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Must read: FT's "Google triumphant" -- it's an excellent analysis of why Google is dominating...

Kudos to Richard Waters of FT for his insightful analysis "Google triumphant."

Let me highlight some key takeaways:

  • The failure of the Microsoft/Yahoo merger eliminates the biggest short-term threat” to Google’s unrivalled position on the web, says David Yoffie, a professor at Harvard Business School. For now, its momentum “seems unstoppable”.

The article also provides excellent new detail to the thesis in my Googleopoly analysis and Senate testimony that Google's real dominance is as the dominant "market maker" for online advertising.

  • "By next year, half of the world’s online advertising – set to reach $55bn (£28bn, €36bn) in total – is expected to flow through Google’s systems. Of that, slightly more than two-thirds will come from advertisements that run on Google’s own websites. The rest represents advertising that the internet company, acting as a broker, places on other companies’ sites in return for a small cut of the action."... [bold added]
    • Mr. Waters is fair in allowing Google to argue extensively why they are not an antitrust problem.
    • Basically, Google argues that because they innovate to the benefit of advertisers and because they don't lock users in -- what's the big problem?
    • What Google's defense sweeps under the rug and fails to address is that being an unregulated and dominant "market maker" in online advertising like Google alone is, affords Google the market power to "self-deal" and "front-run," which benefits Google to the detriment of its customers. It is the ultimate un-regulated conflict of interest.
      • There is good reason why this is somewhat odd territory for antitrust officials to explore.
      • Normally markets like online advertising's auctions of ad commodities -- would be regulated by the Commodity Futures Trading Commission or the Securities Exchange Commission.
      • That's because being a dominant "market maker" or auction broker, is assumed to have the "market power to "self-deal" and "front-run" to the market maker's advantage and the customers disadvantage.
        • As I concluded in my Senate testimony:
          • "The combined Google-DoubleClick would have little accountability to consumers, competition, regulators, or third-party oversight."   

Bottom line: This FT analysis makes an excellent case that:

  • "The search wars look settled;"
  • The overall online advertising market is tipping to Google; and
  • Google is effectively the next Microsoft for antitrust purposes.