Google
Closes In on DoubleClick Deal Score one for Google. The
Federal Trade Commission ruled Dee. 20 that it would not block Google’s (GOOG)
proposed＄3.1 billion acquisition of leading online ad-serving and tracking firm
DoubleClick. The 4-1 decision in Google’s favor marked a major win for the Web
search Goliath, which is battling to expand its considerable share of the ＄30
billion online advertising market beyond tiny text ads related to Web
queries. But Googie can’t claim victory yet. The European
Union’s antitrust commission still needs to sign off on the merger before Google
can begin incorporating DoubleClick into its business. That may not happen
without Google agreeing to certain conditions, if at all. Already, the EU has
raised concerns about its impact on consumer privacy. "This is round one of a
two-round battle," says Jeff Chester, executive director of the Center for
Digital Democracy (CDD), a nonprofit public interest group that opposed the
merger. "The EU can kill the deal, there is no question about it."
The FTC said in its decision that it could only consider privacy concerns
as they relate to marketplace competition. But it did issue a separate statement
with some recommendations concerning online customer data collection and
privacy. The Personal Business of Ad Placement Google
has faced strong opposition to its online advertising ambitions since it
announced plans to acquire DoubleCliek in April (BusinessWeek.com, 4/14/07 ).
Competitors for online ad dollars, such as Microsoft (MSFT), argue the merger
will enable Google to effectively control the market. Ads placed beside Web
search results account for more than 40% of the dollars spent online, and Google
controls more than two-thirds of that market, according to eMarketer. Much of
the remaining online ad dollars go to display ads, the poster-like
banners--DoubleClick’s forte--that run on most Web sites. Online
ads are priced based on how well they are matched to the target consumer. Google
collects data on searches performed by individual computers, and DoubleClick
records information about the computers that visit the Web pages in its network.
The more data they collect, the better they can match a marketer’s ad to a
potentially interested customer, and the higher the premium they can charge on
the ad. But consumer groups see the issue another way: the more
data collected, the higher the risk of violating someone’s privacy. For the past
eight months, groups voiced concerns to the FTC that a combined Google/
DoubleClick would aggregate too much information about what Web surfers do
online, putting consumers at risk. In the end, the majority of the commissioners
decided DoubleClick does not control enough of the display-ad market to give
Google an unfair monopoly. "Competition among firms in this market is vigorous
and will likely increase," the commission majority wrote in a
statement. Increased Competition Recent announcements
by Google’s chief competitors support this argument. On Dec. 19, Microsoft—one
of the few to challenge Google’s merger before the FTC--announced a ＄500
million, five-year advertising deal to place ads on Viacom’s (VIA) network of
popular Web sites, including MTV.com. Microsoft will also be able to sell ad
space on Viacom pages that are not in a premium position, based on the data it
has about visitors to Viacom’s sites. Microsoft also recently
solidified multiyear advertising agreements with Facebook, the second most
popular social network in the U.S., after News Corp.’s (NWS) MySpace, and
well-trafficked social news site Digg (BusinessWeek.com, 9/19/07 ). "When
Microsoft comes into a room and talks about anticompetitive behavior and threats
to privacy, no one can take them seriously," says the CDD’s Chester.
It also didn’t help Google opponents that many of the company’s
competitors recently struck agreements to buy ad networks themselves, similar to
Google’s proposed deal with DoubleClick. Microsoft bought DoubleClick competitor
a Quantive for ＄6 billion in May (BusinessWeek.com, 5/18/07). Yahoo! (YHOO) and
Time Warner’s (TWX) AOL also scooped up ad-serving and targeting firms earlier
this year. Meanwhile, independent players, such as Specific Media, have secured
millions in funding to consolidate their operations with other smaller ad
networks (Business Week.com, 11/1/07). In a statement on
Google’s blog, Chief Legal Officer David Drummond applauded the ruling: "The
FTC’s decision publicly affirms what we and numerous independent analysts have
been saying for months, our acquisition does not threaten competition in what is
a robust, innovative, and quickly evolving online advertising
space." Privacy Violation But will it threaten Web
users The final answer may rest with the European Commission. In November the
commission delayed a decision on the deal (BusinessWeek.com, 11/14/07 ), saying
it was more complicated than many competition cases and demanded further review.
The EC has until Apr. 2 to issue a ruling. Privacy advocates
worry that Google, combining its wealth of search data with the information
DoubleClick collects on who visits clients’ sites, would violate consumer
privacy. The sheer volume of information that DoubleClick collects would make it
easy for Google to understand nearly everything about what millions of
individual consumers do on the Web, critics say. Google counters
that DoubleClick clients own information about who visits their sites and what
they do there. Many of those clients would consider it a violation of that
agreement for Google to, say, sell car ads on its Gmail service to people who
have recently visited an automotive site that uses DoubleClick. As a result,
Google says, it can’t simply fuse its data with DoubleClick’s customer
information. However, privacy groups argue that Google could easily encourage
DoubleClick clients to relinquish their data in exchange for, say, free search
ads. The FTC did offer a ray of hope for privacy advocates. The
commissioners issued several recommendations about behavioral targeting, where
information about users’ Web activity is used to tailor online ads. The FTC said
sites should clearly notify users when they’re collecting data on their actions,
and that sites should limit the length of time they store that data to reduce
the risk of it falling into the wrong hands. The FTC said it
plans to look into whether "heightened protections" are needed to safeguard
consumer privacy online.
The FTC did offer a ray of hope for _____________________________.