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EU poised to approve Google-DoubleClick; Google's increasing dominance now on EU regulatory radar

(Investors: don't miss the last part of this post.) 

Sources indicate that the EU is poised to approve the pending Google-DoubleClick merger soon in what insiders described as a "close call."

  • This arduous ten month review took much longer than Google anticipated when it said 4-13-07 that "the deal would close later this year."
  • Google also did not anticipate that this deal would put it on the antitrust radar as the next Microsoft; the FTC's 4-1 approval came with a stern warning from the FTC: "We want to be clear however, that we will watch these markets and, should Google engage in unlawful tying or other anticompetitive conduct, the Commission intends to act quickly."   
  • Lastly, Google did not expect that the DoubleClick transaction would turn out to be the equivalent of Google "kicking the regulatory behive."
    • Given that the FTC released its new proposed regulatory principles for behavioral advertising simultaneous with its approval of the Google-DoubleClick merger, it is obvious that this merger was the catalyst for moving the FTC to unanimously move towards more regulation of the behavioral targeting practices which are core to Google's extraordinary search monetization success.
    • Moreover in the EU, the reason that the Google-DoubleClick decision was such a close call was that so many large European publishers complained about Google's unfair regulatory advantages that it did not have to abide by the much stricter data privacy and data retention rules that European companies do.
      • Thus this deal has thrust Google into the EU regulatory spotlight, and resulted in much stricter regulation of U.S. search engines in Europe.
      • As the AP reported, even search engines not based in Europe must now follow the EU's stricter regulatory guidelines. 

Regulatory Bottomline: While Google successfully pushed the antitrust envelope in winning approval of their Google-DoubleClick merger, they also "won" the additional booby prize of ensuring that core elements of Google's high-growth, market-leading, search monetization engine will become significantly more regulated in the future.

Investment Bottomline: If Google is smart, the closing of DoubleClick should be a big investment positive for Google

  • Google can immediately cross-sell to all of the many top 1500 advertisers that DoubleClick serves that currently don't use Google.
  • This should significantly increase the number of publisher sites that use Google search, increasing Google's market share further, and it should significantly boost revenue growth for Google, because Google will will now have most all of the world's web publishers and advertisers in its stable, save for the few that use either Microsoft or Yahoo. 
  • Investors who have soured on Google, because of all its "self-foot-shooting," need to remember that the reason this deal was contentious was that it approached the line of being anticompetitive. Investors love near-anticompetitive deals.
    • Deals that raise serious antitrust concerns and then get approved are obviously very beneficial for market share and margins. 
    • It will be interesting to see which investors connect these dots, because the approval could spark a Google rally because regulators have just blessed a substantial expansion of Google's online advertising market dominance.