You are here Googleopoly -- can you say "predatory cross-subsidization"?
Submitted by Scott Cleland on Wed, 2007-08-01 19:04
For those following the FTC's Google-DoubleClick merger review (and whether my prediction in my Googleopoly.net white paper that the FTC will block this merger is on the mark), this link to an article called "Google's Killer App" is a current and real life case study of how Google anti-competitively forecloses competition in the markets adjacent to them.
This excellent case study article is by Brandt Dainow, a web analytics competitor to Google who has conceded that:
What I believe the FTC will find when they investigate this example more broadly is that this is just one of many adjacent competitive segments where Google is systematically trying to snuff out or "foreclose competition" by anti-competitively cross-subsidizing their market power in search by offering "free" services in markets that previously were functioning markets -- where supply and demand met at a price that profitably sustained multiple companies.
What the FTC will have to sort out is whether this behavior and set of facts is competitive or anti-competitive.
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Competitive? The competitive explanation is that this is just normal vertical integration efficiencies of temporary tactical markets that offer no lasting value as a standalone business. In other words, "web analytics" in not a natural separate self-sustaining market segment but only a feature of a larger entity or market.
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This school of thought also often believes, what could possibly be bad about "free"? What customer will object?
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Moreover, competition is tough and this is a fast-moving dynamic market. Tough beans.
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Anti-Competitive? The FTC can look at these facts, and others like it -- and see if this "free" shtick of Google's is pervasive, and learn what the real competitive intent and result of this "free" tactic is.
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The FTC will ask and learn if this is just a benign loss leader strategy, where Google must "invest" in customer acquisition costs to build share -- and where they will eventually charge for the formerly "free" offering.
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The FTC will also ask whether buyers would like to have competitive alternatives to web analytics that are "independent' and don't have the conflicts of interest that Google's integrated offering has -- because Google controls most of the market's click data and now the only tools to effectively measure that data.
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And does it serve customers to have one company, Google-DoubleClick, control most all the consumer click data, most all the analysis of the data and most all of the ad brokering and ad exchanging that relies on that market data?
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The FTC will have to see if there is a provable pattern here that Google is predatorily cross-subsidizing its forays into strategic market segments with "free" services that no competitor could ever hope to compete with -- purely to eliminate those potential competitors and foreclose competition to their integrated vision.
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What the Microsoft experience taught antitrust authorities is that Microsoft had a series of aggressive bundling tactics where it tied its operating system dominance to competitors' products to reach a competitive tipping point in the market segment targeted for integration.
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It doesn't matter the tactic, free service or tying etc. -- what matters is whether this standard Google market behavior, combined with the added market power of DoubleClick, would substantially lessen competition.
Those of you that have read the mountains of evidence in my Googleopoly; the Google-DoubleClick Anti-competitive case at Googleopoly.net know what I think.
As I have said before and will continue to repeat:
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