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Mounting evidence of Googleopoly...


Evidence continues to mount that the Google-DoubleClick merger presents serious anti-competitive concerns.

Let me share a series of antitrust developments over the last several days that cumulatively are very significant.

First, and most ominous, is that Yahoo, the weak #2 in the search market, which used to use Google's search engine, has been actively considering exiting the search business and outsourcing to #1 dominant Google or distant #3 Microsoft, because investors want the greatly expanded investment returns such a revenue-enhancing and cost cutting move would generate for shareholders.  

    • "...over the summer, Mr. Yang did actively assess one major sacred cow: the Web-search-advertising business it built up at great expense in recent years. Under the scenario discussed by top executives, Yahoo would have outsourced that search-advertising activity -- which places small text ads next to Web search results -- to either Google or Microsoft Corp., the people say. One of these people says Yahoo raised the idea with Google."
    • The compelling financial argument for Yahoo to cede its share to Google and tip this market to de facto monopoly with ~80-90% search share -- should send shivers down antitrust authorities spines.
      • The article explains Yahoo would generate much higher returns for its shareowners if it benefited from the higher revenues affiliating with Google's better monetization engine and the dramatically lower costs associated with no search engine.
    • The article goes on to say something that screams loudly that search and display are competitive markets because the reason Yahoo is not likely to exit search is that it would harm its other advertising businesses like display:
      • "...Mr. Yang concluded that Yahoo needed to be the "marketing operating system," providing advertisers with a full menu of online-ad options. Yahoo would have a hard time doing so if it outsourced search advertising, which represents roughly 40% of the U.S. online-ad market..."
  •  The point here for the FTC, is what impact would the Google-DoubleClick merger have on competition if Yahoo were to follow its shareowners' best interests and exit the search business?


Second, Online Media Daily picked up on a new study by investment firm William Blair Co. that “pegs the number of online advertisers globally at more than 500,000 and growing--with 90% of them currently running search campaigns with Google.”

  • Given that DoubleClick claims 17 of the top 20, or 85% of the world’s largest web advertising sites, combining Google and DoubleClick will create one company that serves upwards of 90% of all advertisers globally, a global advertising network sevral times larger than any other competitor. 

Third, according to Neilsen's NetRatings, Google has 71.6% share of the global search engine market, and as evidence of Google's growing market power/network effects (i.e benefiting disproportionately), Google grew its global audience 2.5 time faster than the growth in search usage overall. Third, I emphasize "global" market share because the Internet is the ultimate global market with extraordinary global scale/scope efficiencies and the least transactional "friction" of any global market. 

  • Moreover, the Australian Competition and Consumer Commission has launched an informal probe of the Google-DoubleClick merger per Reuters.
  • That probe is in addition to the EU recently accelerating its process to investigate the Google-DoubleClick merger also per Reuters.

Fourth, PC World produced an interesting and ominous chart in its article: "Is Google too Big? what Google knows about you."

Bottomline: There is mounting evidence that the Google-DoubleClick merger presents serious anti-competitive problems.  As I have said before: "the more you learn, the more concern..."