Google Really Is Taking over the World

From The Online Reporter Edition # 570
Publication Period January 5 through 13, 2008

Google Really Is Taking over the World
Google, the giant of online advertising and searching, has had its $3.1 billion takeover of fellow online ad giant DoubleClick approved by the Federal Trade Commission. The merger creates an advertising titan unlike any other in the online world. Google’s reach is now wholly unrivaled, and its breadth nearly immeasurable. This merger is a herald to a new age of advertising; one based on immense data gathered about, not by, users.
The merger will allow Google to encompass the entire online advertising market, because of the strengths of both companies. Google is the leader in text-based advertising, sending relevant ads with search information. More people use Google than any other search engine, to the tune of 65%, which helped the company see 3Q07 revenue of $4.2 billion and a share price that recently topped $700 and still hovers near that historic marker. DoubleClick is the leader in advertisements for Web sites, things like banner, video and scrolling ads. It made about $150 million in 2006, but has the potential to be worth much more, as is apparent by Google’s offer of $3.1 billion. Together, advertisers in the two networks cover almost every product imaginable, from online publications to antiques and the latest Wii games.
Online advertising is the fastest growing sector of advertising, growing by an annual rate of nearly 20%, leaving outdoor, radio and TV advertising in the dust. It is the only market that can tell advertisers such a vast amount of accurate information: where viewers live, how long they looked at the ad, which site they saw it on and even related ads seen and searches done. Companies like Google will continually buy out smaller companies with better information gathering and ad-displaying tools, helping to ensure a continued growth in the market.
The marriage of Google’s search and information gathering with DoubleClick’s advertising expertise will result in Internet users seeing more, and possibly only, advertisements that directly correspond with their online activity. These ads will be tailored to each individual user, and some fear that this custom fit will occur through Google gathering too much private information. Some fear that this collection of data and highly personalized advertising could lead to new theft and abuse through the Internet or even mobile devices.

The FTC Says Yes to Merger of Giants
The FTC approved the deal without conditions by a four-to-one vote. The FTC did not feel it was approving an Internet advertising monopoly. In its written statement, the FTC said that the merger would not cause a control of the market, specifically citing Google rivals Microsoft, Yahoo and Time Warner, who “have at their disposal valuable stores of data not available to Google.” Pamela Jones Harbour, the FTC commissioner who disagreed with the ruling, said in her dissent that she has “alternate predictions about where this market is heading, and the transformative role the combined Google- DoubleClick will play if the proposed acquisition is consummated.” As a whole, the FTC did note that it had privacy concerns with the merger, but the panel said that it didn’t feel it had the authority to consider privacy in an antitrust matter.
In Google’s corporate blog, which was updated shortly after the FTC vote, Google general counsel David Drummond said, “the FTC’s decision publicly affirms what we and numerous independent analysts have been saying for months: our acquisition does not threaten competition in [the] quickly evolving online advertising space.”
Apart from this merger review, the FTC has called for comments on five self-regulatory privacy principles for online advertisers. While the FTC has approved the merger in the US, Google and DoubleClick still must make their case to the European Union, which is generally stricter with antitrust and monopoly cases than the US. The EU has already dealt some blows to US ambitions, such as its strikes against Microsoft. For this reason, Google’s competitors, as well as some privacy advocates, now focus their lobbying efforts in Europe. Google also has a much larger corner on the Internet search engine market in Europe.

US Private Sector Is on the Fence
Jeffrey Chester, executive director of the Center for Digital Democracy, said of the merger, that the combined company “will become the world’s private ministry of information” and that it “will be able to develop the most detailed profile of users around the world.”
Microsoft and AT&T, the biggest rivals to express concern about the merger, previously spoke against the deal, saying it would allow Google to muscle out any competitors. These worries seemed to have grown in the past year with Google successfully sweeping into mobile, television and other media. While they were dissenting loudly before, it seems no one has really gotten a worthwhile comment out of these two giants since the FTC announcement. Perhaps Microsoft is being quiet so no one will think back to its $6 billion acquisition of aQuantive, a firm that builds media campaigns entirely on data gathered about users.
Some were far less worried about the merger. Robert Liodice, president of the Association of National Advertisers, commented, “Doesn’t everyone know everything about everybody anyway? ...We’ve got identity theft going on everywhere… I view the potential concern about the Google- DoubleClick deal as a drop in the bucket compared to the national issues at play.”
“This merger, and their forays into other media, helps Google follow you if you want them to — and even if you don’t — across a huge expanse of the globe,” said Joseph Turow, a professor at the University of Pennsylvania’s Annenberg School for Communication.

The EU and European Dissent
The European Union tends to be a bit stricter than the US on privacy policies. Privacy is explicitly named as a basic human right in the European Union’s constitution, while ideas of it are implied but not specifically stated in the US Constitution. However, the EU regulatory body that is reviewing the merger said it would focus mainly on the antitrust issues. Last month, the European Commission began an in-depth review of the merger, which is expected to be completed by April 2.
“The EU is a bigger potential roadblock than the FTC was, but it’s hard to say if they’d actually block the merger,” said Blair Levin, an analyst at Stifel Nicolaus. “It’s a possibility but by no means a certainty.”
“The Google-DoubleClick merger would harm consumer welfare by creating a structure that almost certainly will be less respectful of user privacy,” said the BEUC, the EU’s top consumer lobby, in a letter to the European Commission. “There are many ways in which Google, post-merger, could push up prices for advertisers.”
The big thing to watch out for in all of this is the thing that seems to be mentioned the least. If Google does successfully acquire DoubleClick and does indeed end up with something of a monopoly in the online ad space, it has the potential to drive up costs for advertisers, which could then be imposed on consumers. Nothing new, but a little daunting if you think of the global scale at which this giant will operate. Google has regularly proven to be smart and savvy, so we doubt this merger will jack up prices immediately if even at all.