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February 2008

FTC paved way for approval of Microsoft-Yahoo in approving Google-DoubleClick 4-1

I can't say I'm at all surprised to see Microsoft seek to acquire Yahoo. 

  • It makes obvious business sense for both Microsoft and Yahoo -- because it is the only viable and timely strategic option for either company to become a serious and credible competitor to Google-DoubleClick's rapidly increasing dominance of search and Internet advertising.
  • And given the FTC's surprisingly-strong consolidation-endorsing analysis of the Google-DoubleClick merger -- a previously-perceived yellow antitrust light to such a merger by Microsoft -- now has a bright blinking green light for approval.
    • Timing-wise it's obvious to Microsoft to get approval now while the getting is so good.

Google empire builders aren't "sharing" with investors...revenue up 51% but earnings up only 17%

After last quarter's earnings report by Google, I questioned whether Google was more interested in "empire building" spending than in rewarding shareholders (see point three of this previous post.)

  • I've heard lots of explanations why investors have soured on Google's stock:
    • Economic downturn (Google said no on its call)
    • Pay-per-click rates; (Google downplayed this in its call)
    • slowing traffic/searches... (ditto)
  • My simple explanation is that the "momentum pixie dust" that Google has been flying on for a long time -- simply came to back to earth.
    • Investors know what fuels "momentum pixie dust" is actual and expected earnings acceleration.

What blew away the "momentum pixie dust" surrounding Google's stock? At least for the time being?

Google leaps before it looks again on Microsoft-Yahoo -- more shareholder-unfriendly behavior

Google must have been caught off guard last week by the Microsoft-Yahoo bid because they are reacting quite rashly and arguably in a way that is not in the best interests of their shareholders...

First, is it wise for Google to be proactively and angrily  "kicking the antitrust bee hive" in the U.S. and in Europe when their DoubleClick acquisition is still pending with EU regulators?

  • Did it ever occur to Google that they could take the close call in the EU over their pending merger -- that previously was trending in their favor -- and give opponents of the deal in the EU -- more ammunition that this market is too concentrated and that antitrust officials should be more concerned about this market?
    • Has Google forgotten that they have 90% search share in Gemany/Spain and 75% share in France/UK? 

Second, in leading the charge against Microsoft-Yahoo in Washington, has it occurred to any adult in Mountain View that this will only accelerate Washington interest and attention to adopt the FTC's (5-0) proposed behavioral advertising privacy principles/regulation, which would require opt-in and "affirmative express consent" before Google could use "sensitive data."?

Federal Broadband Report proves wisdom of bi-partisan law to promote competition/reduce regulation

Many have missed the high significance of the NTIA Commerce Department report: "Networked Nation: Broadband in America."

  • In particular, press reports, which zeroed in on the histrionics of broadband critics, totally "missed the proverbial forest for the trees" on this one.
  • The fact is that this report is a very big deal for national broadband policy.    

First, this official United States Government report represents the consensus policy thinking and sign-off of all the many parts of the United States Government involved in setting United States broadband policy, including but not limited to: NTIA, FCC, FTC, USTR, CEA, OMB, OSTP, and the Federal Departments of Commerce, Treasury, State, Justice, and Agriculture. 

Second, this is the first and only official and comprehensive U.S. Executive Branch assessment of U.S. broadband strategy/policy and of U.S. progress in deploying broadband. Broadband critics can no longer say there is no official or clear U.S. Government broadband policy, because here it is:

Bursting its own stock bubble: Why Google is its own worst enemy

Since the beginning of the year, Google's stock has fallen over 25% -- about 2-3 times the fall of the relevant indexes.

  • The good news for Google shareholders is that most all of Google's stock price problems are self-inflicted, so they could fix them -- if they wanted to.
  • The bad news for Google shareholders is that Google is unlikely to change its problematic bahavior -- because "leopards don't change their spots."

Why is Google its own worst enemy?

First, Google routinely alienates its friends and allies.

