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Microsoft, others protest Google's DoubleClick deal
- — 28 September, 2007 08:21
Google's proposed merger with online advertising server DoubleClick would create a giant that would control a huge portion of online advertising and hurt the Internet, opponents of the deal have told US lawmakers.
The merger, proposed in April, would create "extreme market concentration", said Scott Cleland, chairman of Netcompetition.org, an lobby group representing large broadband providers.
The merger would leave online advertisers with "no real competitive choice," he told the Senate Judiciary Committee's Subcommittee on Antitrust, Competition Policy and Consumer Rights.
Microsoft general counsel, Brad Smith, argued that the marriage of Google and DoubleClick would give Google 70 per cent control of the search-based advertising market and 80 per cent of the online display advertising market.
Microsoft is still under court supervision for its own 2002 antitrust settlement with the US government. Yet Smith suggested regulators should reject the Google-DoubleClick merge on antitrust grounds.
"What are the economic consequences of allowing the largest company in online advertising to acquire its most significant competitor?" Smith said. "If Google and DoubleClick are allowed to merge, Google will become the overwhelmingly dominant pipeline for all forms of online advertising."
But David Drummond, Google's chief legal officer, argued that DoubleClick has a different business model to Google.
"We are confident our purchase of DoubleClick does not raise antitrust issues because of one simple fact: Google and DoubleClick do not compete with each other," he said. "DoubleClick does not buy ads, sell ads, or buy or sell advertising space. We sell ads, DoubleClick delivers ads."
Microsoft's estimates of Google and DoubleClick controlling 80 per cent of the display ad market is a "made-up number", Drummond added.
A month after Google announced plans to acquire DoubleClick for US$3.1 billion, Microsoft said it would acquire aQuantive, a digital marketing services agency, for US$6 billion. Yahoo and AOL have also recently announced acquisitions in the online advertising space.
Cleland argued that the Google-DoubleClick deal represented the biggest threat to competition in online advertising. He called the US government's antitrust review "a watershed moment" for Internet competition.
Google's own "uniquely monopolistic" mission statement said it wanted to organise the world's information, Cleland added.
"No other entity currently has such a naked ambition to control or effectively corner the market for any of the world's commodities, let alone all the world's information," he said.
Electronic Privacy Information Center president, Marc Rotenberg, voiced concerns that the merger would hugely affect consumer privacy. The combined company would control a vast database of customer data, Rotenberg said.
Regulators in the US, Canada, Australia and Europe "appear to be in agreement" that there is no merger that poses a more significant threat to online privacy than Google's proposed acquisition of DoubleClick, Rotenberg said.
"This is going to be a real problem for the Internet if it's allowed to go forward."
Google believed "deeply" in protecting online users' privacy, Drummond answered. Google has announced plans to make IP (Internet Protocol) addresses and cookies anonymous and the company is working on several other privacy initiatives, he said.
Senator Orrin Hatch, a Republican, asked Google's Drummond how the company could complain about the lack of broadband providers when its merger could create a dominant Internet advertising provider.
Companies wishing to advertise online had "many, many" choices, Drummond said, while most consumers had the choice of one or two broadband providers.
But Hatch also suggested to Microsoft's Smith that Google could lose advertising market share if a better search engine came along. "Where is the antitrust problem?" he said. "Why not just build a better product?"
The online advertising market was consolidating rapidly, Smith said. Companies wishing to advertise online would soon be left with one to three choices, he predicted.