29 Comments

Summary:

Apple recently fired the first volley in a battle over the mobile ad market, by changing the terms of its iAds service to make things more difficult for third-party providers, including AdMob — now owned by Google. AdMob’s CEO says Apple’s move is “bad for consumers.”

UPDATED: When Google beat Apple to the punch by acquiring mobile ad provider AdMob, and then the computer company responded by snapping up competitor Quattro Wireless, it seemed obvious that the two giants were headed for a showdown. Apple recently fired the first volley in what is likely to be an ongoing battle over the mobile ad market, by changing the terms of its iAds service to make things more difficult for third-party advertising providers, including Google. AdMob CEO Omar Hamoui responded today with a blog post in which he says Apple’s decision will hurt developers of apps and in the long run will be “bad for consumers.”

Apple’s new terms for use of the iPhone OS (now called iOS4) don’t specifically mention Google, and they don’t say that third-party platforms or providers can’t provide advertising on the device. What they do, however, isrestrict who can use the analytical data from those ads. The agreement states that data must be either used internally or provided “to an independent advertising service provider whose primary business is serving mobile ads.” Apple goes on to specify that an ad platform or service that is “owned by or affiliated with a developer or distributor of mobile devices, mobile operating systems or development environments other than Apple would not qualify as independent.”

Apple changed its terms in part as a result of data that was being collected by an analytics company called Flurry, whose software is integrated into a number of apps. Jobs referred to this behavior in his keynote interview at the D8 conference, saying, “[W]e went through the roof. It’s violating our privacy policies, and it’s p***ing us off! So we said we’re only going to allow analytics that don’t give our device info — only for the purpose of advertising.”

The upshot of those changes, however, is that AdMob is effectively shut out of providing ads on the iPhone, since the data provided by users as they browse and interact with ads is one of the crucial parts of having a mobile ad platform in the first place. AdMob CEO Hamoui said in his post that Apple’s terms “if enforced as written, would prohibit app developers from using AdMob and Google’s advertising solutions on the iPhone.” The CEO went on to say that:

The terms hurt both large and small developers by severely limiting their choice of how best to make money. And because advertising funds a huge number of free and low cost apps, these terms are bad for consumers as well. Let’s be clear. This change is not in the best interests of users or developers. In the history of technology and innovation, it’s clear that competition delivers the best outcome. Artificial barriers to competition hurt users and developers and, in the long run, stall technological progress.

What will be interesting to see is whether the federal government shows an interest in these complaints from AdMob. When Google said it wanted to acquire the company, the Federal Trade Commission reviewed the purchase because of concerns that the search giant already controlled a large proportion of the online advertising business. The regulator relented in part because Apple launched iAds, which would provide some competition. But if the company is seen as restraining its only significant competitor through licensing terms that seem to single Google out, that might not fly in Washington. Could Apple just have bought itself some anti-trust scrutiny?

Update: According to a report in the Financial Times, federal regulators in the U.S. are already looking at Apple’s behavior to see whether there is cause for concern about it being anti-competitive.

Related content from GigaOM Pro (sub req’d): Social Advertising Models Go Back to the Future

Post and thumbnails courtesy of Flickr user Tambako the Jaguar

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  1. If an advertising company uses the analytics data from Apple devices to perfect its own competitive offering to Apple’s operating system and mobile phone, then Apple can be right in defending itself.

  2. Don’t anti-trust cases require the abuse of a dominant market position? The iPhone is under 50% share of the smartphone market in the US I believe – with Android based devices growing share.

    1. That’s a fair point, Gary — full anti-trust cases generally require the abuse of a market monopoly. But there is a lot of grey in the definition of monopoly, and of what constitutes anti-competitive behavior by a dominant player. Thanks for the comment.

      1. It depends on how you define the market. Apple controls 100% of the market for iPhone/iPad apps and those developers should have a choice of ad networks.

        Autodesk ran into an FTC problem in 1997, not because they controlled all CAD, but because they controlled a defined subset of the CAD market.

  3. It’ll be interesting to see if Apple uses this to cut out Greystripe who is now affiliated with Adobe (a development environment vendor) to allow real-time conversion of Flash ads to HTML over the Greystripe ad network.

    Also the AdMarvel ad aggregating network was recently bought up by Opera (a competing mobile platform). We’ll see whether Apple allows them to continue to exist.

  4. Anti-trust? Against a company with a minor market share? When there are 100s of choices from several viable platform alternatives?

    Aint gonna happen. More than that, Google better hope it doesn’t happen. As I wrote on my site, Google has long practiced something about competitive ad platforms that I consider much worse given Google’s enormous ad market share:

    http://brianshall.com/content/apple-kicks-google-balls-and-google-cant-even-tell-teacher

    Competitor ads
    In order to prevent user confusion, publishers may not display Google ads or search boxes on websites that also contain other ads or services formatted to use the same layout and colours as the Google ads or search boxes on that site. Although you may sell ads directly on your site, it is your responsibility to ensure that these ads cannot be confused with Google ads.

  5. Android Jumps Past iPhone in Ad Clicks, But Symbian Is Still Tops Wednesday, June 9, 2010

    [...] Founder Tries Euro Twist on Y Combinator Model See All Articles » Apple Takes Mobile Ad Battle to Google, [...]

  6. I don’t know, it seems to single out Google/AdMob from where I am sitting.
    Why Apple is allowed to strangle it’s developers in every way possible still confuses me, but people seem to put up with it. They limit the way they develop their apps and now they limit the way they monetize those apps to make a living.

    Seeing as it’s Apples platform, I can see and understand them trying to give themselves an advantage…which seems fair.

    This just seems like they took a list of the top 20 ad networks in mobile and tried to figure out how they would be able to single out any major competitor which as of today is only really Google/AdMob. I almost feel they were safer with the wording they had before that at the very least treated all competitors the same way.

    Should be interesting to see how this plays out.

    1. Do you really want to let your competitor in the mobile phone space advertise on your platform especially when they fund their mobile phone platform strictly through advertising?

      Also not like Google has put Google Maps with the turn by turn directions on the iPhone yet. Not like they aren’t using that for Android first and foremost.

      So…it’s kind of like NBC allowing CBS to advertise its shows on NBC. I admit the analogy needs work, but its the closest thing I could think of off the top of my head.

  7. Apple goes to war with Google, Blocks AdMob « Belray | Investment and Wealth Management Wednesday, June 9, 2010

    [...] June 9, 2010 by Belray Asset Management Leave a Comment When Google (s goog) beat Apple (s aapl) to the punch by acquiring mobile ad provider AdMob, and then the computer company responded by snapping up competitor Quattro Wireless, it seemed obvious that the two giants were headed for a showdown. Apple recently fired the first volley in what is likely to be an ongoing battle over the mobile ad market, by changing the terms of its iAds service to make things more difficult for third-party advertising … Read More [...]

  8. Google didn’t think this chess match all the way through. Sorry, you lose. Hamoui should just get back to work an stop complaining.

  9. companies will now build mobile web based apps for ad distribution on mobile devices. the web wins!

  10. Anti-trust cases in the EU more often fit the definitions you’re stuck into, e.g., harming a competitor.

    When push comes to shove – in U.S. anti-trust action by the government, precedent comes to whether or not consumers are hurt.

    1. Yes, that’s a good point — anti-trust in the U.S. relies on whether consumers are harmed by the behavior, not whether competitors are. Thanks for the comment.

      1. Thanks. Given the number of competitors, um, and those trillions in debt, I doubt even Europe will even bother looking into this.
        But — it’s good to be shown how the US and Europe differ on anti-competitive practices.

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