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Google-Yahoo ad deal would also be a trial balloon testing FTC's antitrust mettle

The Wall Street Journal's scoop that Yahoo is considering a two week trial of outsourcing search to Google -- is also a trial balloon testing the FTC's antitrust mettle.

If you don't remember, the last sentence of the FTC's Majority opinion approving the Google-DoubleClick merger was a clear warning to Google:

  • "We want to be clear, however, that we will closely watch these markets and, should Google engage in unlawful tying or other anticompetitive conduct, the Commission intends to act quickly."

Let's also put this into context.

  • The FTC concluded in their Google-DoubleClick approval just before Christmas, that: 
    • " engines provide a unique opportunity for advertisers to reach potential customers."
    • "Google, through its AdWords business, is the dominant provider of sponsored search advertising..."
    • This and the surounding FTC analysis strongly suggests that the FTC concluded that search is a separate market for antitrust purposes.
  • Comscore in February has Google's U.S. search market share at 59.2% and Yahoo's at 21.6%.
    • Their cooperation would constitute a commercial partnership, (or potential market collusion depending on your perspective) totalling almost 81% share of the U.S. search market -- or over 90% in search revenues.
      • See my analysis for the anti-competitive problems with that level of concentration and control of the online advertising market.

My view is that Yahoo and Google are bluffing and are attempting  a "thread-the-needle" tactical maneuver where they publicly dampen the perception of Microsoft's chances in acquiring Yahoo, without prompting the public or behind-the-scenes antitrust ire of the FTC.

  • Gutsy game to play for Yahoo and Google -- Kinda like playing catch with a stick of dynamite.