Feds Eye Apple's Rules on iPhone Mobile Advertising

By Jennifer LeClaire

June 10, 2010 2:46PM

With Apple limiting access to advertising on its popular iPhone, both the Federal Trade Commission and the Department of Justice may investigate. AdMob CEO Omar Hamoui is bashing new Apple rules shutting out ads from Google, AdMob's parent. Apple already has commitments for more than $60 million in mobile ads from major companies.

Google's not the only one eyeing Apple these days. Both the Federal Trade Commission and the Department of Justice may dig into whether Apple is shutting out Google and Microsoft in iPhone advertising.

The news comes from the Financial Times in a Thursday article that cites two people familiar with the matter. It's not clear whether federal regulators will launch an official investigation into Apple's practices. Apple wasn't immediately available for comment.

"It seems aggressive and anticompetitive, so I can see why [U.S. regulators] are considering an investigation," said Greg Sterling, principal analyst at Sterling Market Intelligence. "But the FTC seems to be investigating almost everything going on on the Internet right now."

Rave Reviews for iAd

Apple plans to debut its iAd mobile advertising network on July 1 on iPhone and iPod touch devices that run its iOS 4 software platform. Apple's announcement did not list the iPad. Companies like AT&T, Best Buy, Campbell Soup, Chanel, Unilever, Geico, GE and Target are among the first to advertise on the new platform.

In total, Apple already has iAd commitments for 2010 of more than $60 million. That represents almost 50 percent of the total forecast U.S. mobile-ad spending for the second half of 2010, according to JP Morgan.

iAd lets users stay within an app they are using and still engage with an advertisement, even while watching a video , playing a game, or using in-ad purchase to download an app or buying digital media. Developers who join the iAd Network can incorporate a variety of advertising formats into their apps. Apple will sell and serve the ads, and developers will receive an industry-standard 60 percent of the iAd Network revenue.

"iAd is going to revolutionize mobile advertising," said Rob Master, North American media director for Unilever. "With iAd, we've been able to create some of our most powerful and compelling ads ever. iAd is the perfect mobile format to reach and engage with our customers."

AdMob Fuels Antitrust Speculation

Statements like that -- and capabilities like the ones Apple is promising -- are turning heads. Specifically, it's turning Google's head. While federal regulators consider an investigation, Omar Hamoui, founder and CEO of AdMob, the mobile advertising network Google acquired, is fueling reasons for that investigation.

Hamoui is criticizing Apple for new developer terms that would prohibit app developers from using AdMob and Google's advertising solutions on the iPhone. He said the rules threaten to decrease -- or even eliminate -- revenue that helps support tens of thousands of developers.

Then he pulled the antitrust card: "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."

But Sterling is reading between the lines of the AdMob attack on Apple. Apple, he explained, sees AdMob as a surrogate for Google and it doesn't want to give Google any access to any potentially competitive information and data . "AdMob is materially affected by this and is obviously -- and justifiably -- angry," Sterling said. "Apple seems capricious and unprincipled from AdMob's point of view."

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