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What Google earnings say about Google-Yahoo; pricing power & a ‘derivative problem’

October 21, 2008 by

-By Scott Cleland

Google’s earnings provide an excellent window into why the DOJ has serious antitrust concerns with the proposed ad partnership between Google and Yahoo.

Google’s discussion of its 4Q08 earnings provides DOJ with substantial fresh evidence that Google is:

  • Exercising substantial pricing power;
  • Not running fair and competitive ‘auctions’; and
  • Anti-competitively self-dealing.

I. Pricing Power Evidence:

Any economist will explain revenue is simply volume times price. In 4Q08, virtually all of Google’s revenues continued to come from search monetization. Google reported that its ‘volume’ i.e. “aggregate paid clicks,” “increased approximately 18%” over 3Q07. Google reported that ‘revenues’ increased by 31% over 3Q07.
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Why eBay’s deals stoke Google-Yahoo investigation fire — less competition among friends?

October 12, 2008 by

-By Scott Cleland

Just when the DOJ is investigating if the Google-Yahoo ad partnership is anti-competitive, eBay bursts onto the antitrust stage with “investigate us too!” acquisitions of Bill Me Later and more classified ad businesses. (See NYT article and post, and WSJ article for excellent background.)

Why are the eBay acquisitions relevant to the Google-Yahoo investigation?

First, they spotlight how dominant and incestuously interdependent the primary Internet players are.

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Googleopoly III – Dependency – Crux of the Google-Yahoo Problem

October 9, 2008 by

-By Scott Cleland

I wrote a new white paper, Googleopoly III, to answer the core question in the Google-Yahoo deal: Would Yahoo compete as vigorously with Google post agreement?

My detailed analysis concludes Yahoo would not compete as vigorously, because the deal would make Google Yahoo’s single most important business relationship — effectively making Yahoo financially, operationally and strategically dependent on Google.

I also describe the agreement as a “Hotel California deal” where Yahoo could check out but never leave…

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00Publius Contributor - Business - Democrats/Leftists - Economy/Finances - Google - Inernet - Media Bias - News - Scott Cleland - Society/Culture - Technology

The Privacy Problem is Unauthorized Tracking

September 29, 2008 by

-By Scott Cleland

The Privacy Solution is a Meaningful Consent Standard

There was a major tectonic shift in the Internet privacy debate today at the Senate Commerce Committee hearing on Internet privacy.

Surprisingly strong consensus emerged surrounding Internet privacy that:

  • Behavioral Advertising did have value;
  • Technology is not the privacy problem with behavioral advertising;
  • The privacy problem is lack of advance meaningful consent by consumers to track their Internet movements and to use their private information; and
  • Any privacy effort must comprehensively include all Internet players using any Internet technology because consumers don’t care about the technology being used—they just care about their privacy being abused.

AT&T, Verizon and Time Warner, three of the four largest American ISPs, all agreed in their collective testimony that any behavioral advertising should involve “meaningful consent” by consumers, meaning the customer:
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00Publius Contributor - Business - Democrats/Leftists - Economy/Finances - Google - Inernet - News - Scott Cleland - Technology

Googleopoly II: Google’s Predatory Playbook to Thwart Competition — a new White Paper

September 28, 2008 by

-By Scott Cleland

My new Googleoply II White Paper (see www.googleopoly.net) identifies and documents the twenty-six sources of Google’s market power and the five different anti-competitive strategies Google employs to foreclose competition.

This original and trenchant analysis brings into sharp focus the moorings of a potential antitrust case against the Google-Yahoo ad pact. The White Paper also should give pause to even the biggest apologists and cheerleaders for Google — if they are ‘open’ to reading it. Simply, it is a must-read piece for anyone trying to understand why the DOJ’s investigation of the proposed Google-DoubleClick is so serious and important.

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Exposing the Biases in the Broadband Policy Debate — My new white paper

September 17, 2008 by

-By Scott Cleland

Invited to speak at the ITIF forum on ITIF’s white paper, “It’s Time to End the Broadband Policy Wars”, I so strongly disagreed with the framing bias of that white paper and the broadband policy debate in general that I decided I needed to counter it by writing my own white paper:

Don’t be Fooled by the National Broadband Policy “Straw Man”
Exposing Three Hidden Policy Biases of Broadband Policy Proponents

The abstract of my six page paper is below:

Abstract: Don’t be fooled by the straw man argument and hidden biases in the assumptions undergirding the call for a more government-centric national broadband policy. Their argument cannot withstand common sense, penetrating analysis, or ‘open’ public scrutiny. There are at least three major hidden biases in their pillar assumptions, that when exposed, make it clear that proponents of a more government-centric national broadband policy need to go back to the drawing board to find a legitimate rationale for their policy approach.
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Google’s dominance grows, But Don’t forget DOJ investigation

September 9, 2008 by

-By Scott Cleland

Google’s online advertising dominance grows — Don’t forget the pending DOJ investigation…

Google’s dominance of the Internet’s business model for monetizing content only grows.

“Gap widens in online advertising: Rivals struggle to catch up to Google as buyers favor search over display” reports Jessica Vascellaro in the Wall Street Journal.

The article’s conclusion is dead on and ominous — the gap between Google and its competitors in online advertising is widening and will continue to do so because the business that Google dominates, search advertising, is growing significantly faster than display advertising is.

While the article focused on the different growth rates of online advertising, the article missed the opportunity to highlight what else the numbers tell us:

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How the FCC Comcast Decision Limits Net Neutrality

August 29, 2008 by

-By Scott Cleland

Contrary to conventional wisdom, the FCC’s order on Comcast’s network management practices, reined in the net neutrality movement much more than it advanced their agenda. The old adage is true here, be careful what you ask for — FreePress/Public Knowledge.

At its rawest level, the chest-beating petitioners got the FCC to reiterate what the FCC has long said it would do, and also order Comcast to do what Comcast already publicly committed to do. When the dust settles and the rhetoric cools, the petitioners will better understand the old adage: be careful what you ask for.

In this instance, they hoped to advance their agenda for sweeping net neutrality legislation and regulation, and what they ended up with was the expert agency taking much of the wind out of their sails.

How does the FCC Comcast decision limit Net Neutrality?
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What 3Q earnings tell us about Google-Yahoo Antitrust Review

July 30, 2008 by

-By Scott Cleland

GOOG-YHOO earn ~100% of profits

With the 3Q08 earnings releases by Google, Yahoo and Microsoft in the last few days, DOJ antitrust investigators of the Google-Yahoo partnership now get their first fresh look at the most recent revenue and profit market shares for this market.

While many, including myself, have focused on the proxy market share measures of searches from ComScore, Nielsen and Hitwise to track Google’s relentless taking of share on a monthly basis, antitrust investigators will likely look past proxy search shares and focus on the truer and more accurate measures of market share–actual, reported revenues and profits.

There are strong reasons why antitrust investigators will shift from the market’s obsession with the monthly search share proxy figures to real financial numbers.

First, users do not pay for search, advertisers and website publishers do; this makes search share an indirect and less relevant measure of true market power.

Second, all searches are not equal, some lead to clicks and some clicks are dramatically more valuable than other clicks.

Third, the search shares are third-party proxy estimates based on samples; they are not auditable and accountable as publicly-reported financial data are; moreover, SARBOX requires CFOs/CEOs to personally sign that the finances are accurate, subject to severe penalties if they are proven to be fraudulent.

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