Apple to face antitrust probe in mobile ad market

As expected, Apple is likely to face an antitrust probe into the terms and conditions of its new iAd mobile advertising network, based on technology it acquired with Quattro Wireless earlier this year. The US Federal Trade Commission will lead an investigation to determine whether iAd unfairly restricts competitors like Google's AdMob, the market leader, from targeting the iPhone/iPad.

Citing the traditional "sources familiar with the matter", Bloomberg reports that discussions between the FTC and the Department of Justice, which can also run antitrust probes, decided the FTC was the more appropriate agency. The main reason for the action is Apple's recent amendment of the terms of its iPhone Developer Program License Agreement. These now effectively block third parties from using the analytical data from their ads - without which their value is much reduced.

The new agreement states that data must either be used internally, or provided "to an independent advertising service provider whose primary business is serving mobile ads." In a clear strike at Google (and, in future, Nokia), Apple goes on to insist that an ad service "owned by or affiliated with a developer or distributor of mobile devices, mobile operating systems or development environments other than Apple would not qualify as independent". This would be serious for AdMob - one-third of the adverts it served in April were for the iPhone, iPad or iPod Touch. Apple claims the collection of ad analytics data by companies like Flurry is violating its privacy policies.

The FTC is also reportedly mulling whether to force Apple to justify its ban on third party development tools (such as compilers to support Flash) for creating iPhone apps. And a third probe could look into Apple's dominance of the US digital music business.

Jeffrey Shinder, managing partner at New York-based law firm Constantine Cannon, and a former special counsel to the FTC, told Techworld: "I would think [the government] would cast a wider net, but mobile advertising is critical. Apple's conduct strikes me as brazen there ... A lot of what Apple's doing, including barring AdMob from the iPhone, is an attempt to entrench that dominant position of the iPhone, and then leverage that into a dominant position in mobile advertising."

In the latest statistics in the US battle between iPhone and Android, digital measurement firm Quantcast calculates that Android now accounts for 19.9% of mobile web consumption in north America, a 12.2% increase on a year before, though iPhone still boasts 58.8%. Between the first and second quarters of 2010, Apple slipped by 4.7%, about the same as Android grew (4.6%). RIM was up 1.3% in the same period to account for 10.4%, while Windows Mobile has the lowest score relative to its market share on handsets (even combined with minor players webOS and Symbian, it only achieved 10.9%, even though it remains well ahead of Android in its US installed base on smartphones).