Google[-AdMob] has come up with another "we think everyone is stupid" defense of Google's anticompetitive behavior: "It's too new to be dominated."
- This new Pinocchio antitrust defense nicely complements its previous grand deception that "competition is one click away," and its previous insult to everyone's intelligence that scale is not important to search.
Google Spokesperson Adam Kovacevich [and AdMob's CEO Omar Hamoui set] up a new "straw man" antitrust problem, easily knock it down, and then presto! conclude Google's acquisition of AdMob is not anticompetitive. From James Temple's San Francisco Chronicle piece:
- "Google spokesman Adam Kovacevich stressed that mobile advertising remains highly fragmented, with more than a dozen networks like AdMob. ..."
- [AdMob CEO Omar Hamoui] "did say that ... antitrust critics misunderstand the online search industry, and that he's confident regulators will approve the deal once they grasp the nuances of the nascent sector.
- "We do display advertising on mobile, which is not an area that Google (or) anyone has dominated," he said. "It's too new to be dominated."
The deception here is three fold:
- First, Google[-Admob] is setting up a false predicate here, that for a Google-AdMob acquisition to be anticompetitive, either Google or AdMob have to be proved dominant.
- Google[-Admob] know full well that the legal and policy antitrust standard is not if either party is dominant, but if the combination of Google and AdMob "would substantially lessen competition."
- Second, Google[-Admob] is implying that a new market can't be dominated.
- The problem with Google[-Admob] advancing this line of argument is that it reminds everyone of DOJ's misjudgement in buying that line of defense last time when it allowed Google to buy YouTube without a second request. The evidence is clear that combining YouTube, the clear first-mover/leader in online streaming video, with an emerging dominant Google search advertising business, resulted in YouTube becoming the second largest generator of searches in the world in three years and helping tip Google from <50% share to >70% share.
- The core judgement the FTC has to make here is whether or not the combination of Google-DoubleClick-YouTube's dominance in online advertising with AdMob's claimed leadership of mobile advertising "would substantially lessen competition."
- Since the FTC incorrectly assumed sufficient competition existed to prevent anticompetitive outcomes in approving the Google-DoubleClick deal 4-1, the FTC will likely be more circumspect this time when Google[-AdMob] try to assure the FTC that the fragmented competitors in this mobile market will still be able to compete with AdMob's leadership after it is combined with Google's search advertising/search advertising syndication monopolies and its strong existing competitive position in mobile advertising.
- In other words, will the remaining fragmented mobile advertising players have sufficient competitive scale/scope/advertising relationships/carrier relationships/infrastructure/network effects to compete head-to-head with a combined Google-DoubleClick-YouTube-AdMob and ensure that competition is not substantially lessened?
- Third, Google[-Admob] presume that a market is still "new" or nascent when the dominant online advertiser in the world is willing to pay $750m for AdMob and Apple pays ~$275m for Quattro.
- Those transactions strongly suggest this market has matured beyond the "nascent" and fragmented stage to become a strategically important and more consolidated market.
On a separate, but related point:
AdMob's leader Mr. Hamoui injured his credibility with antitrust authorities in now admitting in a legal proceeding, that AdMob misrepresented itself to the public in claiming to be "the world's largest mobile advertising marketplace."
- From the SF Chronicle: "Despite claims before the acquisition announcement that AdMob was the largest among them, Hamoui now says it's impossible to identify the leader because none disclose revenue."
Google and AdMob appear to be co-habiting in Pinocchio-ville here.
- If Admob is not "the world's largest mobile advertising marketplace," AdMob long misrepresented itself to the public on its website.
- If AdMob is indeed the "world's largest," and AdMob knows it, AdMob is misrepresenting itself now in the FTC review of the Google-AdMob deal.
- If AdMob is not the "world's largest mobile advertising marketplace" and Google knew that, Google should not have misrepresented that fact to public shareholders when Google announced the deal to justify the $750m price tag.
- And most importantly, if AdMob is not "the world's largest mobile advertising marketplace," then who is? Google?
- The FTC's civil investigative demands (subpoenas to competitors in the market) should enable the FTC to answer that core factual question.
In sum, the evidence suggests that both Google and AdMob may not be telling "the truth, the whole truth and nothing but the truth" in Google's attempt to extend its PC search advertising dominance into the potentially much larger mobile advertising marketplace via acquisition.
The case against the Google-AdMob acquisition is very strong, certainly strong enough to withstand Google's Pinocchio defenses.
- The open question, however, given the strength of the competitive/legal case against the deal, is whether Google will be tempted to try and use its considerable political influence to try and affect the outcome of the FTC's law enforcement process.
[Update: SF Chronicle reporter James Temple clarified that the last two quotes at the end of his article were from AdMob's CEO Omar Hamoui. The text throughout this post has been updated to reflect this clarification -- that the fragmented market antitrust defense is advanced by both Google and AdMob.]
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Google: Antitrust's Pinocchio Series:
Part I: What is "One click away?
Part II: Google: Antitrust's Pinocchio?
