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Our experience with the FTC

Posted by Chika on 5/17/2010 07:00:00 AM

This blog entry is not our typical one that talks about Echofon's new features. Rather, it's about our correspondence with the FTC regarding Google's pending acquisition of Admob. Please read on only if you are interested in the topic.

Please understand that only one naan studio staff member, Chika, dealt with the FTC, and the following is her personal experience.

How we got involved with the FTC

My interaction with the FTC started in February. Initially Admob asked us to send a letter to the FTC to support the deal. Separately, about a week later, the FTC's lawyer contacted us saying she used Echofon and saw the ads from both Google and Admob. The FTC eventually sent us a subpoena and I had multiple conversations over the phone with them, which sometimes went on for 2 hours. In total I think I talked with (or testified to) them for at least 5 hours, probably a lot longer.

Our thoughts on Google-Admob acquisition

When we heard about the acquisition last year, we generally liked it. The reasons being:

  • The mobile ad market was still nascent and no ad network worked perfectly. We liked Admob's technology (ad serve, console's user interface, etc), and Google's reach to a large advertiser base. We hoped Admob and Google together would provide an even better solution.
  • As an iPhone app developer, our bigger concern was Apple's acquisition of Quattro Wireless. Combined Google and Admob had a potential to become a good counterbalance.

The FTC seemed to have a (strong) agenda

Is Google unfair?

During the conversation, the FTC asked me for the actual performance figures of each ad network - click through rate, eCPM and so forth. I was impressed that they were fact-oriented.

In that discussion, however, I mentioned that Google gave us very high ad rate in the first month or so, then the rate dropped significantly. They asked why and I told them that it could be because Google gave us unsustainably high ad rate initially so that we'd move to Google from other ad networks. We had heard in the past that some ad networks employed such bait-and-switch tactic.

The FTC staff seemed to jump on my comment, and tried to use it to portray how unfair Google was.

I made sure to emphasize that we had no proof that Google did this intentionally, and the drop could have been due to many other reasons.

In fact, it did not affect our choice of ad networks either. Since we can allocate our ad inventory among different ad networks on the fly, we just allocate more of our ad inventory to an ad network when it's performing well, and less when it's not. This real-time allocation is done with an ad mediator service. There were several of those ad mediators, and we use Adwhirl.

The FTC staff kept going back to the possibility that Google did the bait-and-switch intentionally, and I had to say we had no proof for that several times.

Is Apple's acquisition of Quattro Wireless irrelevant?

They were also very reluctant to accept my argument that Apple/Quattro was a bigger concern for an iPhone developer like us. One of the staff told me it was irrelevant, and curtailed the discussion.

In one of the follow-up phone conversations, I brought up the issue again and mentioned the concern that Apple may be closing off the iPhone to rival ad networks, but their initial comment was something to the effect of "but you don't know for sure if Apple is really going to do that."

This entire process was for the FTC to produce a document called the declaration for me to sign. The first draft of the declaration did not include anything about the Apple-Quattro issue.

After my insistence, they included one paragraph about it but without any explanation of why this was significant to Google/Admob deal, making it sound out of place. After one or two more back-and-forth, they finally put my whole argument in the declaration.

Is Google almighty?

The FTC also had a strong stance on why Google needed (or didn't need) Admob. As I said, we like Admob's technology and Google's reach to advertisers, and want these two combined. The FTC kept saying Google could develop the technology on its own, and didn't need Admob. I kept saying Google was not almighty and there were areas they had failed to deliver in the past.

I think that it is reasonable for the FTC to argue that Google can develop a better solution on its own. But I felt otherwise. It is a judgment call, isn't it?

Is the FTC qualified to make the decision?

Though some people who have talked to the FTC seem to think its staff do not understand the mobile ad industry enough to judge the situation, I do believe they are capable of making a sound decision. When smart people are equipped with the right motivation and methodology, they can come to grasp the situation pretty well.

To me, the problem was that the FTC seemed to be determined to stop the deal from the beginning. Though they did agree to put together the declaration close enough to my belief in the end, I felt I was pressured to say things in a way that met their goal. (The word "interrogation" came to my mind several times while talking to them.)

Now I hear that the FTC is revisiting the issue by taking into consideration the Apple-Quattro acquisition. That's a good thing. We do want the mobile ad industry to grow healthily, and hope the FTC makes the right judgment without preconceived notions.