According to an article in the Financial Times today, Google has reneged on a commitment to improve the way it manages consumer data in light of its DoubleClick acquisition. There are compelling reasons for Google's delay, as Eric Schmidt points out in the article, but there are even more compelling concerns that demand immediate action.
European regulators cut Google some slack based on its word that it was going to immediately look into ways to boost privacy. A year into that pledge, Google has done little, by its own admission:
The issue came to the fore last April with Google's announced plan to buy DoubleClick, an Internet company which delivers many of the ads consumers see online and which plants many of the cookies that sit on personal computers. The combination of Google's records of a consumer's Internet searches with DoubleClick's information from cookies prompted complaints that one company would hold extensive data about a large proportion of the world's Internet users.
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Now that Google has acquired DoubleClick--the display advertising feather in its proverbial cap--it's time to see if the hat fits.
The $3.1 billion acquisition, which finally closed last week upon European regulator approval, gives Google a much needed boost in the market for display advertising.
Google hasn't offered many clues as to what its plans are with DoubleClick, other than to hint at layoffs. But Google pundits and executives at small ad outfits do have concerns and plenty of opinions about what the search king should do.
Google's AdSense serves up pay-per-click text ads to Web sites within its publisher network, while DoubleClick, which markets a product called Dart, places banner ads on Web sites. DoubleClick also runs an advertising exchange and a search-engine marketing business called Performics.
There are some basic conflict-of-interest questions with some of the additions to Google. As the largest search engine, Google has kept its distance from search engine optimization, or SEO, which is the science of increasing a Web page's rankings in search results. But with Performics, Google owns an SEO company.
"Even if Performics is kept completely separate from the Google search team, there's the impression that Performics might have some special 'in' with Google's non-paid search results," writes Danny Sullivan in a Search Engine Land blog post in which he urges Google to get rid of Performics.
Granted, Microsoft finds itself in the same SEO-owning boat after acquiring Avenue A/Razorfish and Sullivan poses this question to both companies: "You own the pie; do you really need to sell the pie cutters too?"
There's another conflict Google bumps up against with DoubleClick--the fact that it risks alienating publishers who don't want Google to have too much control. Google could integrate DoubleClick's Dart ad management and serving technology into AdWords to offer one unified dashboard and see into even more Web sites across the Internet.
"A lot of DoubleClick's customers consider Google a competitor," says Frank Addante, chief executive of The Rubicon Project, which offers a dashboard for sites to manage the more than 300 online ad networks. (Addante was formerly with L90/adMonitor advertising platform, which was bought by DoubleClick in 2001.)
"Now, if Google owns all the technology they have access to that data, they know what's being bought and sold," Addante says. "It puts customers in a tough situation."
The merger "cements Google's position as 'frienemy' with major publishers," says Jim Barnett, chief executive of Turn, an automated online ad market.
And there's the question of whether Google will continue to restrict its customers from working with third-party ad servers. "Advertisers working with Google couldn't use third-party ad serving, so a lot of people wouldn't use Google," says Michael Cassidy, chief executive of online ad network Undertone Networks.
"Our clients on DoubleClick that have contracts expiring with DoubleClick are saying it's a dead end," that it will be eclipsed by Google technology, which will impact customers, said Ruben Buell, chief executive of AdShuffle, an ad serving company.
Google also has to figure out what the best business model is for ad serving. DoubleClick charges customers for it, but Google is testing a free ad management service called Ad Manager.
Beyond the technical integration issues, the two merged companies face a culture clash. It's "Madison Avenue hipsters" meets "Silicon Valley geek types," according to Addante.
"Display is more brand advertising, more emotional," he says. "I think it's going to take Google some time to learn that side of the business because they're so data driven."
Google says "gadgets" and DoubleClick says "widgets."
Semantics is probably the last thing on Google's mind right now as it starts integrating DoubleClick and its online ad technologies into its business. But it's something they'll have to figure out, nonetheless.
Google's new DoubleClick business, a recent acquisition following U.S. and European regulator scrutiny, announced on Monday that it is adding rich media widget ads to the repertoire of online advertising types it serves up to customers.
Widget ads aim to be interactive and clever enough to entice Web surfers to grab them and embed them onto their own sites or social network pages. They are the newest rage in viral marketing and when done well, they can actually work.
They are becoming quite the trend, and getting a lot of attention and money--22 percent of marketers surveyed by eMarketer recently said they used widgets as a social media marketing application last year, and that percentage is expected to double this year.
The sharing component of the ad widget service is powered by Gigya, an advertising network for widget makers that recently raised $9.5 million.
Meanwhile, Google started offering Gadget Ads on its content network last year.
Now that the Google-DoubleClick deal has been approved by European lawmakers, the online giant has finally taken control over one of the most important display advertising firms in the world. And while some are calling this a great day for Google, I'm not so quick to agree.
