Microsoft, Google Sling Merger Mud

Rivals trade jabs over Google's proposed $3.1 billion acquisition of DoubleClick.

WASHINGTON—Microsoft did its best before Congress to undermine Googles proposed $3.1 billion purchase of DoubleClick, telling lawmakers on Sept. 27 that the deal would allow Google to buy a dominate position in the online advertising market and would give a single company control of the worlds largest database of user information.

Not so fast, Google countered, throwing a few hard elbows of it own.

Testifying before a Senate subcommittee on antitrust issues, Microsoft General Counsel Brad Smith told the panel a combination of the biggest players in search and display advertising "will account for nearly 80 percent of all spending on non-search ads served to third party websites."

Microsoft, which competes with Google in the $27 billion online advertising market, wants the deal stopped on antitrust grounds. In July, the Federal Trade Commission, which is reviewing the Google-DoubleClick deal, approved Microsofts $6 billion purchase of DoubleClick competitor, aQuantive. Microsoft, based in Redmond, Wash., generates more than a $1 billion annually off its display advertising business.

"I will be the first to admit that Microsoft is not disinterested in this issue," Smith said.

Smith, who said the market is expected to hit $54 billion in the next fours years, asked the three senators who showed up for the hearing to consider the consequences of "allowing the largest company in online advertising to acquire its most significant competitor?"


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"We know this market very well. And it is absolutely clear to us that this merger raises serious questions that deserve serious answers," he said.

Seated next to Smith was his counterpart at Google, David Drummond, whose message was simple: Dont believe Microsoft. "This notion of 80 percent is a made up number. The comparison is quite specious. We need to be a little more precise here. I urge you not to be misled by these numbers."

Drummond said Google and DoubleClick are highly complementary, but fundamentally different companies.

"DoubleClick does not buy ads, sell ads, or buy or sell advertising," he said. "All it does is provide the technology to enable advertisers and publishers to deliver ads once they have come to terms, and provide advertisers and publishers statistics relating to the ads."

Google, on the hand, built its business on text-based search advertising revenue. "DoubleClick is to Google what FedEx or UPS is to," prompting Smith to quip, "Google is already FedEX, Google is already Amazon and now they want to buy the post office."

Having traded jabs over the antitrust aspects, Smith and Drummond turned to the privacy implications of the merger. Smith said combining the user data Google holds with that of DoubleClick would allow Google to "record almost everything you see and do on the Internet and use that information to target ads. One question is whether this merger will create a whole new meaning to the term being Googled."

Google insists all information collected by DoubleClicks ad placing technology is, and will remain, the property of the clients. Ownership rights, Google claims, will be unaffected by the acquisition. Drummond also pointed to Googles recent changes to its policies as proof of the companys commitment to privacy.

"We were the first leading Internet company to decide to anonymize IP addresses and cookies in our server logs after 18 months," he saqid. "We are pleased other search engines—including Microsoft, Yahoo and—followed our lead in setting their own data retention policies."

The rivals did agree on one thing: the federal government should lead an effort to create broad-based standards giving consumers privacy protection and clear rules to the industry.


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