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Bernstein analyzes "Plan B" competitive scenarios if EU or FTC block Google-DoubleClick merger

According to PaidContent.org, Sanford Bernstein's Google analyst, Jeff Lindsay:

  • "looks at some of the options available to Google, should the EU (or the FTC for that matter) ultimately come down against the acquisition. He lays out four scenarios: a) Forgo competing in the ad-exchange business. b) Purchase another player, possibly ValueClick. C) Build an in-house ad exchange. D) Form a JV, possibly with DoubleClick". (emphasis added)

The most important takeaway from this analysis is that Google and DoubleClick are obviously competitors in the natural and ongoing evolution of online advertising towards ad exchanges.

  • Lindsey believes it would make most sense for Google to build its own ad exchange in house and that with Google's advantages, Google could get it up and runnning faster than it took Right Media or DoubleClick.

Given the Senate Antitrust subcommittee's concerns in their recent letter to the FTC on the merger:

  • "Antitrust regulators need to be wary to guard against the creation of a powerful Internet conglomerate able to extend its market power in one market into adjacent markets, to the detriment of competition and consumers."

The challenge for the FTC in analyzing this dynamic market is to understand how it is changing and why.

  • As I explained in detail in my Googleopoly.net white paper and Senate testimony:
    • This market is converging because search and display and other forms of online advertising are functionally the same, they technologically deliver "ones and zeros" to consumers' computer screens in a targetted manner, in order to collect ad revenue.
    • Online advertising is rapidly moving towards integration of all forms of online advertising -- so combining Google's "search, ads & apps" with Doubleclick's ad-serving and analytics -- would be like fifteen years ago allowing Microsoft to buy Word and Excel programs to combine with their own Outlook email/calandar, to create the dominant Office platform.
    • Combining the #1 and #2 global Internet audiences, advertiser network, publisher network, and consumer clickstream data, will enable Google-Doubleclick to "see" much more of the online advertising market than competitors:
      • the supply of ads (advertiser network),
      • the demand for targetted ads (audience) and
      • available currency (website content) than any other market participant --
    • enthroning Google-Doubleclick to be the global online advertising "market maker" -- and granting them the competitively unchallengable market power to self-deal and front-run to the detriment of competition, advertisers, publishers and consumers

This Bernstein analysis is also helpful in seeing that the market could and would move on just fine if either the EU or the FTC blocked this merger.

  • There is minimal harm in maintaining the competitive status quo.
  • There is huge harm in allowing the global online advertising market to be dominated by one firm, so that:
    • Companies seeking to monetize their content, and
    • Advertisers seeking to reach a global audience,
      • Would have no real choice but to use the Google-DoubleClick online advertising network of networks.

A bipartisan pair of Senators responsible for overseeing antitrust matters understands the stakes involved with this merger, lets hope a bipartisan array of FTC commissioners also grasp that "an ounce of prevention is worth a pound of cure."   

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