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Justin Bernick, Logan Breed, May 28, 2014
Google announced its acquisition of AdMob in November 2009 when the “mobile revolution” had just begun. Since then mobile device use has exploded. One in five people worldwide now own a smartphone, and more people worldwide now own a smartphone than a personal computer. The number of software applications developed for mobile devices has also skyrocketed, increasing from about 100,000 in 2009 to about one million today in the Apple App Store alone. Over 50 billion apps have been downloaded from the Apple App Store, and another 50 billion apps have been downloaded from Google Play.
App developers “monetize” their apps in many ways, one of which is advertising. AdMob was one of several startup mobile advertising networks. After Google announced its acquisition of AdMob, the Federal Trade Commission began an investigation to assess whether the transaction would eliminate competition between the companies, resulting in too much market concentration. But the mobile industry shifted even as the FTC’s investigation was pending. In January 2010 Apple announced its $275 million acquisition of Quattro Wireless, another startup in-app advertising network that Apple subsequently rebranded iAd. The FTC closed its investigation in May 2010, noting that Apple’s entry and other developments made AdMob’s historical success an “[in]accurate predictor of AdMob’s competitive significance going forward.” Google and AdMob then closed the acquisition.
This article explains why the FTC made the right decision. Pre-merger review under Section 7 of the Clayton Act is inherently prospective, requiring the FTC to predict whether an acquisition “may” reduce competition. However, it can be difficult to predict the effects of acquisitions in industries characterized by rapid change and innovation. That is perhaps more true of mobile advertising than any other industry, and the FTC’s regulatory restraint in the AdMob transaction was clearly justified in light of the rapid innovation and fierce competition that has occurred in the ensuing years.
Disruptive new competitors and new technologies have changed the way advertisers and publishers approach mobile advertising-and monetizing mobile content more generally-since 2009. Moreover, large publishers like Facebook have bypassed entirely, and now dwarf, their ad network competitors. Finally, while iAd may not have been exactly what the FTC predicted, competition between AdMob and iAd-and between the iPhone and Android platforms-is robust.
The FTC was correct that predicting AdMob’s future competitive significance in 2010 was nearly impossible. But even more importantly, subsequent industry developments discussed below show that the acquisition did not reduce competition or stifle innovation.