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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 78% share dominance is, and has been, steadily increasing per all the key public metrics: revenues, Hitwise, and Comscore
  • Many network effects are reinforcing Google's dominance momentum; and 
  • The acquisition of YouTube may have helped tip this market toward monopoly given that YouTube, in just two years, has become the second largest generator of searches in the world and given that Google's search market share is 25% larger with acquired-YouTube than without it (i.e. it created market shares in the high seventies rather than the high fifties.)  

This DOJ review of the Yahoo-Microsoft deal, will not happen in a vacuum or in isolation, but within the relevant context of the DOJ blocking last year's Google-Yahoo deal and DOJ's current investigation of the Google Book Settlement.

  • Before this proposed Yahoo-Microsoft deal, DOJ had a binary choice of:
    • The status quo, i.e. monitoring Google's increasing search advertising dominance for anti-comptetive behavior; or
    • Filing a Sherman Act antitrust suit against Google like DOJ was prepared to file last fall, if Google had not abandoned the Google-Yahoo deal -- per the DOJ prosecutor overseeing that DOJ investigation.
  • However, after this proposed Yahoo-Microsoft deal, the now DOJ has additional choices of how to deal with Google's dominance of this market:
    • Approve the competitive option proposed by Yahoo and Microsoft that arguably provides the most potential for creating more real, viable, and sustainable competition to Google than any other plausible or indentifiable alternative;
    • Disapprove the proposed Yahoo-Microsoft competitive option and hope that a currently unforeseen new search advertising competitor or innovation will change the current market dynamic; or
    • File an antitrust suit against Google if DOJ determines it is acting anti-competitively, and then if successful after several years of litigation, impose either a structural or ongoing regulatory remedy to resolve the lack of competition problem of Google's increasing dominance of the primary monetization mechanism for digital content online.

In closing, this proposed deal puts a bright spotlight on the competitiveness of the Internet search advertising marketplace and also on what the DOJ will likely determine is the best path forward in the next few years for all involved: advertisers, publishers, and users.

  • It is more likely than not that the DOJ will embrace creating a more viable competitive alternative to Google in the Yahoo-Microsoft deal, rather than preserving the status quo of Google's increasing dominance, which then could require the DOJ to file an antitrust lawsuit to protect competition.