Apple announced on Tuesday that it was acquiring mobile ad firm Quattro for $275m, which follows Google’s $750m acquisition last year of Admob (a DFJ portfolio company), in which Apple was apparently also interested. Assuming these two deals are completed the owners of the leading and most promising smartphone platforms will also control the advertising on the devices.
My immediate reaction was to think that this is bad news for content owners. Content owners and their advertising networks naturally fight hard over how ad revenues will be split and if the ad networks have additional leverage due to their control over the platform on which the content runs then they will do better in those negotiations.
I still think that scenario may play out over the long term, although it depends a lot on how Apple and Google choose to compete going forward (more of that below) – but, as Stephen Upstone of mobile ad business Velti pointed out in an email conversation yesterday, in the short to medium term the game is all about growing the pie, not fighting over how it is split.
We are just at the beginning of mobile, the App Store is not only two years old yet and people are still measuring the total number of apps available and downloaded (now 3bn on iPhone/iTouch), and as Stephen says the “real race is to dominate the market … [because in mobile] Apple and Google are tiny now with scale being the key goal”.
By this analysis in the short term we can expect Google and Apple to build links between their advertising and smartphone platforms with the aim of winning the battle for developers – which should make it easier for companies to innovate and make money.
Over the long term the big question is how Google and Apple see themselves evolving and the fronts on which they will want to compete. I can buy into John Battelle’s 2010 prediction that Google will rebrand itself as a software company, which implies they will come to look like a semi-pen source version of Microsoft seeking to get Android/Chrome OS on as many devices as possible and encouraging use of Google apps (Google docs, Picasa, maps etc.). Apple is a bit harder to predict, but my best guess is they will remain a vendor of integrated hardware/software platforms whilst this time round trying to make sure they don’t lose the battle for developers.
If this vision of the future plays out Google will have some conflicts to deal with as their own content will compete with third party apps running on Android/Chrome OS, all supported by Google’s advertising engine. Apple on the other hand will likely have less of their own content and therefore less of a conflict.