Fri, Dec 25, 2009 - Page 11 News List

Regulators still probing Google deal


US antitrust regulators are taking a closer look at Google Inc’s proposed US$750 million purchase of mobile phone marketer AdMob, the latest sign of greater government vigilance as Google tries to expand its advertising empire.

The Federal Trade Commission (FTC) sought more information about the deal this week, according to a Wednesday post on Google’s blog.

This so-called “second request” doesn’t mean regulators intend to block Google’s AdMob deal. Most other acquisitions that go through this stage end up getting approved.

But the FTC’s action shows regulators are watching Google more carefully as the company tries to build upon its dominance of the Internet’s lucrative search advertising market. Google is expected to pull in more than US$22 billion in revenue this year, mostly from ads shown alongside search results and other Web content.

“We know that closer scrutiny has been one consequence of Google’s success,” Paul Feng, a Google product manager, wrote in Wednesday’s blog posting.

Echoing previous management comments, Feng said the company remains confident that its AdMob purchase will be approved.

Google’s huge lead in Internet search triggered a government investigation last year that scuttled plans for an advertising partnership with rival Yahoo Inc, which runs the second most-popular search engine. Yahoo plans to work with Microsoft Corp instead, beginning next year if those two companies can gain regulatory approval.

Since its inception four years ago, AdMob has built a thriving network that sells and delivers ads on applications and Web sites designed for the iPhone and other mobile devices. It remains relatively small with estimated annual revenue of US$45 million to US$60 million, but regulators apparently want to know whether its technology and advertising contacts would give Google an unfair advantage in its quest to sell more mobile phone ads.

Google management has indicated that it believes mobile marketing eventually may become bigger than advertising on Internet-connected computers. That tipping point still appears to be many years away, with US mobile advertising expected to total US$416 million this year, about 2 percent of overall Internet ad spending in the country.

The FTC’s decision to dig further into the AdMob deal means Google probably won’t be able to take over the firm for several more months, Stifel Nicolaus analyst Rebecca Arbogast wrote in a Wednesday research note. It took a year for the FTC to approve Google’s US$3.2 billion acquisition of Internet ad service DoubleClick Inc, which was completed in March last year.

Google’s first big deal, a US$1.76 billion acquisition of the video site YouTube, was cleared by regulators in a month in 2006.

Elsewhere, Google ran into a potential roadblock on Wednesday after another takeover target, On2 Technologies Inc, said it still had not collected enough shareholder support to close its deal.

On2, based in Clifton, New Jersey, adjourned a shareholder meeting to approve its US$106 million sale to Google until Feb. 17 in hopes of getting the necessary support.

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