Both the Senate and House Judiciary Committees are holding separate hearings today on the antitrust issues raised by the proposed Google-Yahoo search advertising deal. (More details on the deal here). Microsoft’s general counsel Brad Smith, whose fought his own share of antitrust battles on behalf of Bill Gates, will be wagging the antitrust finger at Google. In his prepared testimony, he will claim that the deal potentially gives Google control of 90 percent of search ads, will lead to fewer choices and higher prices for advertisers, and raise serious privacy concerns for consumers. He will say:
If search is the gateway to the Internet, and most believe that it is, this deal will put Google in a position to own that gateway and the information that flows through it. Never before in the history of advertising has one company been in the position to control prices on up to 90 percent of advertising in a single medium. Not in television, not in radio, not in publishing. It should not happen on the Internet.
Google’s chief legal officer David Drummond will respond that the deal is good for consumers because they will see better ads, and good for advertisers and Web publishers because more people will click on those ads. He will maintain that Google will not control all of Yahoo’s search advertising, and will point out that Yahoo will compete in that arena, continuing to sell its own ads. It will also continue to compete in regular search. And as for privacy, Google and Yahoo will not exchange “personally identifiable information” about each user.
Here are Drummond’s talking points, which are summarized on the Google Policy Blog (where you can also find his full testimony):
* This agreement will be good for Internet users (who will see ads that are better targeted to their interests); advertisers (whose ads will be better matched to users’ interests, allowing them to reach potential customers more efficiently), and website publishers (who will see increased revenue from better-matched ads on their websites).
* Google and Yahoo! will remain vigorous competitors, and that competition will help fuel innovation that is good for users and the economy. As we’ve said before, commercial arrangements between competitors are commonplace in many industries. Antitrust regulators in the US have recognized that consumers can benefit form these arrangements, especially when one company has technical expertise that enables another company to improve the quality of its products.
* Our agreement will not increase Google’s share of search traffic, because Yahoo will continue to run its own search engine and compete in online search.
* We’re particularly excited that as part of the agreement, Yahoo! will make its instant messaging network interoperable with Google’s. This will mean easier and broader communication among a growing number of IM users, and enable users to choose among competing IM providers based on the merits and features of the services.
* We have taken a number of steps in the Yahoo! agreement to protect user privacy. As Google supplies ads to Yahoo! and its partners, personally identifiable information of individual Internet users will not be shared between the companies. Yahoo! will anonymize the IP address of a searcher’s computer before passing a search request to Google.
That last point about Yahoo anonymizing user IP addresses could set an interesting precedent. Advertisers would rather see those IP addresses freely shared across ad networks and Websites so that consumers can be targeted no matter where they go on the Web. But Yahoo and Google obviously felt it could have been a big enough issue to squirrel the deal with the government. As Congress looks at behavioral targeting in general further down the road, that could pop its head up again (even n a non-antitrust context).
These particular antitrust hearings have been brewing for a while. Google and Yahoo have tried to protect themselves against Microsoft’s criticisms by structuring the deal as a straightforward arms-length commercial agreement. And the fact that Microsoft has a lot at stake in seeing the deal squashed doesn’t make it the strongest witness at these hearings. It is not exactly a disinterested third party, since it is still trying to wrangle the search business from Yahoo itself.
If you trust Google this deal is great. If…
One day, people will look back at this era where everybody was getting ripped off by Google.
Reminds me of Standard Oil in junior high history books…
You’ve got to love Google on this one. They’re almost like old school socialists in their mentality. “Our product is so good, why clutter the store shelves with competing products of inferior quality?” And of course, “Consumers benefit from better advertising.” The customers here are companies that buy advertising, and they benefit from Yahoo having to drag itself out of malaise and getting it’s act in gear. And that’s exactly what Google would rather not see.
Just because something is bad for Microsoft doesn’t mean it’s good for the tech world. And besides, Google is the new Microsoft.
