DoubleClick

It will be very interesting to learn if Google and the SaveTheInternet crowd truly believe in opposing discrimination on the Internet or whether they employ "situational ethics" and only oppose alleged Internet discrimination by their political opponents.

• In other words, should net neutrality only apply to network providers, and not application, service and content providers like the FCC's net neutrality principles says?
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    "consumers are entitled to competition among network providers, application and service providers, and content providers."

A recent Penn State study:  Determining Bias to Search Engines from Robot.txt, highlights that Google benefits from discrimination against smaller competitive search engines because websites block access to those search engines robots that crawl the web to find what users are searching for. 

For those following Google's relentlessly increasing market share, Barrons Online has a succinct summary of ComScore's and Hitwise's latest numbers.

The numbers show why the Senate Antitrust Subcommittee believes Google has market power and why it believe the FTC should determine if Google can leverage its market power in search into other markets before approving the Google-DoubleClick merger. 

For those following Google's relentlessly increasing market share, Barrons Online has a succinct summary of ComScore's and Hitwise's latest numbers.

The numbers show why the Senate Antitrust Subcommittee believes Google has market power and why it believe the FTC should determine if Google can leverage its market power in search into other markets before approving the Google-DoubleClick merger. 

According to PaidContent.org, Sanford Bernstein's Google analyst, Jeff Lindsay:

• "looks at some of the options available to Google, should the EU (or the FTC for that matter) ultimately come down against the acquisition. He lays out four scenarios: a) Forgo competing in the ad-exchange business. b) Purchase another player, possibly ValueClick. C) Build an in-house ad exchange. D) Form a JV, possibly with DoubleClick". (emphasis added)

The most important takeaway from this analysis is that Google and DoubleClick are obviously competitors in the natural and ongoing evolution of online advertising towards ad exchanges.

• Lindsey believes it would make most sense for Google to build its own ad exchange in house and that with Google's advantages, Google could get it up and runnning faster than it took Right Media or DoubleClick.

Given the Senate Antitrust subcommittee's concerns in their recent letter to the FTC on the merger:

• "Antitrust regulators need to be wary to guard against the creation of a powerful Internet conglomerate able to extend its market power in one market into adjacent markets, to the detriment of competition and consumers."

The challenge for the FTC in analyzing this dynamic market is to understand how it is changing and why.

The top Senators overseeing Antitrust matters, Senate Antitrust Subcommittee Chairman Herb Kohl (D-WI) and Ranking Republican Member Orrin Hatch (R-UT), wrote a strong letter to the FTC urging serious scrutiny of the Google-DoubleClick merger. (see pasted copy of the letter at the bottom of this post.)

Having testified before their Senate Subcommittee in opposition to the merger September 27th, I was gratified to learn of the subcommitttee's serious bipartisan concern about the merger and also their very strong grasp of the potential anti-competitive issues arising from the merger.

There are three big takeaways from the letter.

First, the Subcommittee defines the relevant market as Internet advertising, "...combining these two companies' leading positions in these two forms of Internet advertising could cause significant harm to competition in the Internet advertising marketplace."

• The subcommittee has adopted the same market definition as opponents of the deal.
• Google had hoped the Subcommittee would, and still hopes the FTC and EU will, define the market as advertising overall.
  • If the FTC agrees with their Senate overseers that the relevant market is the ~$20B Internet advertising market, and not the ~$300B overall advertising market, the merger is at higher risk of disapproval.

Second, the subcommittee has concluded Google has market power in Internet search, another key conclusion of opponents of the merger. 

Have Penn State researchers stumbled upon a Google-DoubleClick anti-competitive smoking gun?  

PCWorld flagged some very troubling new research findings pertinent to the FTC/EU reviews of the Google-DoubleClick merger by Penn State researchers in its article "Google Favored By Web Admins."  

• Penn State researchers: "Web-site policy makers are playing favorites, and Google is the big beneficiary, say Penn State researchers."

• ""We expected that robots.txt files would treat all search engines equally, or maybe disfavor certain obnoxious bots, so we were surprised to discover a strong correlation between the robots favored and the search engines' market share," said C. Lee Giles, the David Reese Professor of Information Sciences and Technology at Penn State who led the research team that developed BotSeer, in a statement."

 Why is this significant?

The WSJ article today: “Google has even bigger plans for mobile phones” appropriately addresses the big “open” question of whether Google is serious about becoming a wireless carrier, because if it is, it will need to bid and win substantial spectrum in the upcoming FCC 700 MHz spectrum auction.

The WSJ article states: “the behind-the-scenes moves illustrate just how serious the Internet giant is about trying to reshape the wireless world.” The evidence in favor of Google’s serious entry into wireless is significant, as Google:

Ironically, just as the EU is gearing up to conduct an "in-depth investigation" of the Google-DoubleClick merger, the FTC investigation is apparently wrapping up with a whimper. What accounts for this divergence in approaches to this merger review?

The first and obvious explanation is differences in the process and timing.

EU antitrust authorities have launched a rare "in-depth investigation" of the Google-DoubleClick merger. What does this action mean? 

First, in calling Google and DoubleClick "the leading providers" respectively of online advertising/intermediation services and ad serving technology, the EU has tipped its hand in its assessment of a central fact in the investigation that it views these two companies as #1 in the world in their specialties. This obviously troubles Google as they have portrayed DoubleClick as a minor player because of its smaller revenue base in the $300m range. The EU obviously did not buy that Google spin.

Second, the EU rejected Google's blanket assertion that "the parties' activities do not overlap" which is Google's fancy way of saying Google and DoubleClick are not competitors. Well the EU pointedly rejected that Google assertion of fact in stating: "The Commisssion will, in particular, investigate whether without this transaction, DoubleClick would have grown into an effective competitor of Google in the market for online ad intermediation." The obvious implication of this statement is that the EU does see Google and DoubleClick as competitors. And it has framed the question in a way that must trouble Google, which is that they are analyzing the merger through the lens of how competition would develop without this merger. hmmm 

I thought you might enjoy the latest evidence that Googlers think of themselves as special, better than the rest of us, a form of American nobility, the elite of the elite. 

From the recent Newsweek article: "Google goes globe-trotting":

• "Google is like Fantasy Land," says APM David Hammer, 24, who hails from Newton, Mass. "You're one of the chosen people." (bold added)
  • "the chosen people."  ...in a Googlers own words.  Hmmmm. I thought that moniker was already taken, and as I remember, it was not self-granted.  
• The Newsweek article continues: "Actually, it's like being one of the Lost Boys from "Peter Pan.""
  • For those of you who didn't remember them like me, the lost boys were immortals who lived in Neverland with Peter Pan... By the way, isn't Michael Jackson's estate called Neverland? 
• The article then described: "At headquarters in Mountain View, Calif., Google has 17 no-cost dining areas, each focused on a specific cuisine, including Asian fusion vegan and tapas. There are swimming pools, health clinics, beach-volleyball courts and massage rooms."

This Newsweek article preceded the precious front page New York Times story of today: "Google Options Make Masseusse a Multi-Millionaire."