Google $750 Million Purchase of AdMob Cleared by FTC

The U.S. Federal Trade Commission unanimously approved Google Inc.’s $750 million acquisition of AdMob Inc., saying the purchase won’t reduce competition in the fledgling market for advertising on mobile devices.

The deal “is unlikely to harm competition in the emerging market for mobile advertising networks,” the FTC said in a statement on its website today.

Google, owner of the world’s most popular web search engine, is the leader in Internet advertising. With San Mateo, California-based AdMob, it would form the largest mobile- advertising company.

The FTC said its decision was influenced by Apple Inc.’s recent inroads in the market, indicating there may be more competition than originally thought. Regulators’ concerns were allayed by the introduction of iAd, a program that generates revenue from ads placed on Apple’s handheld devices.

“In this case because of developments during the investigation” such as Apple’s entry into the mobile-ad market, “we concluded this deal shouldn’t be blocked,” said Richard Feinstein, director of the FTC’s Bureau of Competition, in an interview on Bloomberg TV.

Google and AdMob combined had 21 percent of the U.S. market in 2009 -- a market that has been doubling in size annually -- according to Karsten Weide, an analyst with researcher IDC in San Mateo.

Growth in Advertising

“As mobile phone usage increases, growth in mobile advertising is only going to accelerate,” said Susan Wojcicki, Google’s vice president of product management, on the company’s blog today. “We’re very excited about the possibilities in this field.”

Google fell $2.96, or 0.6 percent, to $472.05 as of 4:30 p.m. New York time in trading on the Nasdaq Stock Market.

The FTC’s decision shows that Google, which has bought several small companies this year, can still close large acquisitions, said Colin Gillis, an analyst with BGC Partners LP in New York.

“The real question was will they be able to deploy that cash for acquisitions,” he said. The FTC decision “just shows that Google can get deals done.”

Thoughtful Decision

The FTC decision is a thoughtful attempt to monitor antitrust in the rapidly changing technology field, said David Balto, a former FTC attorney who has his own antitrust practice in Washington.

“The FTC is absolutely correct to watch the evolution of the market rather than bring a major antitrust action,” he said.

Google and Apple just a few years ago “wouldn’t even have been mentioned” in a discussion of the mobile market, said Michael Gartenberg, partner at the Altimeter Group, a San Mateo, California-based consultant.

In recent weeks, the FTC delayed its decision on the deal to examine the developments involving Cupertino, California- based Apple, said two people familiar with the matter. The FTC was concerned with conditions Apple is placing on software developers and advertisers for the iAd system, the people said.

Steve Dowling, a spokesman for Apple, declined to comment.

Today’s 5-0 decision by the FTC suggests a shift in thinking following earlier signals from the agency that it was preparing to oppose Google’s acquisition of AdMob.

Sworn Declarations

Earlier this year, the agency indicated it might challenge the combination when it sought sworn declarations from Mountain View, California-based Google’s competitors and advertisers, according to people with direct knowledge of the matter.

The FTC staff had recommended a challenge, according to people familiar with the case who spoke on condition of anonymity in advance of today’s announcement.

Scott Cleland, an independent analyst in McLean, Virginia, said he was “amazed” by the FTC vote because Apple isn’t a big player in the mobile-ad market.

“Apple is a niche provider not serving the entire marketplace,” said Cleland, president of Precursor LLC. “They’re focusing only on serving the Apple product.”

Some attorneys said it would have been difficult for the FTC to show Google’s dominance because the market is still in its early stages of development.

Down the Road

One of the FTC’s considerations in bringing a case should be “evaluating whether the firms involved in the transaction are likely to be the key players down the road,” Barry Nigro, former deputy director of the agency’s Bureau of Competition, said before the FTC’s decision was announced.

Jeffrey Shinder, a former special counsel to the FTC, said the decision was indicative of the “prudent and moderate decisions” on antirust occurring under President Barack Obama.

Some advertisers said they were concerned the acquisition would lead to higher rates.

The decision is “a shock and a disappointment,” said Simon Buckingham, chief executive officer of Appitalism Inc., a New York-based software developer said.

Buckingham said that Google’s behavior will be a future source of concern for federal authorities.

“It’s more a question of when rather than whether Google faces serious regulatory scrutiny,” he said.

Book Settlement

A $125 million settlement between Google Inc. and a group of publishers and authors to create the world’s biggest digital library has prompted objections from the Justice Department, which warned of its anticompetitive nature.

FTC Chairman Jon Leibowitz yesterday told a Senate panel the agency will take a “close look” at Google’s data-gathering practices after the company said it unintentionally collected information from unsecured wireless networks.

Antitrust scrutiny of Google began building before the company announced the AdMob purchase in November.

Google dropped plans for an agreement with Yahoo! Inc. in 2008 after the Justice Department signaled it would try to block the deal. Google and Yahoo are the leading search-engine companies and a combination might give them power to raise ad rates.

Three companies -- Foundem, Ejustice.fr and a Microsoft Corp. service called Ciao from Bing -- in February filed antitrust complaints against Google with the European Union.

The FTC has been monitoring Google since at least 2007, when the company bought Internet advertising company DoubleClick Inc.

In voting 4-1 not to block the DoubleClick deal, FTC commissioners warned that “we will closely watch these markets and, should Google engage in unlawful” conduct, “the commission intends to act quickly.”

To contact the reporter on this story: Jeff Bliss in Washington jbliss@bloomberg.net.

Google, owner of the world’s most popular web search engine, is the leader in Internet advertising. With AdMob, it would form the largest mobile-advertising company. Photographer: Jonathan Alcorn/Bloomberg

May 21 (Bloomberg) -- The U.S. Federal Trade Commission said it won’t challenge Google Inc.’s $750 million acquisition of AdMob Inc., rejecting claims the purchase would reduce competition in the fledgling market for advertising on mobile devices. Bloomberg's Mark Crumpton reports. (Source: Bloomberg)

May 21 (Bloomberg) -- Jeff Jarvis, author of "What Would Google Do?," talks with Bloomberg's Julie Hyman about the U.S. Federal Trade Commission's approval of Google Inc.'s $750 million acquisition of AdMob Inc. Google, owner of the world’s most popular web search engine, is the leader in Internet advertising. With San Mateo, California-based AdMob, it would form the largest mobile-advertising company. (Source: Bloomberg)

May 21 (Bloomberg) -- Heath Terry, an analyst at FBR Capital Markets, talks with Bloomberg's Julie Hyman about the U.S. Federal Trade Commission's unanimous approval of Google Inc.’s $750 million acquisition of AdMob Inc., rejecting claims the purchase would reduce competition in the fledgling market for advertising on mobile devices. (Source: Bloomberg)

May 21 (Bloomberg) -- Richard Feinstein, director of competition at the U.S. Federal Trade Commission, talks with Bloomberg's Lizzie O'Leary about the FTC's approval of Google Inc.'s purchase of AdMob Inc. The FTC unanimously approved Google’s $750 million acquisition of AdMob, rejecting claims the purchase would reduce competition in the fledgling market for advertising on mobile devices. (Source: Bloomberg)