EU antitrust authorities have launched a rare "in-depth investigation" of the Google-DoubleClick merger. What does this action mean?
First, in calling Google and DoubleClick "the leading providers" respectively of online advertising/intermediation services and ad serving technology, the EU has tipped its hand in its assessment of a central fact in the investigation that it views these two companies as #1 in the world in their specialties. This obviously troubles Google as they have portrayed DoubleClick as a minor player because of its smaller revenue base in the $300m range. The EU obviously did not buy that Google spin.
Second, the EU rejected Google's blanket assertion that "the parties' activities do not overlap" which is Google's fancy way of saying Google and DoubleClick are not competitors. Well the EU pointedly rejected that Google assertion of fact in stating: "The Commisssion will, in particular, investigate whether without this transaction, DoubleClick would have grown into an effective competitor of Google in the market for online ad intermediation." The obvious implication of this statement is that the EU does see Google and DoubleClick as competitors. And it has framed the question in a way that must trouble Google, which is that they are analyzing the merger through the lens of how competition would develop without this merger. hmmm
- The EU's framing of this question also implies a preference for DoubleClick to remain a competitor to Google.
The EU's framing of its other main question: "It will investigate whether the merger, which combines the leading providers of respectively, on the one hand, online advertising and intermediation services, and on the other hand, ad serving technology, could lead to anti-competitive restrictions for competitors operating in these markets and thus harm consumers" -- should also trouble Google because, unlike the FTC, which focuses on consumer harm first, the EU focuses on harm to competitors first. hmmm.
Third, it appears to me that the EU is focusing on the exact same core anti-competitive problems I outlined in my Googleopoly analysis and my Senate Judiciary Subcommittee testimony.
- My thesis in a nutshell was that combining "the leading providers" who represent the #1 and #2 largest global online networks of audiences, advertisers, publishers, and clickstream databases, would create a "tipping effect" of network effects that no competitor could possibly compete with.
- It appears that the EU understands this and wants to have Google convince the EU how competitors could compete with a combined Google-DoubleClick.
Fourth, given that Google's shares are so very high in Europe (75-90%), and given the extremely tough stance the EU has taken with dominant American companies, investors should understand that this merger is "no done deal" like Google has led the market to prematurely believe.
Finally, let's remember the company's assertions to investors on this merger's prospects and timing have proven overly optimistic.
- After setting expectations that Google would be treated like the "similar" Microsoft-Aquantive deal, the Microsoft deal was very quickly approved, while Google's deal review drags on.
- Now Google will not know the outcome of its own merger until March/April of 2008!
- Ouch. Seems like the EU is not hypnotized with the pixie dust of Google's market cap.
- As I have long said, the more one learns about this merger the more concern arises.
