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:
Abstract: The crux of the decision of whether the DOJ blocks or blesses the Google-Yahoo ad partnership is the DOJ’s best assessment of whether Yahoo would compete as vigorously with Google after the agreement as before it. At core, the proposed Google-Yahoo ad agreement would transform Google from being just Yahoo’s primary competitor, to also being Yahoo’s single most important business relationship: financially, operationally and strategically. The purpose of this white paper is to analytically “stress test” the credibility of Google and Yahoo’s assertions that Yahoo would have the same incentive to compete as vigorously with Google -- post-agreement. This white paper will:
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Present Yahoo/Google’s specific claims about enhancing competition.
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Spotlight the fundamental asymmetry of the Google-Yahoo relationship.
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It’s not a relationship between equals, but a Yahoo dependency on Google.
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Yahoo needs Google much more that Google needs Yahoo.
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Explain why it’s not credible Yahoo would compete as vigorously post-agreement.
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The agreement creates a slippery slope of more Yahoo dependence.
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The agreement creates a slippery slope need for more antitrust regulatory oversight.
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Google/Yahoo’s largest customers believe Yahoo will compete less.
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This is a “Hotel California” agreement; Yahoo can check out, but never leave.
DOJ has to determine if Yahoo has effectively succumbed to the old adage: “if you can’t beat them, join them.” Yahoo and Google’s claims that the financial transaction between the #1 and #2 primary competitors in a highly-concentrated industry are: entirely benign, involve no quid pro quo outside the agreement, and create no opportunity or incentive for anti-competitive collusion – are simply not credible. The value, depth and breadth of this ad agreement would make Yahoo too dependent on Google financially, operationally and strategically to credibly believe Yahoo would compete as vigorously with Google post agreement as before. Thus, it is more likely than not, that the DOJ will attempt to block this ad agreement between Google and Yahoo as anti-competitive.
