Is it anticompetitive for Google to let Yahoo use some of its technology to earn more money in the search ad business if Google had 61.6 percent of the search market in April while Yahoo had 20.4 percent and Microsoft, 9.1 percent?
It’s only anticompetitive if you believe search ad revenue is—and always will be—the bedrock of the Internet economy. But that’s quite an assumption. Not too long ago some believed Microsoft’s success in desktop software would allow it to monopolize the online world.
Then along came Google and search ads, which no one foresaw.
An outsourcing deal between Google and Yahoo could be profoundly procompetitive because Yahoo makes less than it could in search ads. Using Google’s technology may enable Yahoo to pocket an extra $1 billion which could make Yahoo a stronger player in the search for the next big thing.
It’s important to consider that there may be a next big thing because neither Yahoo nor Microsoft may be capable of giving Google a run for its money in search ads despite their vast resources, in which case it would not be procompetitive to keep them afloat through government intervention. It would just be inefficient.
What if Google becomes a monopoly in search ads? Most monopolies are temporary. Schumpeter teaches that durable monopolies are aided and abetted by government. The risk of that grows with government intervention led by antitrust attorneys.
Microsoft and Yahoo need to find their strengths; we shouldn’t subsidize their weaknesses.
What would be procompetitive would be for Microsoft and Yahoo to invent something new.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.