Great Wash Post article: "Some businesses at mercy of Google see hope in bid"

Kudos to Kim Hart's dead-on insights in her Washington Post article: "Some Businesses at Mercy of Google See Hope in Bid." 

  • Forester research analyst Shar VanBoskirk: "There does seem to be an attitudinal shift," she said. "Two years ago, Google was everyone's salvation," because it enabled small Web site owners to easily make money by selling ads, she said. "Now people feel like it has too much control. They may prefer to work with a player that doesn't have as much power in the market."

  • "Google has the edge right now. Its unmatched reach on the Web, both through its dominant search engine as well as its large base of advertisers and publishers, has allowed it to wield so much power that it can shape markets, anoint winners and declare losers, and set prices for advertising, leaving customers like Davies feeling they're at Google's mercy."

 Well said. Enough said.

Google's Schmidt is new Chairman of New America Foundation -- a force behind information commons

The ascension of Google's CEO Eric Schmidt to Chairman of the the Board of the New America Foundation puts a helpful spotlight on Google's activist agenda in Washington and the cozy relationship between Google and the New America Foundation.

It's important to note that the New America Foundation is one of the two organizational parents of the "information commons" movement -- in that it coauthor-ed the "Saving the Information Commons" manifesto in 2002 with Public Knowlege, which laid the policy groundwork for a more communal Internet, where Internet infrastructure and digital content are supposed to be "open" "commons" or communally-owned by everyone.  

Google is one of the biggest proponents of this "open Internet" ideology where "open" is a codeword for "communal." The Information commons movement has conveniently defined the Internet commons as the property of others that they don't think that they should have to pay for ... e.g. communications companies' networks and content companies' content. (They conveniently have excluded Google from the commons obligation, apparently as long as Google preaches "openness" for everyone else...)

Calling Yahoo's Bluff -- How real is the Google outsourcing option? Not!

In reading most all the major press reports on the Microsoft-Yahoo bid, there has been plenty of reporting on the personalities, the price and the process, but precious little analysis of the core assumption whether Yahoo truly has a credible alternative strategic option -- in outsourcing its search to Google. 

  • One can't get a true handle on the likely endgame of this transaction without a more rigorous testing of this outsourcing pillar assumption:
    • Is outsourcing Yahoo's search function to Google a viable and real strategic option given recent antitrust concerns?
  • No. Upon close examination of the facts, this alternative is a weak bluff by Yahoo at best -- designed to buy time and create the perception that Yahoo has more maneuvering room than Yahoo really does.

Would antitrust officials allow Yahoo to outsource its search function to Google? Highly unlikely. 

More perspective on US broadband/technology ranking in the world

For those trying to get an accurate handle on America's real standing in the world in broadband and technology, it is important to have multiple perpsectives in order to get the best and truest read on reality.

Chairman Markey's Net Neutrality Wolf in Broadband Sheep's Clothing Act

The long-awaited new Net Neutrality bill is finally coming out from House Telecom Subcommittee Chairman Ed Markey and Rep. Chip Pickering -- it's now called "The Internet Freedom Preservation Act of 2008."

After reviewing the draft version circulating among the media this evening, here are my initial takeaways on the new proposed legislation.

First, the proposed legislation attempts to rebrand the controversial "net neutrality" issue as "Internet Freedom" and "broadband policy."  

  • While most all of the net neutrality buzzwords still pepper the legislation (open, discrimination, blocking, degrading, etc.) conspicuously absent from the legislation is the well-known and never fully defined "net neutrality" brand. 
  • This is odd given all the effort Markey's supporters have put into branding this issue over the last two years. 
  • It is doubtful that most people on the Hill, in industry, and in the press will stop calling it Markey's new Net Neutrality bill. 

Second, the bill's primary purpose is a bold attempt to reverse longstanding United States broadband policy by amending Title I of the 1934 Communications Act. This Markey bill would:

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Q&A One Pager Debunking Net Neutrality Myths