I sometimes wonder if the courts are actually capable of even understanding the technological / broader market implications on decisions such as these. I was in court once acting as translator and had to explain WiFi to the judge (and how using someone’s open WiFi was NOT hacking into their computer!)
Is it just me or has Google become Machiavellian? Does anyone believe they actually care about the user? This is about making money, plain and simple. Nothing more, nothing less. Just be honest about it Google and get rid of this it is better for the user. Your doing this because it exposes your ads to more people.
Something about Yahoo working with Google bothers me. Maybe this is how Red Sox nation felt watching Matt Damon sign with the Yankees.
I’ll tell you what’s a miscarriage of justice. It’s Icahn’s proposed board slate for Yahoo. He should be thrown in jail for the indignity of it. The Icahn slate wouldn’t know a page rank from a back link. May as well resurrect Henry Ford or Herbert Hoover from their graves to run Yahoo.
i’m beginning to really hate google. their position vis-a-vis this deal just oozes self-righteous smugness.
A Yahoo/Google merger is a bad deal for everyone but Google shareholders because it creates a monopoly and removes transparency from the marketplace.
But the real story here is the irony WRIT LARGE of Microsoft on the other side of an anti-trust case. That company has been benefiting from wink-wink weak government oversight for 15-20 years. Most of the TC readers who cut their teeth in the browser/player/software wars of the 90s and early 2000s must be sharing a tiny giggle with me.
Google is a monopoly and without any restriction, it will continue to take control of online advertising industry. In future, it will be either Google’s way or highway for consumers. Yahoo as a company really does not have a vision, it is lead by bunch of egoistic bozos who are still not able to overcome the hate for Microsoft. What they don’t realize is Google is the new Microsoft, more dangerous and more deceptive than Microsoft ever was.
“This agreement will be good for Internet users (who will see ads that are better targeted to their interests); advertisers (whose ads will be better matched to users’ interests, allowing them to reach potential customers more efficiently), and website publishers (who will see increased revenue from better-matched ads on their websites)”
I’ve heard all this before… and it was captured especially well in the Charlie Rose interview with Steve Ballmer (10/21/1997)… only difference, Steve was talking about IE.
How ironic how things appear to be so different but are really the same.
And the link… http://www.char...-steven-ballmer
Great interview…
And the link to the interview if anyone is interested…
http://www.char...-steven-ballmer
Great interview.
@5 – it’s JOHNNY Damon
@ValleySnark – Google isn’t just assuming their advertising is better. If you were a web publisher/developer and had any experience with Yahoo Search Marketing, you would know that it is a TOTAL train wreck on both sides of the fence. MSN is better… but has UI issues and Adwords takes the cake. Google Adwords is hands down the best online PPC advertising platform around… for its quality and volume – both important
Perhaps no other company has had 90% of the advertising revenue of any medium… but has anyone deserved it more than Google? I’ll admit, it IS scary that they could have such a large percentage.
You can read more here: http://liviux.b...ployee-records/
Mr. Arrington – Here is a better image for your Yahoo + Google story.
http://www.box....ared/0yc1uz8qok
Pigs get fact and hogs get slaughtered. Google is definately one fat hog.
Pricing on Google ads are already sky high and increasing by 100s of pct each year.
Is anybody dumb enought to actually believe Google’s lame rationale?
All the morons on this site bitching about Google being a monopoly will go right back to Google for their searches. So why not let Yahoo benefit as well?
The deal is that Google’s PPC tech will be used by Yahoo for SERP ads vis a vis AdSense for search and content. That means Google AdWords advertisers can potentially have the same ads displayed in Google SERPs and Yahoo SERPs. That means more bang for buck for existing PPC advertisers. It does NOT make it more competitive. The deal makes it less competitive. It’s quite simple. I would love to see better PPC tech from Yahoo & MSN, but as an advertiser and marketing consultant, AdWords is better for advertisers and for ROI. But there’s a smugness and hidden arrogance in Google to basically say, Yahoo and MSN’s PPC sucks balls – we know it, advertisers know it, SEO & PPC agencies know it – so let this happen and it’ll be GREAT for advertisers around. AdWord prices are not getting lower – going higher. Goo-Hoo is not a good thing in the LONG RUN. Good short term though.
