Google and Microsoft went toe-to-toe yesterday on Capitol Hill, jawing over Google's proposed $3.1bn merger with online ad firm DoubleClick.
Speaking before a Senate subcommittee that handles antitrust issues, Microsoft said that the merger would hinder competition in the online ad market and endanger the privacy of people everywhere, giving Google exclusive control over the largest database of user information ever assembled.
Meanwhile, Google said the deal would empower consumers, enliven small businesses, and promote free speech.
That free speech bit has us doubled over with laughter, but it's hard to side with Microsoft. The Redmond outfit - which was slapped by the DoJ for monopolistic practices in the operating system market - reportedly made a bid for DoubleClick and recently nabbed another online ad firm, aQuantive, in a deal worth $6bn. The Federal Trade Commission has approved the Microsoft-aQuantive merger, but it's still mulling over the Google-DoubleClick pact.
"I will be the first to admit that Microsoft is not disinterested in this issue," said Microsoft general counsel Brad Smith.
Smith voiced his displeasure for the merger before the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights. Since Google already dominates search advertising and DoubleClick maintains a firm grip on internet banner advertising, Smith said, a combined company would have an undue level of control over a market that's expected to top $54bn by 2011.
"What are the economic implications of allowing the largest internet company in online advertising to acquire it's most significant competitor?" Smith asked the committee. "If Google and DoubleClick are allowed to merge, Google will become the overwhelmingly dominant pipeline for all forms of online advertising." He claimed that a combined company would control 70 per cent of the search ad market and 80 percent of the banner ad market.
He insisted this would "be bad" for web publishers, web advertisers, and consumers. Most importantly, he said, the merger would threaten end user privacy.
"Today, it's generally believed that Google and DoubleClick have amassed the two largest databases of online user data in the world," he said. "With this merger Google seeks to record nearly everything you see and do on the internet and use that to target ads."
Then he added that a combined Google-DoubleClick database would throttle competition from rival companies - like Microsoft. "These privacy issues in fact have antitrust consequences," he said. "This concentration of user information means that no other company will be able to serve ads as profitably."
And Google's take on the matter?
The spin from Google
Sitting just to the right of Smith, Google chief legal officer David Drummond disagreed with just about everything he had to say. "The online advertising business is complex, but my message to you today is simple," Drummond announced. "Online advertising benefits consumers, promotes free speech, and helps small businesses succeed. Google’s acquisition of DoubleClick will help advance these goals while protecting consumer privacy and enabling greater innovation, competition, and growth."
He said that small businesses enjoy Google advertising because they can reach consumers they wouldn't ordinary reach and that consumers enjoy it because it "connects them to the information, the products, and the services they seek." But he really got clever with his free speech argument.
"Many bloggers and many web site owners actually can afford to dedicate themselves full-time to that endeavor because of online advertising," he said. "Last year, we paid $3.3bn in advertising revenue to our web site partners and it's a great satisfaction to us that we're able to help this proliferation of online speech and activity."
Google's purchase of DoubleClick, he insisted, will help the company provide even more benefits to consumers and small businesses - and promote even more free speech. "We think we'll be able to provide better and more relevant advertising to consumers and help publishers and advertisers generate more revenue," he said. "All of this new economic activity will fuel the creation of more rich and more diverse content on the internet which of course benefits consumers and society at large."
Drummond also claimed that the proposed deal would not endanger user privacy: "Privacy is a user interest that we've been protecting since our inception and we will continue to innovate in this area."
And he did his best to shoot down arguments that the deal would create a monopoly, insisting that Google and DoubleClick are not competitors.
"DoubleClick does not buy ads, sell ads, or buy or sell advertising," he said. "All it does is provide the technology to enable advertisers and publishers to deliver ads once they have come to terms, and provide advertisers and publishers statistics relating to the ads." Google is to DoubleClick, he said, as Amazon is to FedEx.
Naturally, Microsoft didn't buy this argument. "Google is already FedEx. It is already Amazon," said Brad Smith. "And now they're proposing to buy the post office." ®