What, exactly, makes this such a great day for Google? Is it because it can solidify its position as the world's premier online ad firm? If so, I thought it already was: Google's total share of online advertising revenue before the DoubleClick deal was over 60 percent and no company was even close. If it wasn't that, was it because Google finally had a leg up in the display ad business where it has floundered for years? Possibly. But considering that DoubleClick only generated about $365 million in revenue last year, I just don't think this is a major step forward for the company.
I simply don't know how anyone can say the Google-DoubleClick deal was good for Sergey, Larry, and Eric. And if you look at the numbers and what Google is actually adding in this deal, it looks even worse.
If you ask me, Google made a mistake.
... Read moreDon Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
Google may cut its workforce as it integrates online ad firm DoubleClick into its operations, Google Chief Executive Eric Schmidt warned in a blog posting after the acquisition was approved by the European Commission on Tuesday.
"As with most mergers, there may be reductions in headcount. We expect these to take place in the U.S. and possibly in other regions as well," he wrote. The process of determining the right staffing levels in the U.S. is expected to be completed in the U.S. by early April, and could take longer for offices outside the country, he said.
Schmidt also offered assurances that consumer privacy will be protected following the acquisition. "Our scale and infrastructure mean that users will also be spending less time waiting for Web pages to load," he wrote.
After many months of review, the European Commission finally gave its stamp of approval to the merger, concluding that combining the two companies does not harm competition in the market.
Updated on March 11 at 8:52 a.m.
European antitrust regulators on Tuesday approved Google's $3.1 billion merger with DoubleClick, paving the way for a blockbuster deal in Internet search and publisher-based advertising tools.
Approval by the European Commission, which came without conditions, had largely been expected to occur this week. The Commission's announcement comes three weeks before its April 2 deadline, in which it had to determine whether to nix the deal.
With the Commission's decision in place, Google announced on Tuesday that it has formally closed its merger with DoubleClick.
"We are thrilled that our acquisition of DoubleClick has closed," Eric Schmidt, Google's chief executive, said in a statement. "With DoubleClick, Google now has the leading display ad platform, which will enable us to rapidly bring to market advances in technology and infrastructure that will dramatically improve the effectiveness, measurability, and performance of digital media for publishers, advertisers, and agencies."
According to the Commission's announcement, the deal was approved based on several factors:
The Commission's in-depth market investigation found that Google and DoubleClick were not exerting major competitive constraints on each other's activities and could, therefore, not be considered as competitors at the moment.
Even if DoubleClick could become an effective competitor in online intermediation services, it is likely that other competitors would continue to exert sufficient competitive pressure after the merger. The Commission therefore concluded that the elimination of DoubleClick as a potential competitor would not have an adverse impact on competition in the online intermediation advertising services market.
The Commission also analyzed the potential effects of nonhorizontal relationships between Google and DoubleClick, following concerns raised by third parties in the course of the market investigation.
These relationships concern DoubleClick's market position in ad serving, where Google, by controlling DoubleClick's tools, could allegedly raise the cost of ad serving for rival intermediaries, and Google's market position in search advertising and/or online ad intermediation services, where Google could allegedly have required purchasers of search ad space or intermediation to also purchase DoubleClick's tools.
The Commission found that the merged entity would not have the ability to engage in strategies aimed at marginalizing Google's competitors, mainly because of the presence of credible ad-serving alternatives, to which customers (publishers/advertisers/ad networks) can switch--in particular, vertically integrated companies such as Microsoft, Yahoo, and AOL.
The market investigation also found that the merged entity would not have the incentive to close off access for competitors in the ad-serving market, mainly because such strategies would be unlikely to be profitable.
Google's rivals such as Microsoft, as well as privacy groups, were hoping that the Commission, as well as U.S. antitrust regulators, would kill the Google-DoubleClick deal. But the Commission's passage clears the acquisition's last large regulatory hurdle.
Last December, the Federal Trade Commission gave the online-advertising megamerger its blessing.
U.S. regulators noted that Google and DoubleClick are not direct competitors and that the markets within online advertising evolve quickly. As a result, the FTC did not find evidence that competitive harm would arise from the merger.
The decision by the FTC had come after the European Commission determined in November that it would take a deeper look into the proposed merger. Some antitrust experts at the time noted that Google could face a difficult time in Europe, given differences in the way federal and European regulators evaluate mergers.
Opponents of the merger weigh in
"U.S. and European policymakers must reform the antitrust process to reflect the realities of the digital-market era, where competition, data collection, and content creation are seamlessly intertwined," the Center for Digital Democracy, which had presented its opposition to the FTC and the Commission, said in a statement Tuesday. "In today's digital marketplace, the company that controls the most data about consumers, and has the global reach to connect to them, raises both anticompetitive and privacy concerns. An antiquated and piecemeal antitrust approach fails to protect citizens, consumers, and competition."
