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December 19, 2007 1:41 PM PST

Google: Microsoft-Viacom deal helps our DoubleClick defense

by Anne Broache

At a Capitol Hill hearing in September, Microsoft's top lawyer skewered the proposed merger of Google and DoubleClick as a sure path to an online advertising monopoly.

"One company will become the overwhelming dominant gateway that connects the universe of online advertisers to the millions of websites that display ads," general counsel Brad Smith told a U.S. Senate antitrust panel in his prepared remarks.

Now Google is pointing to a new, $500 million ad deal between Redmond and Viacom on Wednesday as proof positive that there's plenty of competition in the online ad market--a not-so-thinly-veiled reminder that its planned purchase deserves the green light.

"We have argued all along that the online advertising space is highly competitive and that there are no barriers to switching," spokesman Adam Kovacevich told CNET News.com. "While some have apparently argued otherwise, today's announcement would seem to suggest that those arguments are flawed."

The arrangement with media conglomerate Viacom will lock the Google copyright foe into Microsoft's ad-serving platform for five years. All told, Redmond says its Atlas advertising unit acquired as part of its $6 billion buy of ad-tech firm Aquantive has signed up more than 50 new customers since May. (Atlas helps companies handle their own advertising.)

Microsoft spokesman Jack Evans disagreed that the Viacom agreement pokes holes in his company's vocal arguments against the Google-DoubleClick deal, which is valued at $3.1 billion and is currently in what many predict are the final days of Federal Trade Commission review.

"The simple fact is that our transaction covers a small part of the Web and is good for competition, while the Google-DoubleClick merger would hurt competition and consumers by raising substantial barriers and strengthen the parties' already dominant positions," he said.

Besides, it was not an easy proposition to get Viacom to switch from DoubleClick, even without it being a part of Google, Microsoft's Yusuf Mehdi, senior vice president of strategy and partnerships, said in a telephone interview.

"It's quite expensive," Mehdi said of Viacom's decision to switch from DoubleClick to Microsoft's ad platform. "It's a lot of work. We've signed up to pay the costs for all that work. It's not an easily replicable thing."

And if Google and DoubleClick are allowed to combine, he added, they would control more than 80 percent of online advertising, by Microsoft's estimates, making ad-platform switches even more difficult.

Still, there are signs that other factors are at work in the Viacom-Microsoft partnership. If any company would be willing to endure short-term costs to do business with Microsoft rather than Google, it would be Viacom. (For the record, it wasn't immediately clear what those costs are.)

After all, the owner of Comedy Central and MTV, among other properties, has sued Google's YouTube for more than $1 billion in damages, alleging massive copyright infringement of its TV shows. The Financial Times quoted Viacom CEO Philippe Dauman as saying Wednesday that he was "very impressed with Microsoft's attitude toward copyright protection."

Meanwhile, Microsoft has been trying to increase the size of its ad network to better compete against Google. Combined with the remnant Viacom advertising that Microsoft will get to sell as part of this deal, the company has increased its inventory by about 10 percent, Mehdi said.

On the ad syndication side, Microsoft has also recently signed deals to handle advertising directly for Digg, CNBC and Facebook.

CNET News.com's Ina Fried contributed to this report.

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Good for everyone..
by naterandrews December 19, 2007 3:40 PM PST
This is good for the ad industry and for Google & Microsoft. I hate saying it, but I hope that Microsoft gets a few more high profile ad deals like this. That will ensure that Google keeps innovating, and offering updates and new features to their platform. One company alone running an entire industry is no good for anyone, no matter which company it is.
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Holy cow...
by DSollick December 19, 2007 4:53 PM PST
I seriously and honestly busted a gut when I read the first line of this article: "At a Capitol Hill hearing in September, Microsoft's top lawyer skewered the proposed merger of Google and DoubleClick as a sure path to an online advertising monopoly." Wait, what? Microsoft has been to court HOW many times dealing with monopoly issues?!

http://apple20.blogs.fortune.cnn.com/2007/12/01/apple-mac-hits-record-681-market-share-in-net-applications-survey/

Okay, so Microsoft can hold 91.13% of the OS market, but Google can't hold 90% of the advertising market? I'm confused. Who's being accused for attempting a monopoly of what?

Another thing that I don't fully understand, why is it a surprise that Viacom is switching from Google to Microsoft?! Viacom is SUING Google! I know that if I'm running a company, and I'm suing another company that handles my advertising, I'm going to feel uncomfortable going in and talking to them.

Viacom: "Sooo... about those advertising deals..."
Google: "Yes? What about them?"
Viacom: "Well, you aren't angry about us suing you for a billion dollars, right?"
Google: "Oh of course not. We like to shell out a billion dollars to every company that wants to take a cheap shot at us."
Viacom: "Oh, okay. I'm going to uh.. go now. I just wanted to make sure you're not mad."
Google: "No problem. We love to waste time talking with you. By the way, make sure you sleep with one eye open, if you know what I mean."

Of course, that's an entire overdramatization but I think the point is making it's way across.

Microsoft gets 10% of the market share for online advertising and complains about it? Good. Maybe they'll realize how hypocritical they're being about it.

I've been told that people use MSWindows because it works, and therefore, it has a 90% market share. People must be saying the same thing about Google, because they own 90% of the market share on advertising.

Coincidence?
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Oops
by DSollick December 19, 2007 4:57 PM PST
I just want to say that I misread the 10% market of Microsoft in advertising. I do not claim to know the advertising market share of Microsoft and Google, only the numbers I used in my comment were rough estimates.
Yes,
by suyts2 December 19, 2007 10:12 PM PST
thanks for the "Apple" link to tell us about all the evil deeds MS is up to. Apple wouldn't lie about MS , would they? No way, we can see how truthful Apple is by the ads that they spew. BTW, now market share means something?
Hypocrites
by sjsobol December 19, 2007 4:54 PM PST
Does anyone else see the irony in Microsoft complaining about potential monopolies?
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Excuse me while I puke. What unmitigated MS Gall
by technewsjunkie December 19, 2007 6:29 PM PST
for them to sound offended by Google's "potential" monopoly.

We all know that if Microsoft would kill for the same position.
LIARS. (I mean Lawyers)
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