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Google's online advertising dominance grows -- Don't forget the pending DOJ investigation...

Google's dominance of the Internet's business model for monetizing content only grows.

  • "Gap widens in online advertising: Rivals struggle to catch up to Google as buyers favor search over display" reports Jessica Vascellaro in the Wall Street Journal.
  • The article's conclusion is dead on and ominous -- the gap between Google and its competitors in online advertising is widening and will continue to do so because the business that Google dominates, search advertising, is growing significantly faster than display advertising is.

As I read the article, I thought many involved in the FTC's investigation and subsequent 4-1 approval of the Google-DoubleClick merger must be getting awfully worried that they made a big mistake in not appropriately enforcing antitrust law last year when they had the opportunity.

  • A pillar assumption of the FTC's analysis and decision, which the FTC staff effectively concluded in the first several weeks of the several month investigation, was that Yahoo and Microsoft would provide sufficient competition to Google-DoubleClick to prevent any anti-competitive dominance by Google from ever developing.
  • Ooops! Most all the evidence that has come to light over the last year puts that pillar FTC staff assumption in serious doubt.
    • Its widely known, Microsoft concluded that it needed to acquire Yahoo in order to compete with Google -- and that Google concluded it needed to do whatever necessary to prevent Microsoft and Yahoo from combining to become stronger competitors.
    • Now Google has effectively coopted Yahoo from being a competitive threat by agreeing to pay Yahoo almost a billion dollars more than it could earn in a competitive marketplace -- by moving some of Yahoo's inventory over to Google's higher priced monetization engine. 
    • With Yahoo effectively marginalized and Microsoft effectively neutralized competitively, Google is free to consolidate its dominance of online advertising without the pesky competitive interference so rashly assumed by the FTC staff.  
      • Unfortunately for competition and America, only one FTC commissioner understood the network effect of network effects implicit in the Google-DoubleClick merger and that the addition of DoubleClick's dominance in display advertising to Google's dominance of search advertising -- would tip the online advertising market to Googleopoly.
        • See my six charts which quickly explain this tipping effect (particularly charts #4-6); you can also see my full Googleopoly analysis or my Senate Judiciary testimony on the merger -- all the analysis was there for those 'open' to consider it.

Now the DOJ Antitrust Division has the unfortunate task of having to clean up the FTC's mess now that Google and Yahoo have both the market power and stated intent to effectively collude and fix prices in the online advertising market -- a market that the two companies obviously dominate. 

Anybody who looks at the facts of this situation:

  • the exceptional market concentration;
  • the unprecedented network effects and exceptional trends favoring Google; and
  • the naked 'cooperation' between the #1 and #2 online advertising competitors in the Google-Yahoo partnership --
    • Can't help to understand how serious the current DOJ antitrust investigation of the Google-Yahoo partnership is.

Moreover, Google's recently announced browser 'Chrome,' bundles the currently neutral browser address bar with Google's non-neutral search bar in Omnibox.

  • The practical effect of this 'bar-bundling' is to divert user inquiries from what the users know they want and clearly request, to a Google-owned page of results where Google can advertise to the user, and also tempt the user with Google-owned content different than the URL destination the user specifically requested.
  • Isn't that the exact type of anti-competitive behavior that Google tells antitrust officials would be bad if Microsoft did it?    

Furthermore, Google's CEO Eric Schmidt recently made a serious antitrust situation worse by dissing the DOJ in the media by saying Google would go ahead with the Google-Yahoo partnership regardless of what the DOJ concludes...

  • Only Google would be so arrogant as to taunt a prosecutor considering bringing a case against them with the equivalent of trash talking: 'we'll meet you and beat you in court.'

Bottom line:

  • Both the market and the media are 'ostriching' on the seriousness of this antitrust investigation of the Google-Yahoo partnership...