the UK can force Google to change its behavior. I would encourage everyone to make their voices heard confidentially to these regulators. Google and its lawyers have been pressuring app developers to say nice things about the proposed AdMob deal so the only way for the real truth to be communicated is if we as a mobile industry stand together and say that we will not allow Google to do what they did in the desktop Internet market and stifle innovation in the mobile ad market too.

      Email:

      randy Long rlong@ftc.gov
      Rebecca.Purves@oft.gsi.gov.uk

      Sincerely

      Simon

      Simon Buckingham
      simon.buckingham@appitalism.com
      http://www.appitalism.com/blog
      +1-917-573-6067

  2. Anuj Khanna 19/04/2010 @ 1:22 pm

    I do not think we as an industry should oppose acquisition of Admob by Google.

    Google’s acquisition of Admob will not create a monopoly as the vast majority of advertisers, brands and agencies have not yet even tipped their toes with mobile advertising.

    There are several other independent advertising networks that are coming into the market with unique strengths which can match or supersede Admob.

    Admob has worked hard in building their global business and also set the benchmark for other networks to follow. If the consumers independent are affected by this it is a different matter but I see a lot of industry jealousy towards AdMob because of the fantastic valuation and success they have been able to achieve.

    I support this merger as this is the type of success what small innovators in our industry work all their lives for and they should not be denied what they deserve due to speculative individual opinion.

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