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Where else will a viable competitive alternative to Google come from, if not from a Yahoo-Microsoft deal?

The core question at the heart of the DOJ's review of the proposed Yahoo-Microsoft search partnership is where else will competition to Google's increasing dominance come from, if not from the proposed Yahoo-Microsoft search partnership? 

The DOJ has deep and current expertise in this market given their investigation of the Google-Yahoo ad partnership last fall and DOJ's current investigation of the Google Book Settlement. The DOJ also appreciates the facts that:

Google's gobbling Yahoo's search revenue share -- per Google/Yahoo earnings reports

Yahoo lost 11% of its search revenue share to Google during the first six months of 2009 versus the last six months of 2008, per Yahoo's and Google's 2Q09 earnings reports. 

  • This time period comparison was selected because it represents most of the time period since DOJ blocked the Google-Yahoo ad partnership 11-05-08, where the DOJ concluded that Google and Yahoo had combined market shares of 90% and 95% in the relevant antitrust markets of search advertising and search advertising syndication. 

It is relevant, interesting, and instructive to analyze what has happened since the DOJ's 11-05-09 action, and since the economic downturn, given that the DOJ concluded Google and Yahoo commanded 90% and 95% market shares at that time.  

This relative revenue share transfer analysis is straight-forward.

DOJ is formally investigating another Google deal

An unusual and notable pattern appears to be developing with Google and DOJ antitrust enforcers. 

  • Twice in less than a year, the DOJ has formally investigated Google for trying to anti-competitively extend its monopoly market power via a market agreement.
    • It is unusual for the DOJ to seriously investigate a single formal market agreement/settlement for anti-competitive behavior because normally antitrust lawyers can convince a company's leadership to stay away from the anti-competitive line that possibly could prompt a DOJ investigation and/or suit.
    • What is exceptionally unusual is for a company to propose two non-merger-related market agreements in less than a years time that prompt serious antitrust investigations from the DOJ.
  • Today, the DOJ Antitrust Division wrote a letter to the Federal Judge overseeing the Google Book Settlement deal "to inform the court that it has opened an antitrust investigation into the proposed agreement between Google and representatives of publishers and authors... we have determined that issues raised by the proposed settlement warrant further inquiry."

This is the second formal agreement in less than a year that Google has negotiated and drafted that has "crossed the line" prompting DOJ antitrust officials to have to formally and publicly investigate. 

Behavioral Advertising's New Swiss Cheese Privacy Proposal

The new industry-proposed "Self-Regulatory Principles for Behavioral Advertising" which Google publicly patted themselves on the back for today, conveniently do not apply to most all of Google's current advertising business. 

  • When one examines the fine print of the detailed document, it becomes clear that the new proposed self-regulatory privacy guidelines (which in fact are a significant improvement over the status quo) conveniently do not apply to contextual search advertising, the leading form of Internet advertising that Google dominates (per the DOJ), nor to contextual display advertising, the second-leading form of Internet advertising which Yahoo leads.  

As a big proponent of responsible self-regulation, I am disappointed when self-regulation is given a bad name when industry leaders badly game the system by conveniently self-defining themselves, for the most part, from being subject to much of the new self-regulatory guidelines.  

Why am I pointing out this arbitrage of privacy laws?

Yahoo earnings confirm Google taking substantial market share

Yahoo's announced earnings confirm that Google continues to take substantial search advertising revenue and profit share in the first full quarter of financial results since the DOJ blocked the Google-Yahoo Ad Partnership as anti-competitive.

  • Yahoo's owned and operated search advertising revenues fell 3% compared to Google-site search advertising revenues which grew 9% -- a 12% differential -- signalling significant market share gain by Google at Yahoo's expense.
  • Yahoo's affilitate (syndicated) advertising search revenues fell 16% compared to Google-site syndicated advertising search revenues which fell 3% -- a 13% differential -- again signalling significant and comparable market share gain by Google at Yahoo's expense.

Google's dominance of search advertising profit share is even greater than that of revenues because historically the only other publicly-traded search advertising players with significant search advertising revenues: Microsoft, AOL, and IAC/ all consistently lose money in this search advertising segment.

