Why the Federal Trade Commission should let Google and Apple do what they want in the mobile-ad business.

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May 7 2010 4:14 PM

Leave Google Alone!

Why the Federal Trade Commission should let Google and Apple do what they want in the mobile-ad business.

Eric Schmidt and Steve Jobs. Click image to expand.
Eric Schmidt and Steve Jobs

Is Apple the most powerful mobile technology company? Or is it Google? The Federal Trade Commission's apparent answer to that either/or question: They both are.

On the one hand, the FTC appears ready to oppose Google's $750 million purchase of the mobile advertising company AdMob. Google is already the largest advertising firm on the Web; if it gobbles up AdMob, it would become the largest advertising company in the mobile-app world, too. Is that too much power for one company to have? The FTC has been looking into this question for half a year and has solicited opinions from several of Google's competitors and others in the ad industry—a sign that regulators might be ready to declare Google too big to merge.

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But now look at Apple. This week the New York Post reported that the FTC and the Department of Justice are discussing the antitrust implications of Apple's new developer contract. The contract—which every programmer who wants a place in the iPhone App Store must sign—was updated last month; it now prevents developers from creating apps using third-party programming tools like Adobe's Flash. Apple's contract also imposes heavy restrictions on how developers can use third-party advertising systems in their apps. In particular, it seems to block programmers from allowing companies like AdMob to collect traffic data in order to serve targeted ads inside apps. Apple is reserving that right for its own new app-advertising system, iAd. This would make Apple the only viable advertising company for apps on the iPhone and iPad—which is why, according to the Wall Street Journal, regulators have been calling people in the mobile ad industry to ask whether Apple might be overstepping the antitrust line.

It certainly makes sense for the FTC and DoJ to keep an eye on the market for mobile phones, apps, and ads. This looks to be the biggest new sector of the tech industry, and it's wise for regulators to prevent any single company from illegally dominating the fledgling business. But I'm hoping that for now, regulators will hold their fire against both Google and Apple. It's true that both companies look poised to play a big role in the wireless business—they both make phones and the software to run them, they both run mobile app stores, and they're both trying to build advertising platforms to squeeze revenue from these devices.

But that's just the thing—they're both very powerful. If you have to ask whether either Google or Apple is too big for the mobile business, isn't that a pretty good sign that neither one of them is? Only one of them can be a monopoly, after all. At the moment, each company has enough power and ingenuity to prevent the other from gaining a permanent, monopolistic foothold in the phone market.

I've voiced my opposition to antitrust regulation of the tech industry in the past. In retrospect, the government's prosecution of Microsoft in the late 1990s looks misguided. Yes, Microsoft did wield its operating system monopoly to crush upstarts like Netscape. But even with that bullying, Microsoft couldn't last long at the top. It was quickly eclipsed by upstarts like Google and old rivals like Apple (whose stock market value looks poised to surpass Microsoft's).

That's the way it goes in tech—one day you're in, the next you're out. This is partly because the tech sector is extremely welcoming to start-ups. Some of the biggest companies on the Web—like Facebook, Twitter, and YouTube—didn't exist 10 years ago. Technology is also inherently unpredictable—to stay successful, big companies like Apple and Google must keep making bets about the sorts of gadgets and software people will want to use in two, five, and 10 years. Sure, they can skew those bets in their favor by hiring a lot of talented people and buying a lot of companies. But you can't win all your positions; sooner or later Apple or Google will stumble, just as Microsoft did, and some other company will come to lead the tech business.

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