Apple Takes Mobile Ad Battle to Google, Blocks AdMob

UPDATED: When Google (s goog) beat Apple (s aapl) to the punch by acquiring mobile ad provider AdMob, and then the computer company responded by snapping up competitor Quattro Wireless, it seemed obvious that the two giants were headed for a showdown. Apple recently fired the first volley in what is likely to be an ongoing battle over the mobile ad market, by changing the terms of its iAds service to make things more difficult for third-party advertising providers, including Google. AdMob CEO Omar Hamoui responded today with a blog post in which he says Apple’s decision will hurt developers of apps and in the long run will be “bad for consumers.”

Apple’s new terms for use of the iPhone OS (now called iOS4) don’t specifically mention Google, and they don’t say that third-party platforms or providers can’t provide advertising on the device. What they do, however, isrestrict who can use the analytical data from those ads. The agreement states that data must be either used internally or provided “to an independent advertising service provider whose primary business is serving mobile ads.” Apple goes on to specify that an ad platform or service that is “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.”

Apple changed its terms in part as a result of data that was being collected by an analytics company called Flurry, whose software is integrated into a number of apps. Jobs referred to this behavior in his keynote interview at the D8 conference, saying, “[W]e went through the roof. It’s violating our privacy policies, and it’s p***ing us off! So we said we’re only going to allow analytics that don’t give our device info — only for the purpose of advertising.”

The upshot of those changes, however, is that AdMob is effectively shut out of providing ads on the iPhone, since the data provided by users as they browse and interact with ads is one of the crucial parts of having a mobile ad platform in the first place. AdMob CEO Hamoui said in his post that Apple’s terms “if enforced as written, would prohibit app developers from using AdMob and Google’s advertising solutions on the iPhone.” The CEO went on to say that:

The terms hurt both large and small developers by severely limiting their choice of how best to make money. And because advertising funds a huge number of free and low cost apps, these terms are bad for consumers as well. 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.

What will be interesting to see is whether the federal government shows an interest in these complaints from AdMob. When Google said it wanted to acquire the company, the Federal Trade Commission reviewed the purchase because of concerns that the search giant already controlled a large proportion of the online advertising business. The regulator relented in part because Apple launched iAds, which would provide some competition. But if the company is seen as restraining its only significant competitor through licensing terms that seem to single Google out, that might not fly in Washington. Could Apple just have bought itself some anti-trust scrutiny?

Update: According to a report in the Financial Times, federal regulators in the U.S. are already looking at Apple’s behavior to see whether there is cause for concern about it being anti-competitive.

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Post and thumbnails courtesy of Flickr user Tambako the Jaguar