Should Regulators Block Google-Yahoo Deal?

This morning’s Wall Street Journal has an extensive report on challenges facing Google when it comes to advertising, especially with its YouTube division. If anything, the article paints a rather sympathetic view of Google and its money machine. I am surprised by the timing of this story. After all, these problems are quite well known and have been subject of many tomes.

I wonder if this story and Google’s challenges are meant to portray the search-and-online advertising giant as an underdog and win it some sympathy from regulators as it goes in to get its advertising deal with Yahoo approved. As a great counterpoint to the WSJ report, I urge you to read this spectacular and refreshingly honest editorial by Richard Bennett in today’s San Francisco Chronicle. Bennett correctly points out that Google is using the Net Neutrality debate to divert attention from the real issue of how it is going to become the tyrant of online advertising.

Despite its carefully crafted public image as a naive and squeaky-clean innovator, Google is a public corporation managed by professionals, some of them longtime friends of Washington power brokers and fully capable of understanding the problems the Google-Yahoo deal poses.

The tech press has been too busy reprising its Internet Bubble era cheerleading and cooing about Google’s network neutrality “idealism” to raise questions about the demise of Yahoo as a search competitor.

Bennett’s piece meshes with my thinking about Google and its Network Neutrality/broadband doublespeak.

The deal, as currently structured, substantially alters the Internet economy. Advertising is the prime revenue stream for social networks, news sites and Internet aggregators of all kinds, and it’s closely linked to search. Instead of a search market where three players compete vigorously for eyeballs, this deal would create a status quo where the top dog enjoys an 85 percent market share and the ability to set prices for search ads with no fear of being undercut by its much weaker sole competitor. This should set alarms clanging wherever antitrust and personal privacy concerns are held dear, but it hasn’t.