Senate Hearing On Google-DoubleClick & Post Office Metaphors

After all the buildup to
yesterday’s hearing
in the US Senate on the Google-DoubleClick deal, the actual hearing itself
sounded to be a bit anti-climatic. Below, a look at what was said and how it
doesn’t seem like it will influence the ultimate decision by the US Federal
Trade Commission one way or the other.

Google plan to buy DoubleClick scrutinized in US Senate from the AFP has
sound bites such as Microsoft warning that if Google and DoubleClick are allowed
to combine, Google will become too dominant in online advertising:

"If Google and DoubleClick are allowed to merge, Google will become the
overwhelmingly dominant pipeline for all forms of online advertising," Smith
told Senator Herb Kohl, chairman of antitrust subcommittee, at a hearing.

"This merger will almost certainly result in higher profits for the
operator of the dominant advertising pipeline, but it will be bad for everyone
else," Smith said

Bad especially for Microsoft, which itself would like to be the dominant
pipeline for online advertising, and in fact has spent several billion dollars in
the past few months alone to be just that. Should it reach that goal, I wouldn’t
expect to see it back in the US Senate arguing that it should be taken apart.

Google trotted out a "we’re complementary" argument:

"The simplest way to look at this is by way of analogy. DoubleClick is to
Google what FedEx or UPS is to Amazon.com," he said, referring to the main US
package delivery companies and the popular retail website.

While buying DoubleClick will help Google improve sales of display ads, it
will not block other companies from competing, Drummond said.

Well, I wouldn’t say they’re complementary at all. That’s because Google
already does display ads — and delivers them, as well. More accurately,
DoubleClick is to Google like the US Postal Service buying FedEx. It already
delivers the mail, but FedEx might help it deliver some things faster.

Like that metaphor with the post office? I wrote it, then came to this ClickZ
coverage where an
opponent to the deal says similarly:

Turning Drummond’s metaphor on its head, Scott Cleland, president of tech
industry research and consulting firm Precursor said, "Google is already Amazon
and is already FedEx. Now, they’re proposing to be the post office."

Hey, I can go with it either way — Google’s FedEx buying the post office or
vice versa. Either way, it’s still not a good analogy. That’s because by
purchasing FedEx [DoubleClick], Google doesn’t magically get to deliver to more
houses on its mail route. People already voluntarily choose whether they want to
accept delivery of Google’s ads. DoubleClick gives Google a better way to
deliver those ads, but Google still needs to convince homeowners to take
delivery from it, rather than Yahoo or Microsoft.

Indeed, arguments that DoubleClick will give Google too much power or
market share overlook the fact that Google already has a massive display ad
network called AdSense. They don’t need DoubleClick to achieve much of what the
Google critics warn about. Google’s already there. As I commented at

Silicon Alley Insider yesterday:

Search and display are completely different things….

Search ads are ads delivered against an actual expressed desire. You enter
words, get results and ads with them. There’s little guessing about what you
want.

Contextual ads are NOT ads that you somehow don’t have to search for to get
but are somehow searchy. Contextual ads are targeted to the content of the
page you are reading. But just because you are reading some web page does NOT
indicate any expressed desire that you have a particular interest in a product
or service. Read a story about someone murdered — you don’t want ads on
murder. And so on. It is this inaccuracy and guessing that has forced Google
to discount the amount it can get for contextual.

Display — aside from the behavioral target that Yahoo and Microsoft are
doing (and Google is NOT) — is poorly targeted. This is largely brand
building, guessing to match ads delivered against a demographic. You don’t
need to do much demographic targeting in search because it is so precise. People
tell you they want cars. With display, you guess where car buyers might be and
hope showing enough ads may catch a few fish.

Now to the 50 percent thing. I’m not an anti-trust expert by any means. But
Google already — without DoubleClick — has the ability to deliver display
ads on the web. Indeed, it already does — AdSense For Content image ads (as
opposed to text ads) are simply display ads.

So if Microsoft manages to kill the merger and then Google still gets a
more than 50 percent share of online ad market (heck, aren’t they there
already?), what happens — they have to rollback to 49 percent? And does
Microsoft have to give up some of that 90 percent share of the operating
system market it has?

DoubleClick gives Google some new capabilities, but without it Google already has
a massive network — and the massive network that Microsoft seeks
to build on its own, in part with its own acquisition that merrily breezed
through….

I stick to my guns that search and contextual are radically different
things. I’ve spoken about the "contextual pollution" for years, where it gets
lumped into search simply because Google sells it as well.

Look, offline, the closest match you have for search are Yellow Pages.
That’s the "we know the user is looking for something" medium. Now let’s say
you’re a Yellow Pages company who then starts telling TV ads — the "we hope
the user will want something" model. Are those the same? No way. They are
fundamentally different mediums. Radically different.

I agree — the difference might be lost on a national audience. It
shouldn’t be lost on elected leaders (though I have little faith here).

Everyone Fears Google
(Again) & Will The Last Googler To Leave Turn The Lights Out? from me in May
goes into more depth on some of the issues above, on how Google already has
plenty of tracking in place.

Meanwhile, the AFP article clarifies the thing that had been puzzling me
about yesterday’s hearing. I thought this was up to the FTC to decide? What’s
the US Senate doing getting involved? Says the AFP, the senators are deciding if
they want to exert political pressure on the FTC:

US senators do not have the authority to block the deal but can sway
antitrust officials at the Federal Trade Commission, which is looking into
whether Google would get unfair marketplace clout by owning DoubleClick.

At least one senator seems happier about things.
Reports
the New York Times:

Senator Charles E. Schumer, Democrat of New York, appeared satisfied with a
letter from Google, dated Tuesday, that made commitments to take “important
steps” to improve privacy standards. It also promised that the combined company
would increase its work force in New York.

And as for things with the FTC,

from Reuters, Google says thumbs-up is likely:

David Drummond, Google’s chief legal officer, told reporters he did not
expect the Federal Trade Commission to require conditions regarding either
antitrust or privacy concerns, which were raised earlier in the day during a
Senate Judiciary subcommittee hearing.

"We don’t believe that’s likely to happen," Drummond said in response to a
reporter’s question about whether Google would agree to any government-imposed
conditions on the deal.

Privacy also came up at the hearing. Said Senator Herb Kohl:

"Google collects an enormous amount of information on computer users’ search
history and Internet preferences."

As does Yahoo and Microsoft. That’s why the
FTC Town Hall Meeting
happening in November is good, in that it looks at privacy issues overall, rather
than being a witchhunt
about one company that shouldn’t get singled out when it has peers that pose
just as strong a thread to privacy. Sort the lot of them out.

Need more? Techmeme has a round-up of coverage
here and
here.

Over at ResourceShelf, you’ll find links to the prepared statements that
were given.