Commentary on today’s Senate Anti-Trust Hearing

I don’t have time to carry on at length about today’s Senate hearing on the Google-Yahoo search ads price-fixing deal, so here are a couple of pieces written before the hearing that put in its proper perspective.

For your cocktail, try a bit of Information Week, a straight-up tongue loosener.

For your appetizer, enjoy Washington insider and tech buff Declan McCullagh on the revolving arguments:

The U.S. Senate is holding a hearing Tuesday on the antitrust implications of the Google-Yahoo ad deal, and the two companies, along with Microsoft, are testifying. You should expect sober, selfless discussions conducted with the public’s best interests in mind.

Or not. In reality, Microsoft will offer fanciful claims about the alleged detrimental impact of a Google-Yahoo partnership, just as Google offered fanciful claims a few months ago about the alleged detrimental impact of a Microsoft-Yahoo combination.

And for your main course, read Scott Cleland on the importance of advertising earnestly:

This is now a broad antitrust investigation of whether:

* Google and Yahoo are illegally colluding to reduce competition and/or fix prices;
* Google is more broadly abusing its market power illegally to impede competition from its #2 and #3 search advertising competitors Yahoo and Microsoft; and
* Google is abusing its market power in a myriad of ways, for example, “raising the minimum bids on keywords swiftly and steeply.”

And for desert, enjoy Andrew Orlowski’s incredibly insightful analysis of the importance of search ad competition for the future of the Internet economy:

Google: the mother of antitrust battles? | The Register

So Google has been readying itself for regulatory intervention for several years. It lobbies extensively, and thanks to its reach-out program to politicians and wonks, now owns a fair chunk of mindshare among the political elites. With its private “Zeitgeist” conference – an annual orgy of self-glorification – it reaches over the heads of representatives and and hacks to the political leaders and media owners themselves. In the UK, there’s a revolving door between the two major parties and Google.

Politicians can sprinkle a little of the future on themselves just by rubbing up against the web giant.

As Microsoft discovered, fortuitously, this is money well-spent. A sympathetic Bush administration dissolved the DoJ’s will to impose tough penalties against Microsoft more effectively than any lawyer or economist.

And finally, have some nuts with your brandy in the form of the testimony submitted to the hearing, which is just as Declan said it would be.

After I’ve seen the video of the hearing, I’ll have something else to say.

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3 Responses to Commentary on today’s Senate Anti-Trust Hearing

  1. James Butler says:

    It’s not convincing when one of your sources in this entry refers (quoted, no less) to an article based on one of your own paranoid op-ed pieces. Of course you would think it’s “incredibly insightful” … it parrots your own words!

    For the record, the audiences and conversion rates for Google, Microsoft and Yahoo’s PPC programs are all very different. The one that performs the best is Google’s across every metric you would care to measure.

    Is it any wonder that MSN and Yahoo are trying to figure out how they can benefit from Google’s expertise in this area?

    Yahoo is giving up. Who’s ads should they serve, if they don’t generate their own? MSN’s? Of course not. They picked the winner in the PPC wars. So out of only 3 major players (I beg you … tell us who else is playing), there will only be Microsoft and Google left standing, and Yahoo wants to serve ads, so they picked Google’s. Hardly surprising. Would you prefer it if Yahoo served LookSmart’s PPC ads?

    This isn’t a monopoly … it’s market forces. The best player is winning, not, like Microsoft, through back room deals and restrictive practices, but through open competition and a better way of doing things. They’ve also got the hottest search property from which to launch their PPC gold mine, again, the result of their own hard work and expertise, and not the result of shady dealings.

    The next time you want to write about things you barely understand, get the advice of some folks who have first-hand knowledge of your topic, rather than plucking your opinions from the cloud. Your comment about waiting for the video of the testimony, rather than augmenting your opinion by reading and understanding what was said in the transcript you link to speaks volumes about your superficiality.

    Oh, and when you write about net neutrality in the future, be sure to get in touch with Vint Cerf, who you maligned in your op-ed. He’s forgotten more about how important it is to keep the network human-centric than you will ever be capable of learning.

  2. Interesting comment, James, I’ll give it due consideration. In the meantime, may I suggest you read Scott Cleland’s commentary? I added it to the post after you left your remarks.

    I’m waiting for the video because I want to hear what the Senators had to say. Other than Chairman Pat, none of them filed prepared remarks.

  3. James Butler says:

    Thank you, Richard.

    I have read Scott Cleland’s piece, and it is filled with speculation and misinterpretation of what is in evidence. I’m not saying that he hasn’t made any valid points, but the majority of the article is misleading.

    Example 1:
    Myth #1: “Google is exploiting the “Internet choice paradox” …”

    Are users assuming that content businesses have as much choice as they do? I haven’t seen any evidence to support that. As far as I can tell, users don’t think about business access to web properties at all. Businesses think about that. And the article fails to limit the discussion to PPC advertising. There truly is a vast array of advertising choices available to every business that chooses to exploit them … they’re just not as cheap and easy to implement as a PPC program is.

    I concur that advertising on Google is a very compelling tool for businesses, however as long as Microsoft, Ask, AOL and the other players continue to offer PPC (and that may not be for much longer), there will always be choices in suppliers of that particular advertising model. While it’s true that Google will remain the dominant supplier of PPC ads to a wide variety of content channels, there is hardly a paucity of choice when you include text ads, banner ads, product placement, co-branding and many other forms.

    Example 2:
    Myth #2: “The relevant antitrust market is search advertising because there is no competitive substitute for search advertising.”

    So invent one. That’s like saying there’s no competitive substitute for search results. The industry is in its infancy, when compared to other forms of communication that are able to support advertising (television, radio, newspaper, billboard, etc.) This is a new advertising channel in a new medium. I’m sure if someone cares enough to do so they could develop an alternative before too long. Does the absence of a serious contender mean that the infant PPC industry should be subjected to government regulation? Perhaps inasmuch as the other industries do, so in that respect, Google, Microsoft, Ask, AOL, LookSmart, et al. should be provided with a best practices template and as much regulation as the older industries. But I think that’s premature … as your review of the Senators’ comments will, no doubt, amply illustrate.

    Example 3:
    Myth #3, in toto.

    Wha? “More than one way to break the law?” AFAIK there is no law against being a success. Microsoft used that argument with substantial support … until their backroom deals came to light. The current Google-Yahoo deal is (1) non-exclusive and (2) limited in its scope and duration. That’s hardly drawn from the Microsoft model, and Mr. Cleland’s inclusion of this analogy indicates he’s lacking in ammunition.

    Myth #4 … one can see “suspect behaviour” wherever one wishes to see it. A refer you to the Catholic church.

    Myth #5: Colluding to fix prices? Based on what evidence? That ALL of the companies that provide PPC ads have raised their minimum rates? I anxiously await the oil industry collusion hearings … but, wait … there aren’t any. Prices go up and down, mostly up, in every industry on the planet.

    Lastly, just because Google is “under intense scrutiny” does not by any measure imply that they are guilty of any of the charges being leveled against them by Mr. Cleland or by you, sir. This is the point of having hearings … to attempt to determine what is actually happening and to determine an appropriate response, if one is warranted. Implying Google’s guilt in any number of “evil” activities prior to hearing the evidence and weighing the facts is to engage in what is fondly remembered as a “witch hunt”. Shades of Joe McCarthy.

    My previous remarks continue to reflect my stance.

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