Whether or not Google’s planned acquisition of DoubleClick demands close antitrust scrutiny would seem to hinge on how broadly you define the ad market. To Microsoft, the combination will end up controlling “more than 80%” of the market for placing ads on third-party web sites. To AT&T, it raises the specter of one company becoming “the broker of advertising for anything moving on the internet.” Google counters that, when considered as part of the entire ad world, rather than just the online corner of it, Google and DoubleClick are just “small components of a much larger advertising market.”
But it’s when you look beyond advertising, to the broader economic ecosystem that’s coming to define the way traffic and money flow through the consumer internet, that the Google-DoubleClick deal becomes more interesting, and troublesome, from an antitrust perspective. Google is not only the dominant player in the ad-serving market (and would see its dominance expand greatly by adding DoubleClick’s dominant banner-ad business), but is also the dominant player in the web searching market, controlling somewhere between 48% and 64% of that business (depending on whose data you believe). It has also, through its recent YouTube acquisition, seized a dominant share of the burgeoning market for the delivery of video online. Combined with Google Video, YouTube controls 55% of that market, according to Compete, while its nearest competitor, MySpace, holds just 15%. Google’s dominance in all these areas, moreover, seems to be increasing, suggesting that all these markets may have winner-takes-all characteristics.
Such broad dominance across advertising, search, and content businesses – all complements of one another – gives Google rich opportunities for cross-subsidization that in turn provide it with enormous flexibility in cutting exclusive deals with other internet content and services businesses. Consider video serving, for instance. Once Google begins embedding ads in popular YouTube videos, it will be able to be very generous in offering other web publishers revenue-sharing deals for running YouTube videos on their sites – deals far more attractive than what other, narrowly focused video-hosting companies – Photobucket, say – could possible afford. Google can opportunistically give away any of its complements knowing that the other complements will benefit.
Is Google invulnerable? Of course not. It’s still a young company in a young industry, and it has plenty of opportunities to screw up or be taken by surprise. But Google does seem well on its way to creating a playing field that, no matter how you look at it, always tilts in its favor.