My favorite anti-Google gadfly Scott Cleland has a post up entitled "Debunking the Google-Yahoo Antitrust Myths" in which he purports to debunk some erroneous thinking about the Google-Yahoo! deal.
Scott often furnishes the world with interesting ideas in an over-the-top way, but here I think he's gotten it wrong.
He walks through a series of purported "myths" about the antitrust implications of Google-Yahoo!, which got a hearing in the Senate this week. I want to walk through just a couple of them because I think he's framing the relevant market wrongly.
Cleland's "Myth #1" is that there can’t be an antitrust problem as long as consumers are just one click away from a competitive search engine. Rather, he says, "Google is becoming a de facto essential facility for advertisers seeking to reach the global Internet audience."
It's helpful for him to frame the antitrust discussion of Google as being not about consumers' access to search, but about advertisers access to eyeballs. The low barriers to entry for Google competitors is relevant, though. Too much success on the part of Google in capturing advertising market share will draw competitors to go after Google's traffic, which is obviously crucial for holding advertising market share. They can do so easily because, indeed, consumers are one click away from competitive search engines and every other site or service they might visit.
"Myth #2: There can be no antitrust problem because Google and search advertising comprise such a small percentage of the advertising market." Debunking it, Cleland says:
The relevant antitrust market is search advertising because there is no competitive substitute for search advertising. As Google has successfully convinced advertisers, search is a unique way to reach consumers because people self-identify their intentions through active search that they don’t do when they are a passive consumers of mass media advertising through: TV, radio, newspapers, magazines, billboards, or direct mail. Moreover, the search medium enables collection of unprecedented private information about intentions, preferences, economic suitability, etc., which enables unprecedented “targeting” of users with “relevant” advertising that consumers will be most receptive to.
(characteristically quirky formatting omitted)
This I think is wrong. Cleland has whittled down the market to where Google has unique strengths, but that is not the relevant market to this dispassionate, forward-thinking observer. Of course Google has convinced advertisers of how special search advertising is, but that doesn't make it true. There are plenty of ways to target advertising equally well or better than through search, and the large consumer data and targeted marketing industry is there because of it. (Here's the DMOZ directory of "micromarketing" firms, for example.)
What's more, there are plenty of ways to target equally well or better than with search terms. Providers of hosted email, hosted documents, chat, microblogging, and other services have access to information as good or better than what Google has about people's particular interests at particular times. They are all positioned to deploy targeted ad systems like Google's keyed to the content that they process for users.
Whether they deploy such a thing or not depends on whether Google is able to reap higher than ordinary rents from its access to search information. If Google-Yahoo! is prevented from going forward and the two companies are prevented from increasing their profits through the combination -- it remains speculative that they will -- a signal to potential competitors will not go out, and innovations along many vectors will not materialize.
With due respect: Not this time, Scott! Let the markets and the technologies play out as they will.