Inside Google

SAN FRANCISCO, CA — Google Inc.’s $750 million acquisition of mobile ad service AdMob cleared its final hurdle Friday with a boost from AdMob’s jilted suitor, Apple Inc.

The Federal Trade Commission said it unanimously decided to approve Google’s AdMob deal mainly because of Apple’s recent push into the $600 million mobile advertising market in the U.S. The ruling closes a six-month antitrust investigation.

The emergence of another deep-pocketed competitor eased the FTC’s concerns that Google would be able to use AdMob as a springboard for extending its dominance into the nascent field of wireless devices.

“The presence of Apple made it for hard for the commission to construct a merger challenge that it felt it could win,” said Jeff Shinder, a New York antitrust lawyer who is a former special counsel to the FTC.

Apple’s role in persuading the government to sign off the deal is a weird twist because the maker of the iPhone and iPad was negotiating to buy AdMob before Google swooped in with a higher bid last November.

Shortly after the AdMob snub, Apple bought a smaller mobile ad service, Quattro Wireless, that is providing the technology for the iAd platform that persuaded the FTC to sign off on Google’s deal.

Now that it has regulators’ blessing, Google said it will take over AdMob within the next few weeks.

This marks the second time in three years that the FTC has launched an extensive investigation into a Google acquisition aimed at expanding its share of the digital ad market. The FTC spent a year examining Google’s $3.2 billion acquisition of online ad service DoubleClick Inc. before approving it in March 2008.

The government scrutiny reflects the widening worries about the power Google has amassed over the past decade as its search engine became the Internet’s main gateway and its advertising network became the Web’s richest gold mine.

“How this possibly can be construed as promoting competition is incomprehensible,” said John Simpson of Consumer Watchdog, a strident Google critic. “What it demonstrates is Google’s clout in Washington.”

Google has ramped up its government lobbying efforts in part to convince regulators and lawmakers that it faces robust competition from a phalanx of fierce rivals that include Microsoft Corp., Yahoo Inc., Facebook and its one-time ally, Apple.

Google had strongly indicated that it would have gone to court had the FTC tried to block the AdMob deal.

The company believes advertising on mobile devices eventually will be as lucrative as marketing on computer screens, and it considers AdMob to be a key piece in its strategy to make more money from people on the go.

AdMob, launched four years ago by Omar Hamoui, runs a network that delivers targeted advertising to websites and to online applications tailored for smart phones, including Apple’s iPhone and devices powered by Google’s Android software.

The FTC had feared that a combined Google-AdMob would thwart competition and possibly have a ripple effect on the mobile phone applications that rely on ads.

Combined, Google and AdMob will have a 21 percent share of the U.S. mobile ad market followed by Millennial Media at 12 percent, according to the most recent statistics from International Data Corp. Yahoo is next at 10 percent followed by Microsoft at 8 percent and Quattro Wireless at 7 percent.

U.S. spending on mobile advertising is expected to approach $600 million this year and increase to nearly $1.6 billion in 2013, according to eMarketer. That’s still smaller than spending for online ads delivered to laptops and desktops, but growth there is expected to be slower — to more than $33 billion by 2013, from a projected $25.1 billion this year.

The big question now is whether Google and Apple will be able to leverage their advertising networks and widely used platforms for mobile applications to create an effective duopoly in the market.

Industry analysts and mobile ad executives are skeptical and predict that other major companies will try to muscle into the market with acquisitions of their own. Other mobile ad services still in play include JumpTap, GreyStripe, Mojiva and Mobclix.

Microsoft and even some magazine publishers developing applications for mobile devices may emerge as buyers, said eMarketer analyst Noah Elkin. “A lot of molds have been broken in terms of who might try to get into this space,” Elkin said. “Everyone wants access to this mobile audience.”

As Google puts one regulatory investigation behind it, Apple could be wrestling with one of its own.

Apple is also facing increased regulatory scrutiny in Washington. Officials at the FTC and the Justice Department are currently sorting out which agency will examine whether the company is violating antitrust rules by requiring software developers to use Apple programming tools to create applications for the iPhone and iPad.

Tessler reported from Washington.