Category: Media Mergers

Google Policy Blog Fails to Address Yahoo! Deal & Threat to Competition & Privacy

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.

Google/Yahoo deal raises competition and privacy concerns: the redacted SEC filing

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 Google’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 ID” 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 Documentation…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,  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.

Why did Yahoo Tell SEC in 2007 that Google was biggest competitor, but now–with proposed new deal–it becomes its partner?

In its most recent 2007 SEC 10K, Yahoo listed Google as its primary competitor: “We face significant competition from large-scale Internet content, product and service aggregators, principally Google, Microsoft and AOL…. Google’s Internet search service directly competes with us for Affiliate and advertiser arrangements, both of which are key to our business and operating results.” But now, with this proposed arrangement, Yahoo’s former principal competitor is its partner. The same 2007 SEC report submitted by Yahoo also cited the development of its “Panama” search ad system as one of its major accomplishments.

When the Senate raises questions this week on the deal, it should ask Yahoo how it could tell the SEC and investors one thing–and then quickly reverse itself.

source: Yahoo Form 10K. Filed February 27, 2008. Available at: http://yhoo.client.shareholder.com/sec.cfm?DocType=Annual

Google/Yahoo deal and its impact on newspapers

One of the issues the Center for Digital Democracy has asked the Department of Justice to investigate is the impact of the proposed deal between Google and Yahoo and its impact on the already endangered newspaper business. Both Yahoo and Google provide online search ads or related services for the majority of the country’s newspapers. Analyzing how the pairing of Yahoo and Google may affect payments to newspaper publishers, and whether there may be the potential loss of competition, is necessary. Given the current financial pressure on newspapers, CDD urged ‘DoJ to examine the deal to address whether it will contribute to a loss in revenues necessary to ensure Americans have access to print-oriented news resources.” (It’s also interesting to note that Yahoo was reported in the trade press in February 2008 as seeing the potential of its newspaper ad platform to even compete with DoubleClick–which at the time was already acquired by Google

Google/Yahoo! Combine also raises questions about Publicis and WPP deals

Officials need to examine the recent deals made both by Google and Yahoo! with advertising agency powerhouses, Publicis and WPP, respectfully. The Google/Yahoo! combine reduces competition in the online ad sector, and these agreements need to be part of the analysis. Google and Publicis completed their deal last January “based on a shared vision of how new technologies can be used to improve advertising.” Last month, Yahoo! and WPP formed a “multi-year strategic partnership” that is connected to the online ad trading Right Media Exchange.

Search should not be considered a “natural monopoly,” as some cynics suggest. Nor should search by viewed as separate from display; increasingly the two are intertwined. Marketers desire cross-platform strategies. Perhaps that’s one reason Google is hiring cross-platform ad specialists. To quote from a Google job posting: “The Cross Platform Solutions team forms partnerships with advertisers and agencies to build brands online. We strive to deliver the most efficient and effective digital platform upon which the world’s leading brands are built. We connect advertiser’s brand messages to their target audience through innovative, precise and accountable online marketing solutions whose reach can extend around the world.”

It’s hard to keep up with the online ad world, so it’s not surprising that regulators have been slow to address the critical consumer and competition issues. But much is at stake in how diverse and consumer-friendly the new media world will become. That’s why the DoJ and the Hill need to look at these ad agency deals, among other issues we will discuss soon.  Btw, privacy is a serious issue in the deal, no matter how Yahoo! may be spinning it.

Google/Yahoo and the relationship between competition in the digital ad business and content diversity

We have long argued that we must focus on the implications to the funding of digital content diversity as fewer companies dominate the core revenue [monetization] apparatus. Google is in a position to become the primary digital gatekeeper for online/interactive publishing revenues. That’s because how revenues are shared, such as TAC (Traffic Acquisition Costs), is a fundamental economic lifeline for content. That’s especially critical as the old media economy of broadcasting and newspapers continues its meltdown.

We think this excerpt from TechCrunch underscores our view: “On the publisher side things are even worse. Google doesn’t share enough revenue with content sites that show their ads. The only thing keeping them even close to honest is the fact that Yahoo and Microsoft will occasionally compete for those partners. Take that away, and Google will go back to keeping the majority of advertising revenue generated at those sites (their only competition will be other types of advertising, which generate far less revenue). That is a terrible outcome when you look at it from the perspective of the health of the Internet.”

