The enterprising columnist Kara Swisher has done terrific work analyzing the now scuttled Google/Yahoo alliance. She has reported that Google’s lobbying office in Washington, D.C. actually tried to convince top company officials to not pursue the deal. The Google D.C. lobbyists correctly understood that the company is now under the “radar” of a growing number of regulators and privacy advocates from around the world. The failure of the company to heed this sound advice illustrates how its top management is out of touch with the realities of its own market and societal impact.
Here’s an excerpt from a recent Kara “Boomtown” column: “Early on, that was also a big worry of Googleâ€™s own operatives in D.C., who expressed concernâ€“largely ignored at HQ, where execs really do see themselves as not even slightly evilâ€“about its growing image as a scary behemoth.”
Policymakers will need to closely examine the role DoubleClick will play in collecting, analyzing, and helping profile consumers (whether they are online, seeing a video, or using a mobile device, for example). Here’s an email Google is reported sending out this week. My bold:
“We understand that the recent economic turmoil has created a lot of uncertainty in the lives of AdSense publishers. During these difficult times, we’re continuing to invest in innovations that improve publisher monetization and advertiser value in the content network.
We’re focusing on further developing our product offerings and boosting ad performance for publishers. We recently announced advancements in AdSense for search and experiments to make ads more effective. We’re bringing DoubleClick technologies to AdSense publishers, and we’ll continue to launch new products and features. We’re also continuing to improve our offerings for AdWords advertisers, making it easier for them to target the Google content network. Features for advertisers, such as the new display ad builder, are designed to improve ad performance on AdSense publisher sites.
We’ll keep driving technological progress, but our best asset will always be our publisher partners. The strength of AdSense lies in the value of the content you bring to users and the quality of the sites you bring to advertisers. Our success is tied to yours. We look forward to partnering with you for the long term, and remain dedicated to helping you succeed.”
Ad Age reports that Google sales exec Tim Armstrong “is calling for a town hall meeting with the Association of National Advertisers.” [sub. may be required]. The ad association has come out against the proposed Google/Yahoo search ad combine. But such a meeting shouldn’t be a closed door `only the ad biz’ event. By now, Google’s key execs should recognize that the search and online ad market is connected to such issues as privacy, the state of competition, and the future of funding diverse content online. This isn’t an issue that should be constructed by Google as an insider deal. The full range of public policy issues must be debated–including the participation of independent advocates and academic experts to discuss privacy and related concerns. Let Google, the advertisers, critics, supporters, and those in-between have their say–and make it available prominently on YouTube.
Glenn B. Manishin, an antitrust attorney, wrote an op-ed yesterday [reg. required] in the San Jose Mercury News which supported the proposed Google/Yahoo alliance. We take no issue with Mr. Manishin expressing his opinion (although we do profoundly disagree with his analysis and conclusions). But we do find it disconcerting to read his resume and see that Google is listed as his recent client [he’s now at a different firm]. Such a disclosure to readers should have been a prominent part of his article. Here’s the excerpt from Mr. Manishin’s CV [with one client in our bold]:
Partner, Kelley Drye & Warren LLP (2001-08)
Chaired DC/VA Litigation Practice for this New York-based firm and architeched its expansion from legacy telecom regulatory compliance to the policy and legal disputes affecting the new economy. Representative clients included Oracle, Computer & Communications Industry Association (CCIA), Google, Recording Industry Association of America (RIAA), ProComp, Vonage, Return Path, Global NAPs, BroadVoice, IDT, Telos, Winstar Communications, Association of Local Telecommunications Services (ALTS), Consumer Federation of America and Consumers Union. Lead litigation counsel in several trend-setting antitrust cases arising out of the impact of deregulation in the telecommunications industry.
Yesterday, Sen. Herb Kohl, the chair of the Senate Antitrust Committee, sent a letter to the Department of Justice about the proposed Google/Yahoo alliance. Two years ago next month, in its initial complaint filed at the Federal Trade Commission calling for an investigation into behavioral online ad targeting, CDD and USPIRG also petitioned the agency to open up an antitrust investigation. It was clear two years ago–as one surveyed the dizzying global shopping spree by Google, Yahoo, Microsoft, Time Warner/AOL–that a tiny handful would soon dominate the online ad market. Given that online ad revenues are the key to the funding of almost all interactive and online content, we were disturbed by the trend then towards consolidation. Of course, fewer companies controlling all that consumer data also raised fundamental privacy concerns.
