The latest news about Yahoo!, Microsoft and Google have given many the opportunity to watch the government in action. Would the Justice Dept. allow a Yahoo!, Microsoft merger? Do such proposals amount to a system of price fixing, or a constraint of trade by those involved?
The government is always a negative factor. It does not promote, only denying certain types of trade or business practice in the marketplace. And because the government does not think in a future sense, and only in a cutting sense, these officials do not think about creating anything, by statute. By preventing a Google/Yahoo search/advertising partnership or a Microsoft/Yahoo! company-wide merger the government can only narrowly apply their perspective of the law.
There is no way to really know if such partnerships or mergers would unduly affect the marketplace and create an entity that could effectively control prices or access to the market by potential competitors. Steve Balmers letter says enough to lead one to believe that a Microsoft, Yahoo! merger is unlikely. However interesting the issues related to those personalities, the general marketplace has more important issues to think about.
There are a couple of different groups which have a vested interest in the outcome of what happens on the web related to finding information and advertising.
The Public
The is the general version of the public, meaning those whom the government is supposed to protect from exploitation.
The Searcher
This is the specific person who has set out to find some type of information. This person wants the best result for their time and energy spent. The want to go somewhere they can trust to deliver the quickest, most accurate and simplified results. So far, at least for the last few years, this means Google. Currently somewhere in the neighborhood of 70% of all searches are performed through their network.
The Advertiser
Because the companies that perform best in the business of search have reasoned they are also the best situated to exploit text advertisements, companies that wish to advertise on the web are relatively limited in their choices. At least Google's bid system for advertising limits their exposure to price fixing claims.
The Publisher
Publishers are those that display advertisements from the group that pays for them, the advertisers. The Publishers have web sites, social or otherwise that receive traffic from search engines, or readership and social connections.
These are the various groups that have an interest in which companies are in this space, how they are competing and whether they have much of a choice or not as to how they acquire information or make money. Even though there are many search engines out there, most use either Google, Microsoft or Yahoo!. This is in itself a monopoly of sorts, but not for the reason that most think of. Yes, there are many choices for searchers, but for the most part people tend to congregate with the few large companies that get most of the news (Google, Microsoft and Yahoo!). This is behavior consistent with other industries in the non-web world.
Advertisers on the web, whom are usually promoting a web site to sell products or services, are less dependent on searches, and they are generally only charged for those who actually click or access their web site specifically. So in effect they are less dependent on who serves their ads up.
Google's Adwords is a great product in itself, and allows any size company, with any size budget the ability to promote their products. Google's main competitors are Microsoft and Yahoo!. I am not sure the breakdown of the reach of each of their products but I would guess Google has a majority, especially if you add the DoubleClick acquisition.
This is where the issue of Publishers come in. The advertising services, such as Yahoo Advertising Services or Google's Adwords, serve up these ads via their publisher network. From information gathered around the web about Google, it seems that Google only displays a small fraction of these ads on its own site. Where the huge bulk of advertising is displayed is through their Adsense Publisher Network.
This is again only one aspect of the issue. Lets say you are a publisher that uses Adsense to display advertising. Where do you get your traffic from? Unless you are a dedicated blogger, or a large news site (cnn, msnbc...) you most likely get your traffic from Google, Microsoft and Yahoo! search engines. And of these three Google usually provides around 80-90% of that traffic.
And this is where the idea of monopoly diverges from the area of paid advertising. Unfortunately this common definition of monopoly does not reach the level of the legal scrutiny. As long as Google does not prevent, or limit the ability of other companies to compete in the search area there does not seem to be a problem.
It is the publishers, those who receive the bulk of their traffic from search engines that have noticed the big three in realtime. With all the potential that the web offers companies to compete with Google, Microsoft & Yahoo! in search, there seems to be very little competition in this space. Publishers have become extremely dependent on whether these search engines effectively approve of them.
Hopefully there will be more competition in the future, although if the economics that exist on the web mirror every other industry, publishers, advertisers and the public should not expect this to happen anytime soon.
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