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Google Purchase of DoubleClick Under FTC Investigation

The NY Times reports [1] that the U.S. Federal Trade Commission has started a preliminary antitrust investigation into Google’s planned $3.1 billion purchase of the online advertising company DoubleClick, an industry executive briefed on the agency’s plans said yesterday.

Some consumer groups have raised questions about privacy issues involved in having companies which handle more and more of the end-to-end process in users’ clickstreams through the internet, since holding more of the links in the process chain inevitably means being able to ascertain individual’s actions, interests, motives and desires in their day-to-day lives. Read on for more info.

The FTC doesn’t typically focus on privacy issues, however, so this investigation is likely to center more upon concerns that having more of the online industry rolled up under and controlled by fewer large companies could have longterm negative effects on maintenance of a healthily competitive marketplace.

In the search marketing industry, both John Battelle [2] and Danny Sullivan [3] have expressed concerns about portions of the DoubleClick acquisition. DoubleClick is involved in Search Engine Optimization (“SEO”), which is a cottage industry that helps webmasters make their sites more “findable” to users seeking content/info through conducting keyword searches on major search engines like Google, Yahoo!, and Microsoft Live. Historically, search engines keep mum on the precise workings of how they decide what sites will come up highest or most-relevant for any given keyword search, which set the stage for the birth of the SEO industry. If a search engine is now also offering SEO consulting services, it would appear to be a conflict of interest in the goal of providing best results for users while simultaneously providing best service to their clients. In addition, it instantly introduces at least the appearance of an unfair playing ground to the search engine optimization industry since a search engine’s own employees would logically have the best information and ability to get sites to rank better than any competing SEO firm.

As Danny Sullivan said in his recent post on Microsoft Search Marketing Vs. Google Search Marketing [4], “It doesn’t look right; it doesn’t feel right.”

It’ll be interesting to see if the FTC agrees that something’s not right. There are definitely some valid concerns about consumer interests, but there appears to’ve been some significant relaxations of anti-monopoly laws in the last few years as evidenced by the continuing mergers in telephone companies and other vertical industries.

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1 Comment (Open | Close)

1 Comment To "Google Purchase of DoubleClick Under FTC Investigation"

#1 Comment By Iqbal ahmad On 6/13/2007 @ 7:56 am

Google’s purchase of DoubleClick combines the two largest providers of online advertising delivery and is going to reduce substantially the market competition on which Web sites rely on to provide advertising and gives Google the power to control 80% of the online ad market. Microsoft and other companies are crying foul over the deal and hope to get government to look more closely at the deal.
People increasingly compare Google to Microsoft in the mid-1990s—at the height of its power, arrogant at times. Is that a fair comparison?

What is happening here happens in many industries. And thus the Internet moves into the real world. If one is selling consumer goods to retailers right now, you are complaining about Wal-Mart. In every industry’s history there is this huge monster which develops that everyone has to deal with because it brings great efficiencies and lower margins due to scale. And, they also offer much lower return per unit and little or no flexibility
Google’s business model is straightforward – attract as many users as possible to its site by providing what it considers to be “free� content, then monetize that content by selling ads. Google has “a hell of a business model – they’re going to take everything you create, for free, and sell advertising around it.

So if this deal goes through & Google does indeed handle more than 80% of the ads served up after the acquisition, it seems more and more like a monopoly. Give away what others charge for to get them locked in to using your products. Analytics, free, optimizer, free, doubleclick PPC management, free?, doubleclick ad serving, free?
It is also the same strategy Microsoft used to get everyone to use their products and put people out of business. But Google is a natural monopoly in online advertising industry. This is very much a monopolistic play. Microsoft may be the pot calling the kettle