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A Google Monopoly, Like Any Monopoly, Is Bad

There's no shortage of analysis out there claiming that Google's Yahoo partnership should pass regulatory inspection because Google doesn't set advertising rates. The argument, essentially, is that a search monopoly for Google would be OK because the Web giant operates a kind of free market bidding system for advertisers. So, if ads are performance-based and prices go up, that can only mean that advertisers deem those ads to be more effective, and thus, worth more. Right?

Tech Crunch's Michael Arrington couldn't disagree more. In particular, he singles out The New York Times' Randall Stross, author of the latest pro-Googlopoly article, as being "exactly wrong in both his approach and his conclusions." If Google is the only search player in town, then more advertisers will bid on its inventory, and the more advertisers bidding, the higher the price. "So one centralized marketplace equals the highest economic rent to Google, which (advertisers) can then share with third parties," Arrington says adding that this is "the big piece of the puzzle that Stross ignored."

Meanwhile, "on the publisher side things are even worse," he says. Google already doesn't share enough revenue with content sites in its AdSense network. Squeeze Yahoo and Microsoft out of the picture, and the search king can suddenly up its AdSense revenue share. This becomes particularly appetizing once search growth levels off, because Google has shareholders to answer to.

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