Google-AdMob's Antitrust Problems

Google's acquisition of AdMob, "the world's largest mobile advertising marketplace," will receive serious antitrust scrutiny focused on whether the deal lessens competition by extending search advertising monopoly to mobile devices. 

• Expect the review process to be a magnet for a host of antitrust, competition, and privacy product/services concerns much like the proposed Google Book Settlement has been a magnet for antitrust, competition, and privacy content concerns. 

First, Google is misleading with its blanket statement: "We don't see any regulatory concerns with this deal." 

• Not "any" concerns implies Google does not expect: any DOJ/FTC discussion over who reviews the deal; no second request for information; no CIDs (subpoenas); no hearings; or no serious competitor objections authorities will have to explore. If that is true, why does Google say it could it take "several months" to close? 
• There won't be "any" concerns? AdMob is the equivalent of a "Mobile-DoubleClick," and the FTC took several months to review that deal closely. When the FTC approved that deal 4-1 they assumed Yahoo would remain a strong competitor, which was proven dead wrong when the DOJ eleven months later had to intervene and block Google's anti-competitive proposed Ad Agreement with Yahoo. 
• There won't be "any" concerns? DOJ is currently concerned enough with the original Google book settlement to ask the Court to block it as anti-competitive.
• There won't be "any" concerns? The DOJ has also made it clear it is has heightened its scrutiny of high tech competition issues in general.  
• There won't be "any" concerns? In February, before FTC Chairman Leibowitz was designated Chairman, he warned in a statement about behavioral advertising:  
  • "Industry needs to do a better job of meaningful, rigorous self-regulation or it will certainly invite legislation by Congress and a more regulatory approach by our Commission." ... "a national 'Do Not Track List' ... deserves serious consideration." ... "A day of reckoning may be coming." (Almost by defintion, AdMob's mobile ad serving involves tracking to be relevant and targeted.)
• It's obvious there will be "regulatory concerns" with this transaction, what is not clear is what form(s) they will take and how serious they will ultimately be.  

Second, Google is suggesting that Google and AdMob don't compete given that "Google and AdMob are specializing in different areas" and that Google has a different "focus" than AdMob.

There are some pesky facts that indicate Google in fact does compete with AdMob and that Google's acquisition of AdMob could extend Google's existing search advertising monopoly to mobile.

• Google-DoubleClick is the world's largest search advertiser, ad-server, and ad analytics provider. AdMob claims to be "the world's largest mobile advertising marketplace:" "we serve billions of targeted and personalized ads;" to "more than 160 countries," and offers "AdMob Mobile Analytics" and "Mobile Metrics Report." Anyone that understands what Google does knows that Google does the same thing AdMob does, just less in the mobile space than AdMob does.
• The antitrust concern would be that Google's acquisition of AdMob would lessen competition by accelerating Google's growth and emerging dominance of the mobile search market where NetMarketShare.com's latest survey of mobile search engine market shares has Google Global with 97.50% share. 
• Another concern would be the familiar adage "fool me once shame on you, fool me twice shame on me." The FTC was clearly fooled "once" in approving the Google-DoubleClick acquisition, because less than a year later the DOJ had to clean up part of the FTC's mess in blocking Google's anti-competitive ad agreement with Yahoo. The question now is will they allow themselves to fooled "twice" by agreeing with Google that Google-DoubleClick and AdMob do not compete and that their combination would not lessen competition. 
• DOJ also has the experience of its approval of Google's acquisition of YouTube. At the time, DOJ did not foresee the network effect of combining the leading search engine with the leading web-video broadcaster YouTube. Now they know that Youtube itself is the world's second largest generator of searches worldwide per Comscore and that the acquisition of YouTube effectively tipped Google from ~50% percent search share to ~70% search share per Hitwise.
• There is plenty of real world recent experience to suggest that the DOJ or the FTC (whichever reviews this deal), will have serious concerns about whether this deal would lessen competition. The open question is would the concerns be serious enough to warrant any action; it is much too early to make that call.   

Third, many have not connected-the-dots that an antitrust review of Google-AdMob could not help but examine the competitive implications of Google's recent big splash announcement that it would disrupt the wireless navigation market by offering free Google Maps navigation services on Android 2.0. 

• An interesting and provocative post -- by Bill Gurley of AboveTheCrowd.com: "Google Redefines Disruption: The 'Less Than Free' Business Model" -- shows how Google-AdMob could be viewed in the larger antitrust context of Google attempting to extend its search advertising monopoly to wireless via predatory cross-subsidization.
• Mr. Gurley raves about the unstoppability of Google's "less than free" business model in wireless:
  • "Google will give you ad splits on search if you use that version!  That’s right; Google will pay you to use their mobile OS. I like to call this the “less than free” business model. This is a remarkable card to play. Because of its dominance in search, Google has ad rates that blow away the competition. To compete at an equally “less than free” price point, Symbian or windows mobile would need to subsidize."
•  Mr. Gurley raises the issue, and the antitrust review of Google AdMob would provide a forum to investigate to see if Google is anti-competitively leveraging its market power in search advertising to extend its monopoly into mobile.
  • How Google intends to bundle its search, ad-serving, operating system, browser, etc. with AdMob will have big implications on how antitrust authorities would ultimately view this transaction.

In short, Google has misled people that there are not "any regulatory concerns with this deal." On the contrary, Google's dominance of search advertising, combined with its ownership of DoubleClick (arguably AdMob's biggest long term ad-serving competitor) mean there are very serious antitrust concerns with this deal, which will require substantial investigation to sort out.