Antitrust

Google, in making a high-profile complaint to the Justice Department and State Attorney Generals, about Microsoft's latest operating system Vista, appears to be naively unaware of its own antitrust vulnerabilities in its pending Google-DoubleClick antitrust review at the FTC.

• The NY Times made Google's complaint a top right cover story on Sunday and the Wall Street Journal featured Google's complaint as its top business story Monday.  

It has always been unwise for those in "glass houses to throw stones."

Just after Google's CEO Eric Schmidt summarily dismissed privacy concerns as an issue in the FTC's review of the Google-DoubleClick merger, a privacy watchdog group said "Google inc.'s privacy practices are the worst among the Internet's top destinations," according to an AP article "Watchdog group slams Google on privacy." 

• "...London-based Privacy International assigned Google its lowest possible grade. The category is reserved for companies with "comprehensive consumer surveilance and entrenched hostility to privacy."

American privacy groups are petitioning the FTC (EPIC, CDD, and US PIRG) to address the privacy issue in the context of the Google-DoubleClick merger.

• Privacy groups in the US and in Europe are rallying around this issue, because as the NY State Consumer Protection Board has said: "Google's database...will make up the world's single largest repository of both personally and non-personally identifiable information."
• Investors and others that dismiss privacy as a competitive concern in the Google-DoubleClick merger -- do so at their own peril.

Why is privacy a competitive issue in the Google-DoubleClick merger?

An  Associated Press article, "Google Chairman dismisses privacy issue" could turn out to be like waving a red cape in front of a bull.

• Relevant parts of the AP story:
•   "Google Chairman Eric Schmidt said Wednesday that U.S. regulatory approval of his company's proposed acquisition of DoubleClick will not be hindered by concerns over privacy."

• "Schmidt said that Google, when considering the acquisition, "looked very carefully" at privacy and other issues that would come under legal review "because we knew competitors would raise those issues, as indeed they have."

For anyone watching Google closely, they are cleverly locking up all the leading segments of the Internet which control the monetization access points to Internet content.

• Per MediaWeek, June 1st Google bought Feedburner, the largest feed and blog advertising network, which also happens to have the best quality and quantity of major content providers who subscribe to blog feeds.
• It's a shrewd and brilliant move, if the antitrust authorities allow it.
• This comes on the heels of its April proposed merger with DoubleClick, the largest adserving company on the Internet, which is estimated to serve 80-85% of Internet users with display ads per EPIC.
• That came on the heels of the closing of Google's YouTube acquisition, which makes Google the owner of the largest user-created video content network and one of the most popular destinations on the web.

Anyone else see a pattern here?

Ad Age reports that the two largest Advertising Associations have asked antitrust officials to look into the spate of major advertising acquisitions; Google-DoubleClick, Microsoft aQuantive, Yahoo-Right Media, and WPP-24/7 Real Media.

• The thrust of the letter:
• "During the past month, there have been several major acquisition announcements in the online advertising marketplace... These mergers, if approved, certainly would change the online advertising marketplace. As such, those proposed combinations deserve careful scrutiny. It is essential to ensure that none of these combinations restrict competition in the Internet advertising marketplace."

Why is this significant?

• First, the advertising community does not like to make waves or speak ill of any potential client -- in any way in public -- it goes against their normal business practice.  
• The fact that they did speak up and that they did ask the Government to give all these mergers close scrutiny -- was their indirect/politic way of getting their point across without stepping on any one company's proverbial toes.  
• Second, I think they are genuine in their shock and bewilderment that their entire industry has been transformed before their eyes in a matter of weeks.
• The online technology players have swooped in and made it clear that  technology and measurement tools are advertising's future.
• The tail will now wag the dog.
• Advertisers and advertising agencies must adapt or be left in the dust.
• WPP, for one, has quickly adapted with its purchase of 24/7 Real Media.

It is my view that there is a whole lot more going on here than meets the eye.

Google's dominance of the search industry continues....

• Can you say:
• "search" and "antitrust" in the same sentence?
• Can you say:
• "Googleopoly?"

The San Diego Union-Tribune "gets it" -- in  its editorial on Google:

•  "The Google Threat, Needed: a guaranteed private search engine."  

A couple of my favorite parts of this dead on editorial:

• "Google's emergence as one of the scariest companies on the planet continues with a story in the Financial Times describing the Silicon Valley firm's goal of maximizing and cataloging personal information gleaned from every user's use of its vastly popular search engine."
•  "... but should mortify Google's users – because the company has never come close to adequately acknowledging the vast privacy concerns raised by its already massive database."
• "... The potential for government snooping, harassment, financial manipulation, blackmail and all sorts of online crime is stunning."

Add to the list of scary things Google is working on is a "truth meter" where Google CEO Eric Schmidt posited in FT just before the last US congressional election, that in the future Google could help voters gauge in real time whether a politician was telling the "truth" or not.

Both the New York Times and the Wall Street Journal are reporting that the Federal Trade Commission (FTC) will substantively investigate the proposed Google-DoubleClick merger.

• This comes on the heels of an AP report that "an Independent European Union panel has launched an investigation into whether Google Inc.'s Internet search engine abides by European Union privacy rules." Google's search share in Europe is reportedly 75% and 90% in Germany, so we should all expect the EU to also play a formal and significant role in the review of Google-Doubleclick.

Why is the FTC review development significant?

Senate Antitrust Subcommittee Chairman Kohl (D-WI) wrote the DOJ urging them to block the XM-Sirius merger.

It is an exceptionally persuasive and compelling letter that effectively eviscerates XM-Sirius' contention that satellite radio is not a separate market.

• The Senate antitrust experts have concluded it is a separate market, making this a classic attempt to merge to monopoly.

I believe this letter is a good "precursor" for what the DOJ will think and do.

This letter also reached the same conclusion I reached shortly after the merger was announced and which I blogged on in my previous post "XM-Sirius: The emperor has no clothes" 3-31-07.

James Stewart of Smart Money magazine advises investors to buy Google's share's because search is a "natural monopoly."

The article is: "Google is best positioned to dominate online ads."

It's a great read.