Yahoo’s General Counseld Callahan quoted from the Yahoo news story:
“Callahan added that “the claim some have made that Yahoo and Google are price fixing is entirely false. Prices for search terms are set by open and fair market-based auctions, and advertisers only pay when consumers click on their ads.”"
Callahan is SMOKING CRACK. There is nothing ‘open’ about the bidding process. And prices are set most of the time by Google’s ‘Quality Score’, NOT market forces.
Last I checked, Google’s 60ish % share plus a PORTION of Yahoo’s 20ish % share makes for at best about 70-80% total.
So MSFT counsel must be… uhm… overstating the case a bit… one would think they’d be a little more careful with that 90% number… (cough, cough)
Google will “control” (reversibly so), only about 70-80% of search ad serves, TOPS, in the near future.
And actually what’s even funnier than the FALSE 90% number, is MSFT’s argument that since search is the gateway to the internet, Google should be stopped:
Since we’re only talking about search AD serves and not the search itself (it stays right where it is with YHOO), this is a complete red herring. Clearly they CANNOT be claiming that “paid search ads” are “the gateway to the internet”.
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Issues & Solution(s): #1: Yahoo should start buying back it’s shares and find a “White Knight”. Google is not that white knight, so this is just a temporary solution. In the meantime Icahn is likely to make some money but most likely will not be able to replace Yahoo’s board so long as Yahoo gets smart.
Point 1: Yahoo has an Ace with it’s Asian assets & should use it.
Point 2: MSFT can also be charged with anti-trust issues.
Point 3: What’s wrong with MSFT’s own search engine: MSN, etc> ??? Can’t they make $$ ??
A Google & Yahoo all out partnership will not work. MSFT’s Gen. Counsel Brad Smith’s claim of 90% of the search industry being controlled by those 2 companies is a powerful & valid arguement, yet MSFT can’t buy Yahoo without facing it’s own anti-trust issues; either now or later.
Fact is MSFT will have to pay $40 Billion to influence Yahoo’s shareholders.
Fact is MSFT is trying to take over Yahoo during a market slump & because Vista is finished, as well as no more PC Operating systems will be coming out. MSFT has lost 10% of it’s home PC market share in just a few months!
Fact is Google will be charged with Anti-Trust & Privacy issues.
Fact is Yahoo is a very well run company & if they sold shares which would cause them to leave themselves open to attack then it is Yahoo’s own fault…
No one likes MS, Google, or Icahn; But Yahoo you should have kept controlling shares sufficient to prevent any attack. If you Yahoo decided to cash in then it’s your own fault…
What you should be doing Yang is buying back shares…
Correction On my above post: I meant MSFT will have to pay $40 a share offer not $ 40 Billion to influence Yahoo shareholders.
Alex,
Isn’t anything over 50% control a monopoly? Why should Google have the monopoly on search ads? Why?
Google has got to be STUPID if they think this should pass! 90% of the market is a joke! It would be more rational to force a breakdown of Google with their market share as is, not let them get bigger through deals..
I Personally am quitting Google, I’ll just have to find something else to use since I will NOT be supporting their delusions of grandeur!
@kaka. Because we will not benefit. Why let Yahoo and Google benefit at our expense.
Google has the monopoly because it used to be a good company. Now it has taken over by making “certain” deals. Since people use it they will continue to profit & charge more for the advertising.
There are other search engines Better than Google. Google will eventually be charged with anti-trust issues itself.
I don’t search on it, what about you? In fact anything Google I removeeeeee…