[Full disclosure, my site WashingtonWatch.com uses Google's AdSense program and I use Google AdWords analytics to monitor the site's usage.]
Google and Yahoo! have announced a non-exclusive agreement to run Google ads alongside Yahoo! search results. The usual suspects are ginning up to demand antitrust scrutiny, and I’m not persuaded. One self-identified “consumer” group sent me a release which says:
Google influences what consumers see in terms of advertising and search ranking, which lead consumers to click ahead in ways that benefit Google, its products and its sponsors. According to Steve Pociask, president of the American Consumer Institute, “[Google's] dominance makes it harder for small firms to enter the market and differentiate themselves.” He adds, “the Justice Department should now realize that it’s dealing with what is essentially a monopoly and, without strong action, consumers will lose choice, differentiation and innovation for years to come.”
This argument doesn’t make sense, and it doesn’t make the case for antitrust scrutiny of the deal.
Google affects what people see, yes – in direct proportion to the amount people visit Google. That’s true of every Web site and service on the Internet, and people visit sites like Google and Yahoo! precisely so they can be influenced by them. I don’t know what “click ahead” means – the emphasis is in the original release. And of course clicking on links provided by Google benefits Google and the advertisers that buy space on its sites and its affiliates’ sites. It also benefits the people doing the clicking or they wouldn’t do it.
Would Google/Yahoo! “dominance” in search advertising make it harder for small firms to enter the market and differentiate themselves? First of all, I’m not sure what small firms he’s talking about – Advertising networks? Search engines? Advertisers? Web sites? Whatever the case, the existence of a large search-ad network doesn’t disable any of them from seeking their own customers.
There are dozens and dozens of options for all these business lines; it took me a few seconds to find one example that touches all of them – Linkshare. This company brings advertisers and publishers together just like Google does, but with a different style and approach. The barriers to starting a company like this are very low – though there is never a guarantee of success. Most importantly, starting such a business is unaffected by whether or not there is a single large competitor in this space or many small ones. Even if Google/Yahoo! were a monopoly – and I just don’t know how to gauge when that line is crossed – it wouldn’t matter.
The case for a problem is not made. The case for this solution is also not made. How on earth does government interference foster choice, differentiation, and innovation? D’ya realize that this deal is an innovation? It’s an experiment by these companies, seeking after something that consumers and their customers want? The alternative could preserve choice and differentiation, but only in a meaningless sense: the choice to have something that is less attractive than what these companies are putting together. Fooey.
The reflexive opposition to big companies for their influence on competition just doesn’t make sense here. Bigness invariably presents opportunities to small competitors – to find niches that the biggies can’t see or won’t serve, to find cracks in the biggies’ armor plating, and so on. The burden is on small competitors to overcome the strengths of the big ones through the stealth and speed that is their advantage. Rather than weak competitors asking the government for help, they should just work harder. If you’re worried about competition, just fold your arms, watch, and wait.