Stage set for Google and Apple to fight over mobile ads

The battle between Google and Apple for control of the fledgling mobile ad market is officially on, after the US Government’s Federal Trade Commission unanimously approved Google’s acquisition of AdMob.

The approval of the $900 million deal comes just weeks after Apple chief Steve Jobs announced the company would create its own advertising platform, called iAd, which will be launched in the middle of this year when Apple releases its iPhone 4.0 operating system.

Indeed, it appears that Apple’s decision to push into the mobile advertising sector paved the way for the FTC to finally approve Google’s deal to acquire AdMob, which was first announced back in November 2009.

“The Commission said that although the combination of the two leading mobile advertising networks raised serious antitrust issues, the agency’s concerns ultimately were overshadowed by recent developments in the market, most notably a move by Apple… to launch its own, competing mobile ad network. In addition, a number of firms appear to be developing or acquiring smartphone platforms to better compete against Apple’s iPhone and Google’s Android, and these firms would have a strong incentive to facilitate competition among mobile advertising networks,” the FTC said in a statement.

“Apple can leverage its close relationships with application developers and users, its access to a large amount of proprietary user data, and its ownership of iPhone software development tools and control over the iPhone developers’ license agreement.”

The Commission also noted that Apple, which had originally bid for AdMob in competition with Google, recently acquired a location-based mobile advertising company called Quattro and plans to incorporate this technology in the iAd platform.

The approval of the Admob deal gives Google about 21% of the mobile ad market in the US, according to research company IDC, which also says the market has been doubling in size every year for the past few years.

However, the market does remain relatively small and immature. According to research firm EMarketer, around $US593 million will be spent in the US on mobile advertising in 2010, up from $US320 million in 2008. The firm expects the market will be worth $US1.56 billion in 2013, but with the number of smartphones rising exponentially around the world, that forecast could be conservative.

S&P Equity Research analyst Scott Kessler described the FTC approval as a “major win for Google” and said the deal “should enable it to quickly become the company to beat in mobile advertising.”