Two years later, of course, we have even fewer independent companies left standing. Google swallowed DoubleClick (and is poised to partially operate Yahoo); Yahoo acquired Blue Lithium and Right Media; Microsoft acquired giant aQuantive; Time Warner bought Tacoda and Third Screen Media. Etc.
Regulators on both sides of the Atlantic have been asleep at the digital switch. They have failed to both protect competition and privacy. However, there is a growing awareness that there are serious problems looming. As we know, the same deregulatory philosophy which helped wreck our economy is also the foundation for communications and media policy. It is accompanied, of course, by a `golden’ revolving door between government and private industry that has left consumers and citizens vulnerable to a wholesale set of unfair practices. Addressing these issues will be the focus of much work over the next several years.
Google’s post today by Tim Armstrong on why its proposed deal with Yahoo! isn’t a competition problem attempts to weave and spin this critical issue. It’s very revealing as well about Google’s own failure to develop into a company which honestly engages in self-examination and reflection. As one can see from the current melt-down of the financial markets, making money shouldn’t be the sole motivation for behavior. Google should have been able to acknowledge that a major deal with its leading search competitor raises serious questions worthy of broad debate and critical analysis.
The failure of Google to respond to the concerns raised by the World Association of Newspapers this week is reflective of this. Newspapers and content publishers are rightly worried about ensuring a diversity of funding sources for the production of news and other information necessary for a democratic society. It’s not as simple as Google’s Tim Armstrong (who wrote today’s post) suggests, that this deal with give consumers “relevant ads” and help keep Yahoo afloat as a robust competitor. In fact, Armstrong and Google, we believe, aren’t being candid here. When an online ad company dismantles (or turns over) a core part of its search function to its leading competitor, it becomes fatally wounded. As Google knows all well, search and display (and online content) are all intertwined. Yahoo’s future, in my opinion, as a full service online ad company is endangered, as more businesses realize that its search ad business relies increasingly on Google.
There are many troubling privacy issues with this deal, something Mr. Armstrong tries to dismiss by saying that [our emphasis]: “[W]e have taken steps in the Yahoo! agreement to make sure that neither company has access to personally identifiable user information from the other company.” But that leaves open an array of personal data collection points, such as cookies, IP addresses, and other statistical analysis online related data. (The failure, by the way, for the privacy issues of the proposed deal to be investigated by the FTC and Congress, is also disturbing).
Mr. Armstrong is Google’s “President, Advertising and Commerce, North America.” He directs their online ad sales. In responding to concerns about competition in the online advertising market–given its links to broader societal concerns–more than just assurances from the sales department is required.
Last July, my CDD wrote to the Department of Justice Antitrust Division raising a number of concerns about the proposed consolidation between Google and Yahoo! In particular, we were concerned about the impact the deal melding together the two leading online ad companies for newspapers would have on that imperiled business. Now, the World Association of Newspapers has issued a statement opposing the deal, citing many of the same issues. Here’s a link and the first few graphs of their important communique:
For over 60 years, the World Association of Newspapers [W.A.N.] has vigorously defended the freedom of the press. From its beginning, W.A.N. has recognized that newspaper journalism can be truly free only if newspaper publishers are economically independent. This means having the freedom to decide what news to publish, where to publish it, and the ability to build sustainably profitable businesses around it. As newspaper publishers endeavor to adapt to the Internet, their independence increasingly hinges on their ability to monetize news through online advertising.
In this pursuit, one company – Google – has emerged as the significant market power in online advertising. Google has built a very impressive business in 10 years, generating billions of dollars by indexing and linking to online content, then profiting from it through Googleâ€™s own ads. However, of the very impressive $48 billion in online advertising revenue that Google has amassed since 2001, less than one third of that has been returned to online publishers (1), and a much tinier fraction has benefitted the news and content generation industries. As such, most publishers are acutely aware that Googleâ€™s ever-tightening grip on internet traffic, its unbridled use of online content, and its dominance in online advertising poses a very real threat to the continued viability of the independent content generation industry.
It should be pointed out that most of W.A.N.â€™s 18,000 newspaper title members are, in fact, regular customers of Google (and to a lesser extent, Yahoo). These publishers depend on Google (and Yahoo) for a significant portion of their online advertising revenue and rely on each companyâ€™s respective search engines (both their paid search ads and their natural search results) to drive traffic to their websites. To date, competition between both these two search companies has provided a necessary check to any potential market abuses, and has helped to ensure that publishers and content generators are capable of earning an equitable and fair return on their content.
