Reuters last week reported that lawyers at the U.S. Federal Trade Commission will urge the government to put the kibosh on Google’s proposed $750 million acquisition of AdMob. Then, as if on cue, Apple stepped up two days later to demonstrate why such a move is unnecessary.
The FTC’s wariness regarding Google is understandable. The behemoth absolutely owns Internet search around the world and last year posted a staggering net income of $6.52 billion. AdMob, too, has effectively leveraged its position as a first-mover in mobile Web advertising to become the dominant player in its space, according to figures released late last year from IDC. The market research firm said Google and AdMob together would claim a 24 percent share among U.S. mobile ad networks based on estimated 2009 revenues.
But Apple is gearing up to become a major player in mobile ads as well. The iPhone maker — which admittedly pursued AdMob in a move that surely inflated the startup’s price — last week took direct aim at Google and AdMob with iAd, a platform that will allow developers to add mobile ads to their applications “in an afternoon,” according to Steve Jobs. Apple will sell and host the ads, returning 60 percent of revenues to developers. The move stems from Apple’s January pickup of the mobile ad startup Quattro Wireless for a cool $275 million.
Apple is wise to leverage its dominance in smartphone applications, where it accounted for a staggering 99.4 percent of overall sales last year, according to Gartner. But Apple isn’t the only other major player on the field: Millennial Media boasts an 18 percent share among U.S. mobile ad networks, IDC estimated, making it the largest independent firm in the space (assuming the AdMob acquisition goes through).
Other contenders include Yahoo and Microsoft — each of whom have the resources to expand their mobile presence substantially — and JumpTap. (AOL, interestingly, claims a mere 2 percent share among U.S. mobile ad networks in IDC’s view — a shockingly low figure considering the company’s 1997 acquisition of Third Screen Media, which was a pioneer in mobile advertising. AOL’s failure to leverage Third Screen’s momentum underscores the fact that existing market share is no guarantee of future success in mobile advertising, where the ground shifts quickly in these early days.) Meanwhile, Nokia – which joined the space with its 2007 acquisition of Enpocket — looms as a potentially huge player thanks to its massive worldwide handset footprint.
It’s also worth noting that countless smaller players are gaining traction in segments other than display ads, which are AdMob’s bread and butter. ChaCha and 4INFO, among others, are building impressive businesses based on SMS ads. WHERE, whose flagship app uses location awareness to direct users to nearby businesses, has begun building its own local ad network – a move that could be a huge step forward in targeting ads based on a user’s whereabouts. GoldSpot Media is developing an interactive ad network that delivers video pitches to phones in ways that minimize congestion on the network. And mobile carriers, who have yet to make much of an impact in the space, may yet leverage the user data and demographic information that remain the most potentially effective tools in mobile advertising.
A Google/AdMob tie-up would obviously be a marriage of two dominant figures in their respective industries — a proposition that understandably has at least one senator urging the FTC to scrutinize the deal. But mobile advertising is still in its infancy, and it’s far from clear who will emerge as long-term winners in the space. AdMob’s position as a leader could change relatively quickly if Apple makes wise moves or if a sub-segment (like location-based ads) suddenly catches fire. So while the FTC is right to look closely at the deal, it would be short-sighted to block the acquisition. After all, Third Screen Media was once a leader in mobile marketing too.