Consumer Groups Sound Alarm Over Google’s AdMob Buy

Google’s plan to acquire mobile ad network AdMob in a US$750 million deal announced last month is under fire from two consumer groups,Consumer Watchdog and the Center for Digital Democracy. The two have asked the Federal Trade Commission to block the deal, arguing that it would substantially lessen competition in the mobile advertising market, harming consumers, advertisers and application developers, among others.

The letter comes as the FTC is apparently having its own doubts about the deal — or at least wants to learn more before giving its approval. The agency is seeking additional information in a so-called second request, according to a post on Google’s public policy blog.

Mobile Ad Market

Because the mobile ad market is still relatively tiny, the objections to the deal may appear gratitious. However, it is widely expected that mobile marketing will rapidly grow — particularly as local-oriented and geolocation apps and advertising take off — and perhaps even rival online marketing activities targeting desktop users.

“The mobile Web is still in its early stages,” wrote Google’s Susan Wojcicki, vice president of product management, and Vic Gundotra, vice president of engineering, when the deal was first announced. “We believe that great mobile advertising products can encourage even more growth in the mobile ecosystem.”

Dominant Force

It is the future role of mobile advertising that is worrisome, according to John M. Simpson, consumer advocate with Consumer Watchdog.

“It is clear that Google has emerged as a dominant force in online advertising, particularly in search,” he told the E-Commerce Times. “The most recent figure put its marketshare at 71 percent of the search market. AdMob bills itself as the number one ad network in mobile space. We believe putting those two together will result in an uncompetitive situation.”

Google is trying to buy itself into the next digital boomtown in online world, continued Simpson. “It is one thing to do that through legitimate innovation and by offering the best mousetrap, but they are essentially buying their position in the market.”

Besides the antitrust issues, the two organizations are worried about the privacy issue, Simpson said. Mobile marketing has the potential to garner even more information about consumers, thanks to GPS tracking functionality.

“There is little regulation about privacy protection in the mobile space right now,” Simpson said. “If nothing else, this issue has to be looked at if the deal is going to go forward.”

Fears Overblown?

It is not surprising that the FTC is looking at the deal, in light of the Obama administration’s earlier promise to ratchet up antitrust activities, Ryan Radia, an analyst with the Competitive Enterprise Institute, told the E-Commerce Times.

However, “the arguments against the deal are not strong at all,” said Radia. “Google is competing in a large space — not just the search market, but also offline and mobile advertising. So the argument that Google has concentrated power in the advertising space doesn’t square with reality.”

There has been no evidence to show that consumers would be hurt by Google’s acquisition of AdMob — or for that matter, by any of Google’s market actions, he maintained. “Its services are still free and it still brings new services to market all the time, so why intervene?”

DoubleClick Deja Vu

Google may have thought something similar in the past. The AdMob acquisition will be its most expensive purchase since its $3.2 billion DoubleClick deal — which took a lot longer to close than Google ever expected.

U.S. antitrust regulators mulled the purchase for a year before deciding it wouldn’t stifle competition in the online ad market.