It is in that context that W.A.N. believes that the competition that currently exists between Google and Yahoo is absolutely essential to ensuring that our member titles receive competitive returns for online advertising on their sites, and for obtaining competitive prices when they purchase paid search advertising. In our view, the proposed advertising deal between Google and Yahoo would seriously weaken that competition, resulting in less revenues and higher prices for our members. W.A.N. is also concerned that this deal would give Google unwarranted market power over important segments of online advertising.
While Google and Yahoo have stated that their proposed agreement is limited in scope to North America, W.A.N. believes it will have a significant and adverse effect on all newspaper publishers worldwide, as it could have the potential of reducing the incentive for Yahoo to vigorously compete against Google across the globe.
Google’s announcement today is a classic case study on how modern media companies deal with pressure from regulators and advocates. The company announced it would “anonymize IP addresses on our server logs after 9 months.” First, this would not have occurred without the extraordinary pressure brought by EU officials, especially data protection commissioners. [We should also thank numerous privacy and consumer advocates]. Nor would it have happened so readily if Google wasn’t trying to appease policymakers to ensure it can continue unfettered its online advertising shopping spree–such as DoubleClick and the pending joint venture with Yahoo! (and soon perhaps Verizon). Google blinks a bit on privacy when its corporate plans are under the regulatory cross-hairs (such as precisely this moment by the U.S. Department of Justice).
Google still needs to really limit its data collection practices, and become the global leader in privacy protection. It needs to become fully transparent about the myriad–and ever-growing–ways it collects, analyzes, and utilizes consumer data. It shouldn’t take regulatory review, policy pressure, or an attempt to blunt the outcome of a review from competition authorities, for Google to do the right thing. More coming.
That quote in the headline comes from a new analyst note written by ad agency Avenue A/Razorfish. It explains [our emphasis] that: “[T]he deal will most certainly increase Googleâ€™s stranglehold on the mobile search market, and will be another blow to Yahoo and Microsoft, who are rapidly losing browser search share as well. Google currently owns 61% of the mobile search market, and already has deals in place with Sprint Nextel and T-Mobile. A deal with Verizon would give the search engine access to the current no. 2 wireless provider â€“ but soon to be no. 1 once Verizonâ€™s acquisition of Alltel closes.”
Regulators need to examine this deal on both competition and privacy grounds. The current review of the Google/Yahoo combination underway by the Department of Justice would be remiss if it didn’t address the mobile marketing issues. After all, Yahoo! mobile is a significant part of that company’s ad serving business. We still want to know whether Google will also be serving up mobile ads on Yahoo! as part of its forthcoming alliance.
source: Issue No 112 | August 27, 2008. SMTrends. Ave A/Razorfish.
The proposed deal where Yahoo turns over to Google a great deal of its search ad function is available via the SEC. Although it’s the redacted version, there’s enough detail to raise questions. Policymakers, consumer advocates, competitors, and the public should be concerned. The document underscores how competition has eroded in the online ad marketplace for search. The agreement first graph has this phrase [our italics]: “WHEREAS, Yahoo! desires to obtain the right to utilize Googleâ€™s monetization services in connection with certain web sites and Google desires to make these services available to Yahoo!.”
In other words, Yahoo! simply can’t make it on its own. Google gets to “conduct a review of each Prospective Yahoo! Partner Property” for the deal–which means Yahoo!’s relationships are now also Google’s. Google controls the ad copy–which Yahoo! can’t touch. Yahoo! becomes a mere licensee of Google services [“Google grants to Yahoo! a limited, nonexclusive and non-sublicensable license during the Term to access and use the Google Materials solely for the purpose of implementing and receiving the Services…”].
Beyond the deal’s threat to competition, there are privacy issues. Policymakers must ensure that we understand what data is being collected and shared by the two leading search firms. What information is to be obtained in what the agreement terms as a “client ID” [“Client IDâ€ means a unique alphanumeric code or other designation or identifier that is provided to Yahoo! by Google to be used by Yahoo! as a Client ID in accordance with the Documentationâ€¦Yahoo! must assign a separate Client ID to each category of [*].”] The * indicates a redacted portion of the agreement.
We believe this deal will further undermine competition in a key online ad sector,Â and only further strengthen Google. But beyond competition, consumers need to know how the deal will involve their data. Both Google and Yahoo should make it clear what data and analytics will be developed and shared.