Google unwisely chose to trumpet Apple's purchase of Quattro as evidence that the mobile advertising market is competitive -- and by implication that the Google acquisition of Admob therefore should be approved.
First, the FTC surely remembers that Google CEO Eric Schmidt indignantly said only last year that Google and Apple were not competitors, so there was no reason for Mr. Schmidt to have to step down from Apple's board, despite an FTC antitrust investigation into potentially illegal Google-Apple inter-lockiing directorates.
- Should the same FTC that is now investigating Google-AdMob, believe that Google's assertions last year that Apple was not a competitor were forthright... or should they believe that Google is being forthright now -- that Apple has suddenly become a major Google competitor?
- What has changed in such a short time? Could it be Google's announcement just this week of a Google Nexus One phone that is clearly a direct assault on Apple's iPhone? If so, will the FTC learn via subpoena that Google was planning the Nexus One long before the FTC began its antitrust investigation of the Google-Apple interlocking directorates?
- It seems both the FTC and Apple would want to know just when Google began planning its sneak attack on Apple (and who was involved in the planning), while Google's CEO was acting as a supposedly friendly director of Apple and while he was enjoying a trusted bay window view into Apple's most competitively sensitive plans, strategies and ideas?
Second, Google highlighting Apple-Quattro reminds everyone that Google outbid Apple for AdMob and paid an exceptional $750m price for AdMob (~15 times sales) which strongly suggests Google paid with surplus market power to block Apple from acquiring the clear first-mover and pick-of-the-litter in mobile in-app advertising.
- Did Google's blocking action substantially lessen Apple's ability to compete in mobile in-app advertising?
- In other words, how comparable is Quattro to Admob? The reported price differential suggests it is but a fraction of AdMob's competitive heft.
Third, Google, in trumpeting that Apple-Quattro is evidence of robust competition in mobile in-app advertising, Google ironically must now make the case how the company that they said just months ago was not a competitor, now will be able to ramp up from ZERO advertising business to become a formidable enough competitor soon enough to ensure that Google-AdMob is not an anti-competitive transaction.
Fourth and probably most importantly, the Apple-Quattro transaction has less to with the FTC's analysis of Google-AdMob than most may appreciate. Google-AdMob got a second request not Apple-Quattro. Google is the DOJ-determined dominant player in search advertising (and syndication), and Google is acquiring AdMob, which represents itself as the world's largest mobile advertising marketplace. The combined market leadership positions strongly suggest massive synergies and network effects.
- On the other hand, Apple at core is a manufacturing business model with a supplementary transaction or store business model. Apple has no significant mobile advertising business, presence, or expertise to speak of outside of Quattro.
- As the FTC will discover in its investigation, Quattro is no AdMob, as the pricing of the deals confirms.
- Thus the combination of a new entrant Apple (albeit highly respected and capable) with a mobile ad provider Quattro that is clearly inferior to AdMob, does not suggest strong synergies or network effects to be able to compete with Google-AdMob.
Moreover, what the FTC has to do is take what they learned the hard way from the Google-DoubleClick merger, that Yahoo and Microsoft indeed were weak competitors to Google's rapidly strengthening monopoly despite their existing resources, presence, infrastructure, and relationships in the search business.
- In looking at Google-AdMob, there is no strong alternative competitor, because Yahoo, Microsoft, and Apple are not currently meaningful mobile advertising competitors to Google or AdMob.
- Ironically, by spotlighting Apple-Quattro as strong evidence of a highly competitive mobile advertising market, Google unwisely has focused and accelerated the FTC's analysis and likely conclusion that there is no real significant competitor to Google-AdMob.
- In highlighting Apple-Quattro, Google mostly sheds light on Google-AdMob because Google is encouraging the FTC and others to compare the two side by side. Oops.
In short, Google needs a plan 'B' to distract the FTC from looking hard at how much of a competitive boost, leapfrog, acceleration, synergy, and network effect combining the most dominant force in online advertising globally would be with the first-mover, and clear leader in mobile advertising globally.
- The more the FTC investigates, the more clear it will be clear that the Google-AdMob transaction "substantially lessens competition" and creates an effective and efficient bridge for Google to rapidly extend its dominance of PC-based search advertising to the potentially much larger mobile advertising place.
If you want more information on Google-AdMob see my white paper: