Apple To Face Regulatory Probe Over iAd Mobile Ad Product

  |  May 28, 2010   |  Comments

Regulators will examine Apple's behavior in the mobile ad space following the FTC's scrutiny of Google's AdMob acquisition.

U.S. regulators are preparing to launch an investigation into Apple's activity in the mobile advertising space, according to a lawyer involved with the Federal Trade Commission's recent investigation into Google's acquisition of AdMob, which was approved last week.

Last month Apple altered its developers' license agreement to, depending on how you interpret the language, effectively outlaw third parties from serving ads into applications on its devices. That could force advertisers to use Apple's proprietary iAd product to reach consumers through apps on the iPhone, iPod Touch, and the iPad.

Andrew G. Berg, a shareholder in the Litigation Practice Group at international law firm Greenberg Traurig, said an investigation from either the FTC or the Department of Justice regarding that action and others is now a certainty, thanks primarily to the FTC's investigation of Google's AdMob acquisition.

In an officially released statement regarding its approval of that transaction, the FTC made detailed and repeated references to Apple's activity and potential strength in the mobile ad space, and referenced Apple's control of its developers' license agreement, arguing it provides a "unique ability to define how competition among ad networks on the iPhone will occur and evolve." The release also stated the FTC would "continue to monitor the mobile marketplace to ensure a competitive environment."

According to Berg, who represented an AdMob competitor after it received a subpoena in conjunction with the FTC investigation, "The statements [in the FTC press release] were there for a reason, and signify that there will be further action from either the FTC or the DoJ." Berg added, "The restrictions in the developers' license agreement is a significant issue the FTC or DOJ is going to look at. The question now is who is going to look at it. It makes sense for the FTC to do it, given that it concerns issues raised during the AdMob investigation."

Rival networks in the mobile ad space welcomed the FTC's newfound familiarity with the mobile ad market. For example, Paul Palmieri, president and CEO of AdMob competitor Millennial Media said last week, "One of the largest outcomes of this deal is that the FTC recognized how competitive this market is, and can be, provided it remains an open ecosystem. The burden is now on regulators, and Apple in particular, to preserve an open and competitive market that will provide the most choice and value for developers and consumers, no matter how tempting it is to do otherwise."

Its hardly surprising Millennial Media is keen to retain the ability to serve ads into applications on Apple devices, since a decent portion of traffic to its network is likely to come through that channel. According to the company's own data, the iPhone accounted for 70 percent of ad requests to its network during March.

AdMob has refused numerous requests for comment on what the changes mean for its own network, which also relies on traffic from Apple devices to deliver a portion of its traffic. An AdMob spokesperson told ClickZ, "Combined, the iPod touch and iPhone generated 2.9 billion ad requests in the U.S. [in AdMob's network in March] compared to only 1.7 billion requests from Android devices."

Berg also suggested the mobile device will become "the key consumer device five years from now," and that "whoever can dominate it will have a lock on an incredible cash stream." He also highlighted the importance of free content, and what he described as the "challenges" of monetizing free content from a business perspective.

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ABOUT THE AUTHOR

Jack Marshall

Jack Marshall was a staff writer and stats editor for ClickZ News from 2007 until August 2011. 

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