An Internet Economy or "Ecommony?" Growing pushback against "Information wants to be free"

The recession has created new urgency for multiple content industries to find a better way to protect and monetize their property/content in the digital world.  The dotcom bubble ethos that “information wants to be free” is like a gross mold destroying the incentives to create and distribute valuable content digitally. (Be sure not to miss the shocking analysis at the end of this post comparing revenue generation per user in the digital "ecommony" versus the real economy.)  


The first point of this post is to connect-the-dots why several content industries are currently in the news actively pushing back against the "ecommony" anti-business model, where content owners are expected to effectively give away their valuable content to the open Internet/digital commons without the requirement of permission or payment.


The first broad and serious counter-movement by business may be in the offing to ensure that valuable content is indeed paid for when distributed digitally. Serious financial and business risk is driving creative thinking about how to better protect and monetize valuable content digitally.


Why FTC’s Behavioral-Ad Principles Are a Big Deal – Privacy-Publicacy Fault-line Part IV

The FTC staff's revised behavioral advertising principles make it clear that the FTC understands the Internet’s growing privacy-publicacy fault-line. The FTC’s new guidelines are all about tackling the growing problem of unauthorized publicacy – meaning the tracking, collecting and “mashing-up” of information consumers reasonably expected to be kept private.  (“Publicacy” is the opposite of privacy.)

  • Privacy-Publicacy Fault-line Part I, II, III.


Why are the FTC’s new guidelines a much bigger deal than most appreciate?


First, the new guidelines put a new and brighter privacy regulatory spotlight on Google, the world’s dominant behavioral-advertiser, and to a lesser extent, Yahoo, Google’s distant #2 competitor.

Implications of a Search Monopoly for Content/Applications

The content and applications industries have yet to connect-the-dots of the U.S. Department of Justice concluding search advertising is a monopoly and that Google has pro-actively sought to further its monopoly in search advertising and search advertising syndication.  

  • The long term implications of this DOJ conclusion are sweeping and profound for content and apps providers.  

Simply, if the DOJ believes Google is a monopoly, then it follows that DOJ would believe it is illegal under antitrust law for Google to proactively disadvantage its competitors’ content/applications by favoring Google-owned content/applications over competitors’ content/applications on Google’s search advertising monopoly platform.

The gravitational pull destroying traditional journalism -- the Internet black hole of scale

Tribune's bankruptcy is fresh evidence that the recession is accelerating the demise of journalism precipitated in large part by the advent of the Internet. And where is the Internet taking the journalism profession and business? Not towards the utopian citizen journalism of conventional wisdom, but inexorably towards the gravitational pull of the black hole of the Internet -- scale.  

  • To understand the future of the journalism business, and most content businesses for that matter, one has to understand The Internet Black Hole of Scale which is comprised of:
    • Audience size and reach:
    • Advertiser network breadth and depth;
    • Publishing breadth, depth and timeliness;
    • Sales/targetting data volume, integration and specificity; and
    • Infrastructure platform economies of scale and scope.  

So why can't the journalism profession/business compete long-term with The Black Hole of Internet Scale?

Yang's "open" legacy is being overlooked going forward

Most are missing the lasting implications and legacy of Yahoo CEO Jerry Yang's signature "Open" strategy, in all the media chatter about his demise and his successor. 

Yang set Yahoo on a new and different strategic trajectory philosophically and culturally -- i.e. that of the open source movement -- which is strategically Google-aligned and Microsoft-opposed.

  • As Yang said in a statement reported in the Washington Post, "it was important to re-envision the business for a different era to drive more effective growth. Having set Yahoo! on a new, more open path..." [bold added]
  • In the WSJ today was another example of Yang's open legacy and open source/wisdom of crowds philosophy and culture that his successor will inherit: "Mr. Yang's preference for letting employees reach consensus rather than make tough decisions himself..."

This means the cultural momentum and trajectory at Yahoo is to remain close to its "open source" philosophical ally Google regardless of the DOJ decision to oppose the Google-Yahoo ad partnership and despite its investor-correct public statements to the contrary about Microsoft.

Jerry Yang's legacy will not only be opposing shareholder interests in scuttling the Microsoft offer, but also the under-appreciated 'open strategy' he implemented that is designed to continue to thwart a Microsoft bid going forward.