Trade Analyst on Google/Yahoo!: Google becomes “monopolistic gatekeeper”

From Diane Mermigas June 18, 2008 column in Online Media Daily [excerpt]:

excerpt: The deal puts more than 90% of the search ad market in Google’s hands, and raises the likely prospect that Google and Yahoo will work together on display ads. Executives from both companies have suggested as much, calling the partnership “good for competition;” when they should have said that it is “good for the competition.” The deal is a Trojan horse that makes Google the monopolistic gatekeeper, sucking the democracy and free capitalistic process out of advertising and e-commerce. The nonexclusive clause in the deal seems meaningless…Deutsche Bank, CitiGroup and Merrill Lynch are among investment banks reducing their estimates on Yahoo in anticipation of its advertisers shifting their business to Google. “This effectively signals the end of Yahoo’s competitive entry in the paid search business and signals to advertisers /agency customers to simply work with Google to purchase ad impressions from Yahoo longer term,” said Deutsche Bank analyst Jeetil Patel.

Yahoo opposed Google/DoubleClick Deal a few months ago: Tales of corporate turn-around

via Paidcontent.org. October 15, 2007:

“Yahoo (NSDQ: YHOO) has made its first public comments on the European Commission’s review of Google’s (NSDQ: GOOG) $3.1 billion purchase of DoubleClick, and, as you can probably guess, its take is pretty negative. In a submission to the Commission, Yahoo says the purchase, if approved, will mean higher prices for online display ads and less competition in the digital publishing sector. Andrew Cecil, public policy head for Yahoo Europe: “Combining Google’s search business with Doubleclick’s ad technology will strengthen Google’s dominant position in Europe. The competitive landscape for online advertising will be negatively impacted.”

and via Search Engine Watch: “Meanwhile in Europe Yahoo is heading the push with the EU. Yahoo has longer online advertising standing in Europe.
“Combining Google’s search business with DoubleClick’s ad technology will strengthen Google’s dominant position in Europe,” Andrew Cecil, head of public policy for Yahoo! Europe, said in an e-mailed statement today, Bloomberg reported. “The end result will be higher prices for Internet publishers and advertisers and less choice for European consumers.”

Ad Biz Looks Critically at Google/Yahoo! Pairing

Just some excerpts from today’s coverage, to give policymakers and the public a sense of how the 10 year pact is viewed from inside the ad industry.

First, from Ad Age: “Yahoo is outsourcing search monetization to Google in a 10-year deal, the companies officially announced tonight. But advertisers see less competition and higher prices…But the agreement… doesn’t necessarily protect Yahoo from the possibilities that the deal will erode its search business in the long run or make Google an even more dominant player. When Google search ads are mixed in with Yahoo search ads for a particular search query, Google will almost always win the better placement… And if Google consistently wins, marketers may be less inclined to bother using the Yahoo system, instead choosing to put their optimization efforts toward a single system.”

Yahoo, Google Strike a Deal on Paid Search. Abbey Klaassen. Ad Age. June 12, 2008 [sub required]

Online Media Daily: “…some in the industry have questioned whether Yahoo brass thought about the repercussions of the deal in terms of competition and advertiser perception in the mid- to long-term.

“I think the financial rationale is pretty clear,” said Bryan Wiener, CEO of 360i. “But $450 million is a lot of money, so it can’t just be all tail terms that Google will be serving. I can’t imagine that there won’t be some very valuable commercial terms in that mix.” Wiener said that if advertisers no longer saw the value in buying keywords directly through Yahoo, then fewer companies would end up using (Yahoo’s Search Advertiser Platform) Panama in the long run.

According to Neeraj Kochhar, vice president/director of SMG Search, there are definite concerns among advertisers. “I don’t see this as a positive move in terms of competitive activity,” Kochhar said.”

Final Microsoft Rebuff Sends Yahoo into Google’s Arms. Tameka Kee. Online Media Daily. June 13, 2008 [reg. required]

Stephanie Clifford of the New York Times has a good blog post on advertising industry concerns about the deal.

From the Los Angeles Times, 6/14/08:  “The consolidation of everything under Google is not good,” said Aimee Reker, global director of search at digital agency MRM Worldwide. “It will aggregate so much power and control in one place that it no longer is an open marketplace.”

Congress and Anti-trust Officials Must Take Action on Google-Yahoo! Deal: Competition and Privacy Issues at Stake

The government must take swift action to prevent the creation of a digital combine that merges assets and services of the first and second leading online search advertising companies—Google and Yahoo!
Google is the country’s (and world’s) leading search firm. Yahoo is ranked number two and says it is the foremost online display advertising company. This combination potentially threatens user privacy, as more data (including behavioral and mobile) about consumers are shared or pooled by the two leading online giants. Competition in the online ad sector—already weakened by a series of takeovers and acquisitions—is seriously threatened. This deal will have a significant impact on the advertising industry, including agencies. Both Google and Yahoo also provide critical search advertising services for many of the nation’s leading newspapers. Congress will need to explore how this deal impacts journalism, especially at a crucial marketplace juncture for the traditional media industries. Yahoo is permitting Google to extend its reach into one its significant assets–paid search. Shareholders will also suffer, as Yahoo! will be viewed by advertisers as a less effective means to target consumers.

Statement on behalf of the Center for Digital Democracy