Google Defends DoubleClick Deal As Benefit To Industry
- by Tameka Kee , September 28, 2007
Though the five witnesses (including David Drummond, Google's chief legal officer and Brad Smith, Microsoft's general counsel) all read prepared testimony to outline and support their points of view, the search giant stumbled at times through the Senate's question-and-answer session. Meanwhile, opponents such as Smith, Internet business expert Scott Cleland and the Electronic Privacy Information Center's Marc Rotenberg seemed more poised during the Q&A.
That's not to say that the hearing began or ended with any anti-Google sentiment. On the contrary, Judiciary Subcommittee Chairman Herb Kohl (D-Wisconsin) and ranking member Orrin Hatch (R-Utah) tossed equally tough questions at all the witnesses, focusing on getting as much information as possible on marketplace competition, Google and DoubleClick's specific roles in the online ad landscape, and consumer data privacy.
"The total amount of merger activity in the industry exceeds $30 billion this year, creating profound consequences for all who use the 'net and all who sell products and services using the 'net," said Kohl, in his opening remarks. "The leading company placing Internet display ads is DoubleClick ... In less than a decade Google has become universally known as the best, fastest way of searching the Internet ... Once these two companies have joined forces, will the barrier for a new entrant to the marketplace simply be too high? Or will the likely benefit outweigh the potential damage?"
Google's Drummond argued that the benefits would clearly outweigh the risks, downplaying the search giant's supposed chokehold on the online advertising market. He allowed that the company was the search leader--but found fault with the arguments that Google was trying to buy its way into overall dominance.
"The acquisition does not raise antitrust issues, because DoubleClick is not our most significant competitor," said Drummond. "Google is in the business of selling advertising. DoubleClick does not buy ads or sell ads--it provides tools that enable pubs to deliver ads--they don't compete."
Microsoft's Smith countered that argument with text from Google's own AdSense home page for publishers, as well as a screenshot from social network Friendster showing display ads. "Go to AdSense and the first thing it says is 'AdSense for content crawls your pages and delivers ads'," said Smith. "And you can see from the Friendster example--the top ad is delivered by DoubleClick, the ad below it is delivered by Google."
Alluding to Drummond's analogy that Google is to DoubleClick what Amazon is to FedEx, Smith said: "Google is already Amazon, and is already FedEx, and now they're proposing to buy the Post Office."
Cleland, founder and President of Precursor has already authored an extensive white paper entitled "Googleopoly"--so when called to comment on Google's assertion that the merger was not anti-competitive, he supported his testimony with diagrams and research.
"They do compete, because it's about how ads get served to a screen," said Cleland. "Google serves those screens with text and contextual ads and DoubleClick serves them in banner or video--but it's the exact same function that serves ones and zeros through a network. These are interrelated markets and they compete for the same ad dollars. It's like someone saying since my eye and ear are separate they don't have any interaction with my brain."
Both Smith and Cleland cited Google's oft-reported 70% stake in the search market and DoubleClick's 80% share of display, arguing that together, the two companies would create a bottleneck for advertisers seeking to reach consumers online--with Google as the pipeline's sole gatekeeper.
In defense of the search giant, Dr. Tom Lenard, Senior Fellow of The Progress and Freedom Foundation, argued that although the nature of the acquisition warranted FTC review, actual government interference in this evolving market "could be quite dangerous."
Lenard added that legislators needed to be wary of the argument that because of Google's current search dominance, the resulting integrated search and display solution would be so good that no one else could compete. "In a race, you don't want to grab the belt of the person in the lead and say 'go slower so that everyone else can catch up'," said Lenard.
"Firms who buy ad services are sophisticated and price-sensitive," Lenard said. "They use multiple suppliers--and if one becomes too expensive they'll go someplace else very quickly. That will discipline the market." In a post-hearing interview, Lenard said that he didn't think the FTC would block the deal.
Meanwhile, Marc Rotenberg, executive director of the consumer privacy organization EPIC challenged Google to live up to its claims of commitment to consumer privacy by spelling out just how they planned to use data following the DoubleClick acquisition. "If Google feels that there should be enforceable privacy standards, then this is the perfect opportunity to get it in writing with a consent order."
But he cautioned that even then--the wealth of combined data could still be problematic. "We applauded [Google] last year when they opposed a broad subpoena from the Department of Justice for user search data," said Rotenberg. "But we also said that there's an ongoing risk. As long as they keep this much data, someone can legally ask for this information."
Any antitrust ruling on the deal is left to the Federal Trade Commission, but the Senate is in a position to introduce new law on the subject. According to Sen. Kohl: "We have not reached a conclusion with respect to any of the issues presented here, but these are important questions in our society. I am sure there will be additional rounds before this heavyweight fight is settled."
The FTC has scheduled a town hall meeting later this fall to collect more public testimony on the issue.
