Ironically, by going head-to-head with Google in yet another arena, mobile advertising, Apple may have handed its estranged best friend victory over the US antitrust authorities. Google’s planned acquisition of AdMob is under scrutiny from the Federal Trade Commission (FTC), but Apple’s launch of its own mobile ads system, iAd, proves there is plenty of competition in the market, argues Google CEO Eric Schmidt. Carrier oriented solutions like Alcatel-Lucent’s new Optism could strengthen his argument further.
The FRC is assembling an internal litigation team to mount a challenge to the $750m AdMob deal, says the Wall Street Journal, citing the usual ‘sources familiar with the matter’. Apparently, the FTC has also sent letters to AdMob’s competitors requesting sworn statements about the potential impact of the deal, and briefed Congress about its concerns. There has not yet been any vote on a possible block of the deal.
“While we’re continuing to work with the FTC, there is overwhelming evidence that mobile advertising will remain competitive after this deal closes,” a Google spokesperson told the newspaper. And in a speech on Sunday, Schmidt said iAd was ‘evidence of a highly competitive market’.
The deal has been seen as epitomizing Google’s growing dominance of its key business areas, advertising, search and location. Vodafone CEO Vittorio Colao called for more competition in his keynote speech at the Mobile World Congress, while Herb Kohl, Democrat chairman of the Senate subcommittee on antitrust, has urged the FTC to scrutinize the AdMob acquisition closely, as it “raises important competition issues’. Two years ago, the FTC reviewed Google’s $3.1 billion proposal to purchase display advertising company DoubleClick, later clearing the transaction.
A handy bit of competition might be welcome to keep Google out of antitrust clutches, but it might not have chosen Apple to play AMD to its Intel. This is not just because of the iPhone maker’s market influence ‘ in fact, Apple tends to stay in niches, while Google is more able to extend its business models universally across the web. Rather it is because, every time Apple and Google move against one another ‘ in apps stores, operating systems, devices or services ‘ Google’s open access, browser/cloud/streaming model comes into question, as Apple pushes its own vision of controlled, downloadable apps. This forces Google to fight on first principles, rather than merely with product features and marketing tactics, and in the mobile world, the browser approach is by no means guaranteed to win ‘ at least until connections are universally fast, cheap and reliable.
Advertising is no exception to the new rules of Apple-Google competition, with Nokia, the great decider in emerging markets in particular, sitting somewhere in between. iAd, based on Apple’s acquisition of Quattro Wireless last year, allows iPhone developers to insert interactive, rich media adverts into their programs and share the resulting revenues. In-app advertising is expected to be a major boost for revenues in software stores and ad networks, allowing users to view interactive video without leaving the app. All this is geared to deliver ’emotion’ in the ad experience. Premium brand interactive units can be adjusted for different platforms and browsers. In return for selling and hosting the adverts, Apple will keep 40% of revenue, compared to 30% for App Store programs.
As with the broader Apple-Google debate, this is a war between the downloaded app and the browser. Apple is saying, with iAd, that the best way to monetize free content, and for users to consume advertising, is within the application – while Google and its putative acquisition AdMob are focused mainly on ads delivered in the browser or on mobile web pages.
Apple’s approach also gives it far greater control of its overall environment and the quality of experience on the iPhone and iPad. CEO Steve Jobs said: ‘We think most of this mobile advertising really sucks and we think we might be able to make some contributions.’ The darker side of that creativity, as seen in the increasingly dictatorial rules governing the App Store, will be seen in ads too. In February, Apple warned iPhone developers that applications that incorporate location to deliver targeted advertising would be rejected from the store, and iAd creatives will probably have to go through a review and approval process, though Jobs hinted this would be less onerous than the one for apps themselves.
Google’s dilemma is severe, and it urgently needs to have the upper hand in mobile advertising in order to make sense of its investment in mobilizing its key services, such as search and location, and developing new platforms like Android. It could copy Apple, but this would contradict its support for web ads and apps being superior to downloaded ones. Of course, it has already made that compromise in Android Marketplace, and while its medium term vision rests around the browser, the cloud and the Chrome OS browser-as-operating system, in the short term it has accepted that the mobile platform is well behind the wired PC in supporting web apps rather than native ones ‘ partly because of customer and developer habit, partly because of the constraints of the device formats and their wireless connections.
Google has had to support downloads and native tools for Android, just as Apple itself shifted away from a browser-oriented model based on Safari, giving into pressure to allow native access to the original iPhone, even after Jobs had tried to get developers to build mobile Safari apps instead. Google needs to bow to current mobile norms, even while it tries to shift everyone towards the browser and the search engine as their main ways to interact with the mobile web. We expect to see it respond to iAd in kind, while hoping Apple has handed it an AdMob victory, allowing it to steam ahead in broader mobile ad platforms.
Apple’s rift with Google has also led to fevered speculation that its former friend’s search engine would be supplanted as the default for iPhone OS 4.0 and the WebKit-based Safari browser. However, based on the developer preview release of the updated OS, Google remains in place, and there is no sign of a rumored deal with Microsoft to put its new Bing in the position. If such a deal is still being negotiated, however, Bing could turn up as the main search engine in the beta or final release (as could Yahoo).
Apple and Google may be locked in combat over mobile advertising, but the cellcos want neither of them ‘ they need a platform that is tied into their networks, and gives them control of the advertising experience and revenue chain. Alcatel-Lucent, eagerly positioning itself as the carrier’s friend in the ‘telco 2.0’ world, is targeting that demand, bringing its promised mobile ad system to market with Orange as its first customer (See separate story elsewhere in this issue).