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About a year ago, Google announced its acquisition of DoubleClick for $3.1 billion. Since that time, the deal had been held up by the Federal Trade Commission due to lobbying efforts by Microsoft and privacy advocates. In December the FTC ruled by a margin of 4 to 1 that Google could move forward with the deal. The fight will now shift focus to Europe, where EU agencies will examine whether the deal violates anti-trust laws.

DoubleClick is a digital advertising firm which specializes in distributing web advertisements like banners and videos. Their system has been compared to a stock exchange, with an auction model that allows web advertisers and publishers to bid on ad space regardless of their affiliation. Google’s current system also features an auction, but only partner websites can participate. The sale of Doubleclick ended a bidding war between Google and Microsoft, which has been trying to compete with Google in the online advertising business. Though $3.1 billion is a much higher price than Google was expected to pay, it could be they went forward with the acquisition to prevent Microsoft from achieving a better position in the internet ad industry. Indeed, as one analyst surmised in this New York Times article, “Keeping Microsoft away from DoubleClick is worth billions to Google.”

The move puts Google in a better position to begin relationship-based ad placement with web publishers and advertisers. Up to this point, Google’s vast ad exchange has been algorithm-based. The combined companies may be able to deliver both search and display ads in one place to DoubleClick’s powerful clients. While the increased competition is what bothered Microsoft, privacy lobbyists also opposed the buy-out because it gives Google high-level access to consumer data.

In an open letter to the FTC, consumer-advocacy group The Center for Digital Democracy wrote, “Indeed, the purpose of Google’s acquisition of DoubleClick is to control a major competitor in order to foreclose any serious competition in the interactive advertising market. There are powerful network effects, involving the collection, analysis, and targeted use of consumer and business behavioral data sets that will be compounded if the merger is approved, effectively eliminating whatever competition is currently viable in the marketplace.”

The worry is that Google will have unrestricted access to consumer behavioral data, and it will give them an unfair advantage over competitors. The Center for Digital Democracy believes the FTC ruling is flawed, saying, “U.S. consumers will have to live under the shadow of an even bigger digital giant, with a privacy time bomb ticking in the background.” Privacy concerns are echoed on popular technology blog Slashdot: “When I saw this headline, all I could think was “Google buys up another chunk of the internet.” Seriously — DoubleClick is everywhere. It’s almost like Google’s trying to become the web.”

The EU now plans to investigate the deal to examine whether it would unfairly squash competition. Google has already pledged to the EU to preserve some of the information-sharing restrictions currently in place at DoubleClick. The folks at Google seem optimistic the acquisition will go through. Chariman and CEO Eric Schmidt says, “The FTC’s strong support sends a clear message: this acquisition poses no risk to competition and will benefit consumers. We hope that the European Commission will soon reach the same conclusion, and we are confident that this deal will deliver more relevant ads for consumers, more choices for advertisers, and more opportunities for website publishers” (Google Press Center).

Thursday, January 17th, 2008 Both comments and pings are currently closed.

By Haley January Eckels