The organization also cited concerns that the merger would aid Microsoft in its goal to acquire Yahoo. That deal is largely being driven by Microsoft's desire to bolster its online-advertising capabilities.
"Instead of ensuring competition, (the Commission) and the FTC have literally paved the way for the emergence of a global digital duopoly over online advertising," the Center for Digital Democracy stated.
European regulators are planning to grant approval for Google's proposed $3.1 billion takeover of DoubleClick, possibly on March 11, according to a Bloomberg report.
And that would be approval without conditions, three sources familiar with the matter told the news service.
Google was given the go-ahead by the U.S. Federal Trade Commission in December, but has been waiting for European regulators to act.
There are a lot of moving parts in Microsoft's unsolicited buyout bid for Yahoo. One of the latest arose last week when the software giant switched its legal team back to its old standby, Sullivan & Cromwell, from Simpson Thacher & Bartlett, which dropped out as legal adviser due to a conflict with another client.
It's tempting to start connecting the dots, but one source familiar with the change said the conflict in question had nothing to do with Simpson's client AOL LCC, which the law firm advised on the Goowy Media acquisition. That deal closed on January 30, two days before Simpson's client, Microsoft, announced its unsolicited bid for Yahoo.
Microsoft's big bid for Yahoo
Yahoo reportedly is in talks with AOL, News Corp., and others about them coming in as a white knight to outbid Microsoft.
"We hold Microsoft and its team in the highest regard," Pete Ruegger, Simpson's chairman, said in a statement. "However, in order for us to fulfill our ethical obligations to each of our clients, it became necessary for us to withdraw from this representation."
A spokesman for Simpson Thacher declined to comment beyond Ruegger's statement and declined to disclose the name of the client in conflict.
However, the conflict centered on the "timing of a clearance" and the client declining to issue a waiver to Simpson Thacher to continue representing Microsoft, the source said. And because Microsoft's bid was unsolicited, the issue of a potential conflict could not be addressed beforehand, the source noted.
Other Simpson clients include DoubleClick, which the firm successfully represented before the Federal Trade Commission involving the proposed Google merger. And while the FTC cleared the way for the merger, DoubleClick will still be represented by Simpson before the European Commission during the proceedings this year.
Microsoft, from the get-go, however, did not involve Simpson Thacher for any antitrust representation in its Yahoo bid, according to a report in Lawyer.com.
European regulators are expected to approve Google's proposed acquisition of online ad firm DoubleClick in February despite circulation of a threat assessment report, according to a research note released Thursday by Stifel Nicolaus.
Google was given the go-ahead by U.S. regulators late last year, but it's still waiting for approval from the European Union.
Staff members in the competition department of the European Commission have prepared a draft "Statement of Objection" that assesses how the takeover could pose threats to competition. "It is a necessary, but not sufficient, step in the EC merger review process," the analyst note says.
European Commissioner Neelie Kroes apparently has not decided whether to present the "Statement of Objection" to Google, or whether to clear the merger, according to the investment banking and research firm.
While Kroes has a reputation for being tough on mergers, the EC rarely blocks a merger, the note says. EU statistics show that of the 128 mergers in the past decade that received Phase II expanded scrutiny, only 12 were blocked, and 63 were approved with conditions.
"We continue to believe the EC will likely not block the merger," the analyst note concludes. "We see the risk, rather, as whether it imposes conditions that could make business tougher for Google."
An EC spokesman provided this statement on the analyst note: "We never comment on the state of play of our merger investigations. I can simply confirm that a decision to approve or veto the deal will be taken by the Commission no later than 2nd April."
A Google spokesman in Europe says the company hopes the EC will approve the deal.
"This is still an ongoing investigation but we do not believe the transaction raises any competition concerns," the Google statement says. "Google and DoubleClick are not competitors; current competition among firms in the marketplace is vigorous; and publishers and advertisers can easily move across providers of online services."
Federal Trade Commission regulators said Thursday that Google's controversial $3.1 billion merger proposal with DoubleClick can proceed, despite earlier complaints raised by competitors and privacy advocates.
FTC regulators have been reviewing the proposed merger for months for possible antitrust violations, after Google announced plans in April to acquire the online ad serving company.
"After carefully reviewing the evidence, we have concluded that Google's proposed acquisition of DoubleClick is unlikely to substantially lessen competition" in the online advertising space, the commissioners wrote in their majority statement.
The vote was 4-1, with Commissioner Pamela Jones Harbour issuing a dissent that reflected her "alternate predictions about where this market is heading, and the transformative role the combined Google/DoubleClick will play if the proposed acquisition is consummated."
For more in-depth coverage, see "FTC allows Google-DoubleClick merger to proceed."
