Antitrust

Google's dominance of the Internet's business model for monetizing content only grows.

• "Gap widens in online advertising: Rivals struggle to catch up to Google as buyers favor search over display" reports Jessica Vascellaro in the Wall Street Journal.
• The article's conclusion is dead on and ominous -- the gap between Google and its competitors in online advertising is widening and will continue to do so because the business that Google dominates, search advertising, is growing significantly faster than display advertising is.
  • While the article focused on the different growth rates of online advertising, the article missed the opportunity to highlight what else the numbers tell us -- which is that:
    • Google is also taking massive market share from everyone so that Google is effectively capturing most all of the growth in online advertising, and
    • Google is capturing ~90% of all the online advertising profits in the US.  

As I read the article, I thought many involved in the FTC's investigation and subsequent 4-1 approval of the Google-DoubleClick merger must be getting awfully worried that they made a big mistake in not appropriately enforcing antitrust law last year when they had the opportunity.

Google is so arrogant it isn't even aware it is being arrogant.

Per a San Francisco Chronicle article:

• "Google Inc. and Yahoo Inc. will start a high-profile advertising partnership by early October, even if federal regulators haven't yet approved the deal, Google CEO Eric Schmidt said Thursday.
• "We are going to move forward with it," Schmidt said in an interview on Bloomberg television after being asked whether the companies would wait for the Justice Department to complete its review."

Let's put this Google behavior into a little context.

DOJ antirust prosecutors are currently involved in a serious antitrust investigation of the Google-Yahoo online advertising partnership for potential Sherman Act collusion/price-fixing illegality.

• By declaring that Google is going ahead with the Yahoo partnership, with or without approval of the DOJ -- Google is not so subtly telling the DOJ -- "we'll see you in court," "try stopping us, if you can." 
• What words come to mind to describe Google's public behavior and effective declaration of legal war by their CEO?
  • Arrogant? insolent? disrespectful? defiant? impolitic? inflamatory? tactless? imprudent? unwise? or just downright dumb?   

Bottom line: Normal companies, who respect the rule of law and law enforcement authorities, understand the old adage that "if you want honey, don't kick the beehive."

• But Google is not normal, its special -- it has a "don't-be-evil motto" "get out of jail free card." No jail is big enough to hold Google! 

Let me leave you with this analogy:

Kudos to David Smith of the Gaurdian Observer for his outstanding piece on Google as it turns ten years old.

• Its a must read for anyone interested in Google or the future of the Internet. 

Some of my favorite insights from the piece are highlighted below:  

Does Google inherently favor its Google-owned applications over competitors in search results? The more one looks, the more it looks that way.

Saturday's New York Times article: "Some Media companies choose to profit from pirated YouTube clips" -- got me thinking about the anti-competitive nature of Google's increasing dominance of the process of locating copyrighted content online.

GoogleBlogoscoped has flagged additional evidence that Google anti-competitively favors its own content over competitors in a good post: "Google allows itself a special ad."

• This complements my post earlier this week: "New evidence of Google search bias -- Its relevant to DOJ investigation of Google-Yahoo ad-deal."

The case builds...

Bottom line: How the DOJ ultimately rules on the Google-Yahoo ad partnership will tell us a lot about how much of the future online content economy Google will be allowed to de facto control.  

Does Google anti-competitively leverage its dominance in search to disadvantage its competitors, including Google's media competitors? New evidence suggests yes.

• A nod of thanks must go to GoogleBlogoscoped and innovator Timo Paloheimo who invented a derivative search engine, Google Minus Google, for the clever purpose of offering "Search with Google without getting results from Google sites such as Knol, Blogger and YouTube."
  • Mr. Paloheimo explains that he was inspired to create Google minus Google by the New York Times important article by Miguel Helft: "Is Google a media company?"
  • This suggests that a lot of people, when they connect-the-dots of Google's dominance in search and Google's aggressive competitive forays into everyone else's business, will have a similar eureka moment that Google is anti-competitively extending its dominance in search to other market segments.

The evidence shows Google is not a neutral search engine or a neutral wholesaler of search services.

As I will show below:

Harvard Business School Professor Benjamin Edelman posted his earlier House antitrust testimony on why the "Google Yahoo ad deal is bad for online advertising." 

• Professor Edelman debunks Google's claim that auctions determine Google's search prices by explaining how in many cases Google actually sets the price of search through its reserve pricing policy.
• He also explains why Google is not being truthful when it claims that advertisers can easily take their data with them -- in reality Google impedes advertisers ability to use alternative advertising platforms through a technical "API" barrier to entry. 

In short, it is a useful and concise read, for those closely following the Google Yahoo deal and those trying to determine whether or not the DOJ will have problems with the proposed online advertising partnership.

• It adds to the mounting evidence that a "partnership" between a dominant #1 Google and Google's leading online advertising competitor, Yahoo, is in fact anti-competitive collusion and a de facto price fixing scheme.    

Kudos to Cade Metz of The Register for exposing Googleopoly's new self-granted entitlement to take their customers money without permission -- called "automatic matching" in Adwords.

I was amused at the near total absence of business analysis in most of the coverage of, and commentary on, the new hyped "Cuil" search engine, the reportedly most-promising potential Google-beater.

Most commenters on Cuil totally miss that it is NOT their user perspective that determines success or failure of a search engine's business, but the BUSINESS perspective that matters.

Knol, Google's newly announced online publishing service, is an ominous direct competitive threat to traditional newspaper/magazine/journal publishers, NOT a challenge to Wikipedia as many in content circles naively and wishfully think.

• Like the frog that has the good sense to jump out of boiling water, but who can be lulled into a false sense of security and get cooked if the tempature increases gradually...
  • ...publishers of all types currently have a false sense of security that Google is targeting Wikipedia and not them because Google has YET to really monetize Google News or YouTube.

Wake up publishers/editors! Google, with by far the world's largest: