Antitrust

In monitoring Google as closely as I do, it has become increasingly clear that Google does not believe it has to obey the rules, standards, regulations and laws, that others routinely obey and respect. Google increasingly operates like a self-declared, virtual sovereign nation, largely unaccountable to the rules and mores of the rest of the world.     

• There is plentiful evidence of Google's unaccountability; see the following analysis peppered generously with source links. 

The impetus for this analysis and documentation was Saul Hansel's outstanding New York Times Blog: "Google fights for the right to hide its privacy policy." 

• In a nutshell, Mr. Hansel spotlighted how Google is refusing to abide by the Network Advertising Initiative's rule that its members must display a link to their privacy policy on their home page; and that this industry self-regulatory body is expected to bend its rules specifically to accomodate Google.
• This is no isolated incident, shirking the accountability that most everyone else respects is near standard operating procedure for Google. 

Is Google accountable to anyone?    

First, can public shareholders hold Google accountable?

Kudos to Box.net blog who created a clever Googolopoly board game modeled after the Monopoly board game most have us have played at one time or another.

• Per Box.net: "...One day we got tired of being serious about the situation and came up with Googolopoly, a game where you can take part of ruling the internet even if you don’t work in Mountain View. The goal of the game is to use Google shares to buy as many properties as you can without landing in the deadpool and losing your stock. As with any great board game, there’s a very real metaphor to what’s going on…. What happens when the Google monster gobbles up all that is left in the web world, is present on your cell phone, desktop, and even controls your health information? For all their product excellence, the threat of amassing this much data is too serious to ignore."

I would be remiss if I didn't link to my own, differently spelled, www.googleopoly.net website which includes some of the most in-depth and serious analysis of Google's growing market power.

For those who wonder -- why should I care:

Microsoft's resumed interest in Yahoo's search business, suggests that Yahoo is close to outsourcing some of its search to Google. The antitrust implications of the world's #1 and #3 online advertising competitors, Google and Microsoft, fighting over the #2 competitor, Yahoo, has finally attracted serious media attention.

• A Financial Times editorial: "Search for a rival" asks: "How do you spell Googlopoly?" (I spelled it with an 'e' in my www.googleopoly.net Google-Doubleclick analysis and Senate testimony.)
  • The FT: "Any deal that lets Google supply part of Yahoo’s search advertising, however it is dressed up, must be bad for competition." 
• Today the New York Times', Steve Lohr, with contributions from Miguel Helft, produced the most in-depth reporting to date of the antitrust issues surrounding a Google-Yahoo search partnership: "Google Says It Will Defend Competitive Rationale of a Yahoo Deal."  

Now that the antitrust implications of this issue are beginning to get heightened media scrutiny, let me lay out my case of why a new Google-Yahoo search partnership is anti-competitive collusion and not benign collaboration. 

First, one must look at the competitive impact of a Google-Yahoo partnership.

The new 2008 Internet Advertising Revenue report just came out from the Interactive Advertising Bureau.

It has U.S. Internet advertising revenues for 2007 at $21.2b, up an impressive 26% from 2006 revenues of $16.9b, but nowhere near as impressive as Google's 56% overall revenue growth in 2007. 

With the pending Google-Yahoo outsourcing pact reportedly being negotiated, I thought it might be iluminating or instructive to see what share of U.S. Internet advertising revenues Google and Yahoo each have, and what they would have on a combined basis. 

• Given that Google's 2007 U.S. revenues were ~$8.9b that would be about 42% of all U.S. advertising of $21.2b.
• Given that Yahoo's 2007 U.S. revenues were ~$4.7b that would be about 22% of all U.S. advertising revenues of $21.2b.
• That would put Google and Yahoo's combined Internet advertising revenue shares at 64% that the "partnership" would collectively control. 

At a minimum, the domination of these two players in the U.S. Internet advertising market, combined with Google's incredible momentum in taking share from all its competitors signalling powerful network effects, must concern both the DOJ and FTC.

If Google and Yahoo partner to not compete as fully as they did before... where is competition going to come from? 

With respect and affection to the memory of the late great Dr. Seuss.... 

Googlehoo mocks all the boo hoos over their ballyhooed Googlehoo coup.

Get a clue.

Googlehoo pooh-poohs a collusive coup between their crews.

It's no glue to screw you.

But, who knew it would be true, that Googlehoo would rue, that Justice could see through, Googlehoo's collusion boo-boo, and eventually sue?

Can we construe Mr. Icahn's Yahoo debut, and shareholder kung fu, as a rejection of the Googlehoo view?

Will Yahoo bid Googlehoo adieu, overcome the Microsoft taboo, and renew the review of the Microsoft view?

As Google and Yahoo continue to negotiate their search outsourcing pact, pesky competitive facts keep arising that suggest that such a deal is likely to eventually be found by antitrust officials to be illegal anti-competitive collusion.

• Yahoo is running an AP story that says that Google has now surpassed Yahoo as the #1 "most popular website in the United States according to Comscore."
• This is on top of Google and Yahoo being the #1 and #2 search providers in the U.S. and the leading competitors in the display advertising market, ad tools market and ad brokering market.

The operative question is not whether Google and Yahoo can craft an acceptable search advertising outsourcing pact that can pass antitrust muster, but whether the DOJ wants to encourage such intimate  and important business "cooperation" between Google, the dominant #1 in the market, and one of the only two companies that most consider to be Google's primary competition in multiple market segments.

I had to grin when I saw that two of net neutrality top supporters of net neutrality, eBay and Craig Newmark of Craig's list are reportedly in an legal fight and Craigslist is actually accusing eBay of anti-competitive behavior. 

I have to point out two ironies here:

First, eBay has 95% share of the online auction market. Yep, like Google in Europe, eBay is well past the unofficial maarket share level of what it takes to be declared a monopoly.

• It seems as if online unofficial monopolies like eBay are not above leveraging their market power in one market,online auctions, into an adjacent market like the classified ad market.

Second, it is both Craigslist and eBay, who are eviserating one side of the newspaper industry's two-sided business model (ads and subscriptions), while at the same time promoting net neutrality, which is a clever scheme by online monopolies like Google and eBay to effectively prevent broadband companies from evolving into a two-sided marketplace with  both subscriptions and advertising.

 Bottom line: It seems as if eBay defines anti-competitive as what others might do to eBay, not what eBay actually does to others. Ask Craig.    

A Silicon Insider post does a great job of building on Richard Waters FT point that Google's search business is increasingly rivaling the size of Microsoft's Windows monopoly.

It is getting harder and harder for Google to continue to pretend to be the little vulnerable upstart -- Google is now the dominant incumbent in search and increasingly the market power in online advertising.

The numbers in Silicon Insider's analysis are quite compelling.  

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.

BBC News' Silicon Valley bureau is reporting on increasing "Alarm at Google-Yahoo partnering" and is highlighting a new letter to the DOJ Antitrust Division by 16 civil rights and rural advocacy bodies:

• "In a letter to Assistant Attorney General Thomas Barnett, head of the Justice Department's anti-trust division, the coalition argues that such a deal would give Google almost 90% of the search advertising market and strengthen its influence over internet users' access to information.

  "We face a possible future in which no content could be seamlessly accessed without Google's permission," the letter states."

It appears others are noticing that Google's dominance of search, and online advertising threatens to control the monetization of all content on the Internet...

Last summer I wrote an op-ed for the Washington Times entitled: "The Ultimate Internet GateKeeper," which is what Google is quickly becoming...