The Federal Trade Commission is reportedly on the verge of suing to block Google’s proposed acquisition of mobile advertising firm AdMob. The deal’s antitrust implications were discussed in a panel earlier this month on Capitol Hill featuring Berin Szoka. (For other interesting perspectives on the topic, see Geoff Manne and Tom Lenard).

In an opinion essay on Forbes.com this week, I argue that the FTC should approve Google’s acquisition of AdMob without conditions:

FTC Should Green-light Google AdMob Deal

by Ryan Radia

Google competes in many markets, but its most pressing threat comes not from a rival but from antitrust authorities. The Federal Trade Commission is reportedly on the verge of filing a lawsuit against Google to block its proposed $750 million acquisition of mobile advertising company AdMob. Yet antitrust fears about Google are misplaced. Government intervention would harm the very consumer interests the FTC is supposed to protect.

As the government prepares for a potential court battle against Google, the budding mobile advertising market is evolving before our very eyes. Just two weeks ago Apple launched iAd, a mobile advertising platform aimed at the world’s 50 million iPhone users. And Microsoft is in talks to acquire Millenial Media, another major player in mobile advertising, according to Business Insider.

Meanwhile, smart phone use is increasing rapidly–and opportunities for entry in the mobile advertising market are increasing with it. Can Google, armed with AdMob’s advertising platform, succeed in gaining the top spot in mobile advertising? Perhaps — but only if Google-AdMob manages to outcompete and out-innovate rivals that have deep pockets and brilliant engineers of their own.

What tomorrow’s mobile ad market will look like if Google and AdMob join forces is anybody’s guess. Trying to predict how a proposed merger or acquisition will impact consumers is difficult, if not impossible.

What we do know, however, is that voluntary decisions by companies to acquire — or be acquired — tend to benefit competition, not hinder it. That’s why federal courts so rarely grant requests to block proposed mergers or acquisitions. When government steers the evolution of markets in unnatural directions, it usually gets it wrong, and consumer welfare suffers.

Antitrust intervention is especially problematic in the modern information age. According to a recent study by antitrust scholars Geoffrey Manne and Joshua Wright published in the Journal of Competition Law & Economics, conventional antitrust standards tend to underestimate the critical role that innovation plays in dynamic high-tech markets.

The case against Google is a prime example of this fallacy in action. We know consumers have benefited tremendously from Google’s innovations in search and other digital markets, yet these benefits come largely in the form of qualitatively superior products, rather than incremental price reductions. Antitrust proceedings simply cannot gauge the impact of these innovations on consumer welfare.

Google’s lucrative search business has enabled the firm to shake things up for the better in high-tech arenas like navigation, e-mail, office productivity and voice. Not all of Google’s offerings have succeeded, but many Google innovations — including Gmail, Google Docs, Google Voice and Android — have changed the rules of the game in their respective fields, attracting massive user bases while improving the state of competition immensely.

Critics of the Google-AdMob deal, including Sen. Herb Kohl (D-Wisc.), portray Google as a big, bad monopolist yearning to extend its supposed dominance into new markets. But is Google’s size and scope — a byproduct of its success — really such a bad thing for consumers?

Consider that since 2002, Google has been the leading U.S. online search provider without interruption, yet competition among search engines remains as intense as ever. While Google’s rivals have failed to dethrone the leader, Microsoft continues to invest heavily in its search engine Bing in hopes of some day capturing the search crown. And a steady stream of newcomers, fueled by venture capital, aspires to displace Google much like Google displaced Yahoo! as market leader years ago.

Opponents of the Google-AdMob deal fret that the combined firm would control a treasure trove of potentially sensitive user information. That may be true, but it’s no reason to fear the deal. As Google privacy guru Alma Whitten argued here last week, “the only way to stay in business is to give users what they want.” Google has been a good steward of user data precisely because users expect strong privacy protection.

Firms that fail to deliver on privacy are soon chastened, including Google itself, as the recent Google Buzz fiasco demonstrated. Allowing the Googles of the world the freedom to make mistakes — and suffer the legal and reputational consequences — is crucial if online markets are to realize their full potential. The Web is only 15 years old. Most digital territories remain uncharted. They will remain so unless innovators are free to experiment with novel approaches to using and collecting information.

Rapid, unpredictable change is the hallmark of the modern digital economy. Google may be on top in many high-tech markets today, but it won’t stay there for long unless it continues to innovate and take risks. That’s because in the information age, success is determined by creativity, not market share. From AOL to Yahoo!, America’s high-tech sector is strewn with former market leaders who were no match for the relentless forces of creative destruction.

Taking Google to court may be an easy way for FTC regulators to score political points by appearing to be “protecting” consumers. In reality, it’s bad news all around. If the Google-AdMob deal succeeds, the upside is enormous. If it fails, rivals like Microsoft and Apple will happily fill the void. The FTC can best serve consumers by sitting this one out.

Friday, April 16: I’ll be moderating a PFF Capitol Hill briefing on Super-Sizing the FTC & What It Means for the Internet, Media & Advertising. My panel of FTC veterans and observers will discuss the growing powers of the Federal Trade Commission (FTC). As I’ve mentioned here and here, financial reform legislation passed by the House and now pending in the Senate would give the FTC sweeping new powers to regulate not just Wall Street, but also unfair or deceptive trade practices across the economy. This could reshape regulation in a wide range of areas, such as privacy, cybersecurity, child safety, child nutrition, etc. The FTC has also asserted expanded authority to regulate “unfair” competition in its lawsuit against Intel. Register here for this 12-2 pm briefing in the Capitol Visitor Center!

Thursday, April 15: I’ll be participating in Capitol Hill briefing on Google’s proposed acquisition of AdMob, a leading in-app mobile ad network, which the FTC appears poised to challenge. (RSVP here.) Geoff Manne has probably done the best job debunking arguments against the deal but, sadly, couldn’t make the panel. ITIF’s Dan Castro will moderate a panel including (besides myself):

• Simon Buckingham, who’s expressed concerns about the deal on his Appitalism blog and accused Google of leveraging Google’s desktop search dominance into the high-end mobile market”;
• Lillie Coney of the Electronic Privacy Information Center (EPIC), which never passes up an opportunity to denounce Google on privacy grounds;
• Jonathan Kanter, Cadwalader, Wickersham & Taft LLP, who represented TradeComet.com in their antitrust suit against Google and has also represented Microsoft in the past; and
• Glenn Manishin – Duane Morriss LLP, an antitrust lawyer who’s represented Google.

Tuesday, April 27: We just announced another PFF Briefing: Cable, Broadcast & the First Amendment: Will the Supreme Court End Must-Carry?, 10:00-11:45 a.m at Hogan & Hartson LLP (555 13th Street NW, Washington, DC).The panel, moderated by Adam Thierer, is an all-star cast representing all sides (cable, broadcast and programming) of the fight over the the FCC’s must-carry rules, which require cable television systems to dedicate some of their channels to local broadcast television stations. The Supreme Court narrowly upheld these “must-carry” rules in the mid-1990s. But last year’s DC Circuit decision striking down the FCC’s 30% cap on cable ownership lead Cablevision to challenge the must-carry rules. The Supreme Court will soon announce whether it will review the Second Circuit’s decision last June upholding the rules. The parties challenging must-carry make many of the arguments we made in PFF’s amicus brief calling for the DC Circuit to strike down the cable cap: Video distribution has become highly competitive, with satellite and telco fiber offerings competing for traditional video service and the Internet increasingly offering an alternative video programming distribution channel.

The importance of this case extends far beyond cable and broadcast regulation, since it concerns how the government deals with “gatekeepers” who supposedly exercise “bottleneck” power. If that sounds familiar, it’s because that’s the basic rationale behind all sorts of past and proposed regulation, from net neutrality to search neutrality, app neutrality and beyond, as Adam and I have noted.

Register for the event here.

There’s been a lot of hand-wringing lately about Google’s recent acquisitions of Teracent (ad-personalization) and AdMob (mobile ads), as well as Apple’s response, buying AdMob’s rival Quattro Wireless. Jeff Chester, true To form, quickly fired off an angry letter to FTC Chairman Jon Leibowitz, ranting about how the Google/AdMob deal would harm consumer privacy with the same vague fulminations as ever:

Google amasses a goldmine of data by tracking consumers’ behavior as they use its search engine and other online services. Combining this information with information collected by AdMob would give Google a massive amount of consumer data to exploit for its benefit.

Yup, that’s right, it’s all part of Google’s grand conspiracy to exploit (and eventually enslave) us all—and Apple is just a latecomer to this dastardly game. It’s not as if that data about users’ likely interests might, oh, I don’t know… actually help make advertising more relevant—and thus increase advertising revenues for the mobile applications/websites that depend on advertising revenues to make their business models work. No, of course not! Greedy capitalist scum like Google and Apple don’t care about anyone but themselves, and just want to extract every last drop of “surplus value” (as Marx taught us) from The Worker. (Never mind that in 4Q2009 Google generated $1.47 billion for website owners who use Google AdSense to sell ads on their sites—up 17% over 4Q2008—or that Apple has a strong incentive to maximize revenues for its iPhone app developers.) Internet users of the world, unite!  You have nothing to lose but all those “free” content and services thrown at your feet!

Anyway, the letter lambastes AdMob’s current privacy policy, claiming that it “provides inadequate notice and little ability to opt out of its data collection and targets children 13 and over” and asserts that things are only going to get worse once Google takes over. By contrast, our far more reasonable friends at PrivacyChoice raise some very fair questions about Teracent’s current privacy policies, decrying “The worst consumer opt-out“—but unlike Chester, an anti-advertising zealot, the PrivacyChoice folks realize that, when big companies like Google and Apple buy small companies like AdMob, Teracent and Quattro Wireless, they face enormous pressure bring their new acquisitions privacy practices up to their own standards.  And where the new acquisitions are operating in a new area, like location-advertising, big players will likely decide on higher, not lower, privacy standards. As PrivacyChoice notes:

No doubt Google is working to assimilate Teracent into its own (much better) consumer privacy practices. But Teracent’s shortcomings provide a good reminder of the chasm in quality between the best and worst consumer privacy practices of ad-targeting companies. Until websites and advertisers start to attend to these matters in their own choices, this disparity in commitment to best practices will remain a central challenge to effective self-regulation.

Much as it annoys the Big-is-Bad crowd, consolidation can often reduce that that “privacy practice chasm” by raising the bar for all players. Google and Apple have spent years (in Apple’s case, decades) building trusted brands, which gives them a much stronger incentives to protect users’ privacy than a scrappy start-up under intense pressure from VCs to make their investment work—and quickly.