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Googleopoly III - Dependency - Crux of the Google-Yahoo Problem -- new white paper

I wrote a new white paper, Googleopoly III, to answer the core question in the Google-Yahoo deal: Would Yahoo compete as vigorously with Google Post Agreement?

  • My detailed analysis concludes Yahoo would not compete as vigorously, because the deal would make Google Yahoo's single most important business relationship -- effectively making Yahoo financially, operationally, and strategically dependent on Google.
  • I also describe the agreement as a "Hotel California deal" where Yahoo could check out but never leave...

I wrote this white paper now because, there are many indications that the DOJ will decide to bless or block this Google-Yahoo deal next week before the parties' October 11 review deadline.

The abstract of my 10 page White Paper is below:

Sen. Chairman Kohl's Letter to DOJ on Google-Yahoo

Senate Antitrust Subcommittee Chairman Kohl sent a letter to the DOJ on the Google-Yahoo ad agreement stating "we conclude that important competition issues are raised by this transaction."

"These issues include: 

  • Whether the agreement will lead to higher advertising prices;
  • whether search and display are interchangeable and substitutable; and 
  • Whether this transaction will strengthen Yahoo as a competitor or perpetuate its decline and even exit from this market; and
  • whether there are significant barriers to entry impeding new competitors in this market."   

The letter ends with the thought that they "...would encourage the Department to intervene to protect competition..." if this deal now or in the future were to "...cross the line into an unacceptable, anti-competitive collaboration among competitors..."

It is important to note: Ranking Republican Member Orin Hatch was not a signatory of this letter; he was a signatory of the Subcommittee's letter to the DOJ on the Google-DoubleClick merger. 

Bottom line: The timing of this letter suggests that the DOJ is close to a decision on whether it will block or bless the proposed ad agreement between Google and Yahoo.









Google-Yahoo's "tip of the iceberg" problem with DOJ

The Google-Yahoo ad agreement is at great risk of being blocked by antitrust authorities because of a very serious "tip of the iceberg" problem.

  • Google and Yahoo continue to publicly frame the issue as only what is above-the-surface in plain-sight -- i.e. the proposed ad agreement -- or what I describe as the 'tip of the iceberg.'
  • Unfortunately for the companies, skilled and dutiful antitrust investigators look deep beneath the surface for the 90% that is  hidden and secret -- the true relationship and incentives between Google and Yahoo -- or what I describe as the rest of the iceberg.
  • The reason why the public and press may be surprised if the DOJ challenges the Google-Yahoo ad partnership, is that very few have bothered to dive in and look beneath the surface of this ad agreement to what it means for the overall relationship between Google and Yahoo. 

There are sound reasons our judicial system requires that parties/witnesses testify under oath to tell the truth, the whole truth, and nothing but the truth.

Antitrust Institute paper opposes Google-Yahoo ad pact

Norman Hawker of the American Antitrust Institute released a measured and balanced white paper, "The proposed Google-Yahoo alliance" that recommends the agreement be blocked if Yahoo can't remain a viable competitor to Google and Yahoo.

  • One telling quote: "It strains credulity, however, to believe that Google would agree to an arrangement that gives its chief rival $800 million

    to invest in efforts that would, if successful, reduce Google’s market power."

The paper is well done. It is a value-added read for those focusing on the outcome of this issue. It is also a good complement to my recent white paper: "Googleopoly II Google's predatory playbook to thwart competition."

Googleopoly II: Google's Predatory Playbook to Thwart Competition -- a new White Paper

My new Googleoply II White Paper (see identifies and documents the twenty-six sources of Google's market power and the five different anti-competitive strategies Google employs to foreclose competition.

  • This original and trenchant analysis brings into sharp focus the moorings of a potential antitrust case against the Google-Yahoo ad pact.
  • The White Paper also should give pause to even the biggest apologists and cheerleaders for Google -- if they are 'open' to reading it.
  • Simply, it is a must-read piece for anyone trying to understand why the DOJ's investigation of the proposed Google-DoubleClick is so serious and important.

The press release for my White Paper is included below:

Internet Expert Unearths Google’s Predatory Playbook:

Why the DOJ Needs to Block the Google-Yahoo Ad Partnership

Partnership Would Further Cartelize Search Advertising -- Harming Advertisers and Publishers

Google-Yahoo "auction" defense is a sham

Google's main defense of why Google-Yahoo is not a price-fixing arrangement that prices are set by competitive auction -- is simply not true. The "its an auction" defense is a sham, superficially appealing, but still a cover-up.  

  • Google's full court press defense of the deal -- with back to back blogs by Google, plus a New York Times op ed defending the deal -- signal its crunch time at DOJ and that Google is mighty concerned.

Why is Google's "auction" defense a sham?

World Federation Advertisers opposes Google-Yahoo ad pact

Uh oh. Google's worldwide customer base, the World Federation of Advertisers is formally recommending that the EU block the Google-Yahoo ad pact.

  • "The World Federation of Advertisers (WFA) fears that the proposed advertising alliance between Yahoo and Google will have a detrimental effect on competition, result in price increases and reduce the options available to advertisers worldwide.
  • It has therefore sent a written submission to the European Commission's Directorate-General for Competition recommending that they block this agreement."

It puts a serious crimp in Google's credibility when Google's world wide customers disagree so publicly with Google that the Google-Yahoo ad pact is good for advertisers...

  • If they can't convince their customers... it will be even harder to convince antitrust authorities...

Countdown: 8 or 23? days to Google-Yahoo DOJ deadline

The plot thickens. Google's CEO Eric Schmidt remains defiant that he is going ahead with the Google-Yahoo pact regardless, but may be signalling Google is willing to wait until the second of its two contractual deadlines: October 11th, versus September 25th per press reports.

What's the real deadline?

  • Under section 16 of the redacted Google-Yahoo agreement submitted to the SEC, the companies gave the DOJ 105 days from June 12th  -- that's September 25, 2008, to complete their antitrust review. Google-Yahoo can extend that review deadline if they choose to. 
    • Another deadline in the Google-Yahoo agreement -- October 11 or 120 days after June 12th. After October 11th either Google or Yahoo can terminate the agreement to "avoid or end a lawsuit" filed by antitrust authorities.
  • There is no official DOJ deadline or timetable to file an antitrust suit if they choose to do so.

Clearly there has been a cascade of ominous developments that signal the DOJ investigation of the Google-Yahoo deal is very serious indeed.

World Assoc. Newspapers Opposes Google-Yahoo deal

The World Association of Newspapers stated it "strenuously opposes Google’s attempt to take over a portion of Yahoo’s content advertising and syndicated search businesses. Google already substantially dominates both businesses and its market dominance is growing by the day. Yahoo is (and should continue to be) Google’s most significant competitor in the syndicated search business and is (and should continue to be) its only real competitor in content advertising."

The WAN also said:

  • "Perhaps never in the history of newspaper publishing has a single, commercial entity threatened to exert this much control over the destiny of the press."
  • "Freedom of the press is too important to rest in the hands of a single company." (FreePress? Where are you?)

Google, you have another BIG problem.

  • In addition to having the association of the top advertisers representing 9,000 brands oppose your deal, Google now has the association representing 18,000 newspapers world wide 'strenuously' opposing the Google-Yahoo deal.

Now large powerful voices from Google's two biggest customer segments have seen through Google's pathetically self-serving argument that it needs to cartelize the search advertising industry to best serve its customers.

Better late than never. Content providers were largely asleep at the switch in the FTC's review of the Google-DoubleClick merger.


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