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Response to WSJ.com 8/21/07 Opinion Piece entitled “Googling ‘Monopoly'”

JP’s Note: The Wall Street Journal online is a pay site and the opinion piece I am responding to below is available only for subscribers. The Opinion piece up for discussion appeared in the 8/21/07 edition on Page A14 and was written by Thomas M. Lennard and Paul H. Rubin, both affiliated in various capacities with the Progress & Freedom Foundation. I would love to point to the piece online or better yet, post it here, however this is against WSJ policies. Perhaps Mr. Murdoch will change this policy in the near future – one could only hope.

Thankfully, the Progress & Freedom Foundation took the initiative to post the piece here.

Seek First to Understand, DoubleClick that is

Gentlemen –

I just put down yesterday’s WSJ Opinion page and
couldn’t help myself but to drop you a friendly note. My personal
opinions about the practical implications of Google’s proposed
acquisition aside, I find that your comprehension and dismissal of a possible Google monopoly is cursory and premature.

In
your Opinion piece from Tuesday, August 21, you offer counter points to
the each of the two chief complaints you have heard about the
Google/DoubleClick acquisition. As a practitioner of the art and
science of online marketing for the past 8 years, I am compelled to
share with you the total scope of the services DoubleClick provides to
its clients. Knowing this is a key but overlooked point germaine to the
first argument you surface. The second argument you call out, the
“privacy issue”, I will let lie as that is the more emotionally charged
and headline worthy aspect of the two argument. Frankly, I agree with
you that targeted marketing is better marketing and I embrace cookies
as the lifeblood of the Internet. However the latter privacy argument,
on which you spend approximately half your space (just eye-balling it),
is not where the real impact will be to the online marketing world both
from the perspective of the marketer and the “marketee”. As a
“market-oriented think tank”, I would have surmised that more thought
would have been spent on the fungible market implications of this
acquisition.

The basic premise of the first argument is that Google places
text ads mainly on its own Web site, while DobuleClick delivers ads
from advertisers to Web sites. Both true, however this river runs
deeper. Google’s revenue also comes from the distribution of their ads
into the Google Network and the
Google Content Network.
Another heavily marketed (and tracked) part of the Google Advertising
Network is their AdSense product that distribute text ads to whoever
can plug them into their webiste and shares the cost per click revenue
direct the Web site publisher. Despite the huge net cast by the Content
and AdSense networks, one must guess that today the current percentage
of revenue and total amount of impressions definitely tilts in favor of
the Google.com
domain. Google purposely keeps a tight leash on the exact definition
and scope of these off-domain networks. I am surprised that Google can
get away with such a high degree of ambiguity and outright
circumspection, especially for a public company, however that is an
entirely separate matter. Regardless, Google syndicates its ads and its
growth is contingent upon further distribution. Thankfully advertisers
can opt out of content network distribution as the performance for many
ROI conscious marketers on the content network is pitiful.
The point is that Google does deliver ads from advertisers to Web
sites, just like Doubleclick.

Further,
Google is effectively cutting out the value-added broker in its
acquisition of DoubleClick. You cannot dismiss the consolidation of
power that is forthcoming. Is it a monopoly in the true sense of the
word? Maybe not, does it have the makings for one in a year or two –
you bet. The absolutely brilliant, “get out of jail free card” is that
Google can never be a monopoly in the truest sense of the word as it is
not a price maker – arguably Google is only a market maker. Despite
this phenomenon, DoubleClick and its over 1,500 clients collectively
spend a lot of money on Google Search. In addition, the number of
Affiliates through the DoubleClick|Performics side of the business that
buy search from Google only increases the amount of ad dollars being
spent. In addition, Doubleclick offers search technology (DART Search) and
full service search
via Performics Search. This is real money being spent on real
advertising and real services. Not to mention the insight to MSN and
Yahoo! search efficacy, technology and processes would be of the utmost
strategic concern to any online marketer who currently advertises on
those two venues via Doubleclick (not to mention Microsoft and
Yahoo!!). Google is trying to own the relationship from cradle to grave
and extract as much money out of the online marketing pipeline as
possible. This is arguably, for better or worse, the objective of a
corporation. That is not the issue I take with your assertions. I would
argue that it is important, in a free market, that some autonomy exist
between
the market maker and the participants in the market. Google is walking
a fine line between trying to be the “one stop shop for all
your Internet needs” versus their roots as a friendly, helpful and
relevant organizer of information.

The
downside is thus – history has shown time and again that over the long
term, the free market will resist any one entity that
disproportionately controls the potential future revenue of many market
participants. The majority owner of any market (natural or otherwise)
is wanton to abuse the power – oil, telcos, diamonds, public utilities,
etc. The barriers to entry to compete against Google are being raised
on a daily basis and Google is no different than the aforementioned
monopolies despite their altruistic “do no evil” leanings.

Do not be mistaken: Google is on the warpath, they are super
smart, they are motivated and they have battles raging on numerous
fronts (FCC Spectrum Auctions, Internet Backbone Purchasing, and an
intense focus on their own holy trinity of products: Checkout, Product
Search and Analytics) all coordinated by and fed into a master, long
term plan. We are at the start of a race. The future scenarios and
implications of these strategies are just starting to show and as the
writing on the wall becomes clearer to more people, the pace of
Google’s machinations will only intensify. A fascinating future for
sure and one I am excited to participate in. As you folks look at the
implications of the digital revolution on public policy, stop and take
a look at the real long term impacts as opposed to some near term
objective that to the interested outside observer look to more fan the
flames of capitalism than to really look under the covers of the
dynamics between Google and Doubleclick.

Thank you for evoking the thoughts and instigating a very
helpful exercise coordinating a lot of once disparate ideas. I very
much appreciate the opportunity to share my point of view with you. I
would welcome a rebuttal or an alternative point of view from your side
of the fence.

Categorised in: Online

This post was written by DEP Ecommerce Consultants