Evidence FTC Tipped Google to Mobile Ad Dominance

New evidence indicates that the FTC's lax Google antitrust enforcement -- in approving Google's acquisition of AdMob with no conditions in 2009, despite FTC staff recommendations to block it as monopolistic -- have enabled Google to extend its dominance of PC search and advertising into mobile search and advertising.

• Bloomberg reports that: "In January, eMarketer… estimated Google's share of U.S. mobile ad revenue was 52 percent in 2011, driven by searches. Google earns about 95 percent of all U.S. mobile search ad revenue;" and according to Gartner "Google's Android became the dominant mobile phone operating system last year" with a 50.9% share in 4Q12.
• Just nineteen months after buying AdMob, the self-proclaimed "world's largest mobile advertising marketplace," Google has taken a dominant/majority share of all U.S. mobile advertising and mobile operating systems, while also grabbing a clear monopoly 95% share in mobile search advertising.
• This outcome was obvious to others at the time of the FTC's Google-AdMob investigation.

In 2010 when approving Google-AdMob, the FTC said: "although the combination of the two leading mobile advertising networks raised serious antitrust issues, the agency’s concerns ultimately were overshadowed by recent developments in the market, most notably a move by Apple Computer Inc. – the maker of the iPhone – to launch its own, competing mobile ad network."

The FTC also said about Google-Admob: "…evidence gathered by the agency raised important questions about the transaction. Google and AdMob have competed head-to-head for the past few years, with a notable increase in intensity during the past year. This competition has spurred innovation and allowed mobile publishers to keep a large share of the revenue generated from the sale of their ad space. The companies also have economies of scale that give them a major advantage over smaller rivals in the business, the statement says."

Given the news that Apple has been subpoenaed by the FTC on Google mobile search, the subpoena likely is exploring in part if Google misrepresented in anyway the competitive facts or implications of Apple's entry into mobile advertising in order to persuade the FTC commissioners to overrule the staff recommendation to block the transaction.

The other most likely line of inquiry in the Apple subpoena or "civil investigative demand," is the deal Google offered in 2007 to be the default search provider for the iPhone in 2007 and the iPad in 2010.

• The FTC appreciates that Google's exclusive OEM deals to be the default search engine for products and services from Apple, Adobe, Dell, AOL, Ask.com, etc. are central to Google's dominance, especially in mobile.
• This part of the antitrust investigation addresses one of the few parallels with how Microsoft acquired its monopoly power in the 1990s.
• What this subpoena also indicates is that the FTC investigators are looking for clear evidence that Google is leveraging its market power with OEMs to extend its market power even further.

Eight long months after first subpoenaing Google in June 2011, it is welcome news the FTC is finally beginning to subpoena competitors who know where many of Google's proverbial bodies are buried.