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Exposing DoubleClick's misdirection on Google-Doubleclick merger

The WSJ yesterday had an illuminating interview with David Rosenblatt CEO of DoubleClick about its acquisition by Google.  

Mr. Rosenblatt engaged in some pretty effective "spin" so I thought it would be helpful to shine a brighter light on some of his pat answers that were... how should I say it... less than forthcoming.

In response to a question about whether he could reassure web publishers that Google did not have too much market power, he said: "Google shares revenues with publishers so it makes sense that their interests are pretty much aligned." 

  • That may sound right on the surface, but don't be fooled with the "spin" of saying it's a revenue sharing arrangement -- Google still has pricing market power. 
    • Even under a revenue sharing arrangement, Google could use its market power in search to extract an ever-increasing percent of the shared revenues through a relationship with DoubleClick. 
    • Just because there is revenue sharing doesn't mean there isn't an effective "price" in these markets/relationships that Google's increasingly dominant search position can lever through a DoubleClick arrangement.  
      • (Remember, Google gets roughly 11 cents per search compared to roughly 4 cents per search by Yahoo.)
    • As Google's search share becomes increasingly dominant, Google-Doubleclick could have the market power to demand a larger revenue share and the web publisher could have a decreasing ability to avail itself of a comparable competitive alternative.  
    • Just because Google has a non-traditional revenue-sharing business model, does not mean that basic economic or antitrust principles no longer apply.

In response to a question about how DoubleClick intends to address digital privacy concerns, Mr Rosenblatt said:

  • "Ad-serving information collected by Doubleclick... has always been the property of our clients and not us. And so a change of ownership of DoubleClick will not change the terms of those contracts."   
  • There are a couple of misleading parts to that answer.
    • First they are assuming that there is no privacy concern about DoubleClick and their web publisher clients use of private information under this current arrangement -- that is not true -- there is. 
    • Second, they are trying to distract people from the fact that consumers' private information is being accumulated, analyzed, and targeted on an unprecedented scale and in a way that U.S. law has prevented other industries with private information from exploiting the way Doubleclick and Google do.
    • Mr. Rosenblatt is engaging in some clever misdirection, trying to deflect attention to contractual terms and away from the end result at issue: consumers' privacy.
    • The big point here is that contrary to what Google and DoubleClick like to intimate -- they don't work for consumers -- they work for advertising entities.
    • One of the greatest sources of Google's market power is its ability to competitively arbitrage a huge hole in U.S. privacy law.
      • This enables Google to amass and abuse Americans' privacy in a way that U.S. law has long prevented with financial institutions and communications providers.
      • Google's real vulnerability here is that it may be engaging in an unfair trade practice in systematically using Americans' private information in a way that they are not aware of, or expecting.
      • It's not the first time a competitor has developed an unfair competitive advantage by systematically misleading consumers. 
      • It is particularly egregious in Google's case because they have the number one consumer brand in the world and they are not paid by consumers.     

For more on this point of view, please read my ten-page analysis of the Google-DoubleClick merger: