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Will the FTC strictly enforce antitrust laws in its review of Google's AdMob acquisition? Google-Admob is a watershed decision for the FTC given that:

• Google recently blew off the DOJ's serious antitrust objections to the pending Google Book Settlement;
• The EU opened a preliminary investigation of antitrust complaints against Google from companies in the UK, France and Germany; and
• The DOJ had to play backstop to the FTC and block the Google-Yahoo Ad Agreement, less than a year after the FTC incorrectly assumed in their 4-1 approval of the Google-DoubleClick deal that:
  • Yahoo and others would provide sufficient competition to Google; and
  • Google acquiring DoubleClick would not "substantially lessen competition" or tip Google to a monopoly.    

A recent New York Post article: "FTC inclined to approve Google's acquisition of AdMob" states the deal "may just squeak by federal regulators."

Kudos to Mike Swift of the Mercury News for his important article about how Google "says the race and gender of its workforce is a trade secret that cannot be released." 

• Google and four other Silicon Valley companies opposed the paper's FOIA request for summary equal employment opportunity data, while most other companies like Cisco, Intel, and eBay complied.

This raises some relevant questions for Google.

Pending FCC policy proposals in the National Broadband Plan and the Open Internet regulation proceeding would vastly expand the implicit multi-billion dollar subisidies Google already enjoys, as by far the largest user of Internet bandwidth and the smallest contributor to the Internet's cost relative to its use.

Interestingly, the FCC's largely Google-driven policy proposals effectively would:

• Promote Google's gold-plated, 1 Gigabit broadband vision for the National Broadband Plan at a time of trillion dollar Federal budget deficits;
• Recommend a substantial expansion of public subisidies for broadband that would commercially benefit Google most without requiring Google to contribute its fair share to universal broadband service; and
• Regulate the Internet for the first time in a way that would result in heavily subsidizing Google's out-of-control bandwidth usage. 

I.   Does Google need more subsidies?

Google is one of the most-profitable, fastest-growing, cash-rich companies in the world, with over $10b in annual free cash flow, 17% revenue growth, and ~$25b in cash on hand.

Kudos to Nicholas Carlson of Silicon Valley Insider for an outstanding must-read post on Google's new social media additions to gmail it calls Google Buzz: "WARNING: Google Buzz has a huge privacy flaw."

In the last year, Google has taken almost a third of the search revenue market share that they did not have before -- per recent company reports.

• In other words, Google's search revenue share increased from 90% in 4Q08 to 93% in 4Q09.
• To understand the math, supporting numbers,and links behind this estimate see the end of this post.

Google's 4Q09 earnings release also shows Google is exercising its market pricing power at the expense of web publishers by reducing the revenue share percentage shared with web publishers (i.e. raising prices) because web publishers have no where else to go; please see the illuminating analysis by Amit Agarwal of Digital Inspiration blog who deserves credit for this important insight.

• Not only does his analysis show that the revenue Google shares with its web publisher "partners" is going down from 75% at the beginning of 2009 to 72.1% at the end of 2009, these percentages actually understate the price increases imposed upon web publishers because the data masks that the total numbers involve more publishers getting relatively smaller pieces of the overall pie.

So what are the takeaways here?

First, Google is indeed a monopoly and only growing more dominant quickly.

Second, Google is abusing that dominance by raising prices on web publishers that have no real competitive alternative.

Third, these facts make it more likely that:

January 27, 2010

For Immediate Release

Contact: Scott Cleland

703-217-2407

Media@GoogleMonitor.com

GoogleMonitor.com Launches Today

Will spotlight Google’s lack of transparency and accountability

Google generated probably the strongest annual revenue growth, 17%, of any large U.S. company this past quarter. 

• Given that Google is exceptionally non-transparent, the minimal guidance and insight that Google is required to provide as a public company always provides a rare glimpse into what is really going on at Google. 

What are the big takeaways from the earnings call?

First, Googleopoly continues to gobble revenue market share at a voracious rate because we know Google's revenues are up 17%, and Google's only significant competitors, Yahoo and Microsoft are continuing to lose ground, (as Yahoo is expected to report a revenue decrease on Tuesday so its search revenues can be assumed to badly lag Google's 17%, and Microsoft Bing's modest search share gains are not keeping up with Google's torrid search growth in a weak economy.)

Second, Googleopoly continues to show strong evidence of its dominant market power in pricing as its revenue growth of 17% is outpacing its paid click growth of 13% -- by roughly 30%. There is no stronger evidence of monopoly power than pricing power and Google clearly has pricing power aplenty.

• Google is very good about keeping its pricing power hidden from public view by letting no relevant market information escape Google's "Black Box" auction process.    

Third, Google's CEO Eric Schmidt reaffirmed that Google is on an acquisition spree with some "big" buys coming -- and with almost $25B in cash and roughly $10B in annual free cash flow -- Google can afford to buy most whatever it wants.

In a brief but very important WSJ story, Google abandons any pretense that it is a neutral search engine/advertiser. See the WSJ piece: "Google advertises its China position with search ads."

• The story is worth re-reading a few times, because it becomes more disturbing the more one realizes all the implications of it.

The story reports that Google is doing something new in taking the top Sponsored Link ad position for itself in searches like "Google and China."

What this tells us, is Google, the search advertising monopoly per the DOJ, not only claims the top search result for itself for many searches in areas that Google owns content, like GoogleMaps, and Youtube, but now it also lays claim to the most valuable top advertising position as well to promote Google's public policy agenda. (If Google is willing to promote its China policy, why would it not promote its chosen political candidates? or its public policy positions of a variety of social issues targeted to users intentions/profiles that only Google happens to know?)

Google's behavior here belies its repeated representations that Google is a neutral search engine and runs neutral ad auctions. This should seriously concern the DOJ and FTC antitrust authorities, which are both investigating if Google is anti-competitively leveraging its monopoly position to dominate new markets that it enters.

Google's reported likely acquisition of Yelp, a popular review site for local businesses in major cities, does a lot to bring Google's broader monopolization strategy into clearer focus.

• Yelp is potentially just the latest in a slew of strategic information-related acquisitions that Google has made, that when looked at individually -- look small and innocuous, but when looked at together and as a cumulative pattern, appear eerily reminsicent of the classic monopolization tactics of Standard Oil's monopolization of the oil industry via acquisition of oil producing/distributing networks in the late 1800s and those of pre-1911 AT&T in rolling up most of the nation's telephone networks via acquisition.
• Google is simply replicating the same type of monopolization strategy for the 21st century by acquiring key strategic information producing/distributing networks.

The following list of strategically important Google acquisitions belies the conventional wisdom that Google's scale and scope have been grown organically and as a result of Google in-house innovation.

Google is now blocking the Internet content of users' choice in two different Google services, meaning that Google has assumed the mantle as the Internet's only net neutrality repeat offender. 

• Google's non-neutral behavior pattern indicates that they are confident that they don't need to respect net neutrality because the FCC will exempt Google from any net neutrality obligations when the FCC's proposed Open Internet regulations are formalized next year.  

So what are the two different Google services that are blocking users access to the Internet content of their choice?