Google-Admeld: More Gaming of Antitrust Enforcement?

Google's reported purchase of Admeld, described by TechCrunch as "an advertising optimization platform for publishers," appears to be another clever gaming of the antitrust enforcement process by Google to reinforce and extend its core search advertising monopoly.

  • Google appears to believe they have figured out their monopolization-extension formula via antitrust enforcement, and are now in "lather, rinse and repeat" mode.

As I explained in formally opposing Google's acquisition of DoubleClick in 2007, which I believed would help quickly tip Google to monopoly (which it did) by allowing Google to buy the roughly third of user, advertiser and publisher relationships that they did not have, antitrust enforcers focused myopically on the market of the acquired company and missed the monopolization-extension significance and effect of the purchase on substantially augmenting the core Google search advertising monopoly.

Google's exceptionally clever gaming of the antitrust enforcement process here, is a relatively simple and powerful maneuver that only Google can do, because only Google has the near perfect market inside information that its search advertising monopoly provides.

  • Google knows very well that antitrust enforcement depends on more fully developed and established markets where there are substantial facts and stability in where a market is and is going.
    • That's because antitrust enforcers have a natural humility to generally not intervene in nascent markets, especially those with short or small revenue histories -- i.e. the data series antitrust authorities most rely upon to make their competitive judgements.
  • Google also knows that its search advertising monopoly and its unique mission of organizing the world's information uniquely provides Google with the ancillary benefit of the best real world data to spot first which nascent products and services will become genuine first movers and thus are most likely to dominate their chosen market segments before anyone else can.
  • Moreover, Google knows that it can buy a first mover most cheaply and with the least competition by buying it early when Google is confident from its unique data that the target is a genuine first mover.
  • Furthermore Google knows that if it acquires and combines a first mover company in a strategically important adjacent market to Google, the acquisition will have the powerful multi-benefit of:
    • Reinforcing Google's search advertising monopoly;
    • Nipping a potential competitive threat in a strategic market in the bud;
    • Turbocharging that acquired first mover with Google's monopoly distribution via over 90% of Internet users, advertisers, and publishers; and
    • Extending Google's monopoly power to an adjacent market to benefit from Google's extensive network effects.
  • Simply, Google's monopoly power enables it to short circuit the normal power of antitrust enforcement by getting antitrust enforcers to focus myopically on the silo market of the acquired company and not look at the big picture, i.e. all the network effects and Google's overall monopolization strategy (for the latter, see page 23 of this antitrust powerpoint on Google.)
    • By arbitraging a process that only looks at the trees and misses the forest that the trees are in, Google cleverly gets the Government to augment and sanction the rapid expansion of Google's monopoly to much of the Internet ecosystem.
    • Google fully understands this "soft underbelly" of the way that antitrust enforcers act and Google is exploiting it to the hilt over and over again.

Let's review the pattern to better fathom is power and significance.

  • In 2006, Google Video was not succeeding, but in buying first mover YouTube before it was revenue significant, Google bought what it believed would become the second largest generator of searches in the world and Google's early data was right. (75% of Google's search market share gains from 7-2006 and 7-2010 came from YouTube per ComScore -- see page 11. moreover, DOJ did not ask for a second request on YouTube to learn more.)
  • In 2007, Google bought DoubleClick. The FTC wrongly and myopically focused on the display ad and analytics business, while Google appreciated the real value of DoubleClick to Google was tipping its search advertising dominance to monopoly by buying the hundreds of top global advertisers Google did not have and the 25% of Internet viewers it did not have.
  • In 2009, DOJ, in looking at the big picture, blocked the proposed Google Yahoo ad agreement, by threatening a Sherman Section 2 monopolization case.
  • In 2010, the FTC approved Google's acquisition of AdMob, the first mover and dominant 50% share provider of in-app advertising, despite "serious antitrust concerns," because the FTC imagined that Apple was a new entrant to advertising that would be a competitive counterweight to Google, when Apple was only targeting a portion of the market Google was targeting.
  • In 2011, the DOJ approved the acquisition of ITA with a consent decree, so at least DOJ has a mechanism to try and prevent Google from anti-competitively extending its monopoly into travel services.

In sum, Google has good reason to believe that they have discovered and mastered a clever way of gaming the antitrust law enforcement process and extending its monopoly power to strategic adjacent markets that could potentially be a source of competition in the future.

A big open question here is whether the likely Google-Admeld transaction will be part of the FTC reported broad antitrust investigation of Google, or whether the FTC will put on its blinders and only look at how the transaction affects AdMeld's market segment that it already leads in.

  • The most important open question here is will the FTC see the broader monopolization forest in the trees of Google's 98 acquisitions?