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Will The FTC Protect Web Publishers From Google's Forced Exclusivity?

Posted by
Adam Epstein
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on Wednesday, 19 December 2012
in adMarketplace News

The largest antitrust investigation in 15 years is expected to conclude soon. Its outcome will impact, for decades to come, how Web publishers generate revenue, which in turn, dictates what Web content is free and available to consumers.

Since June 2011, the Federal Trade Commission has been investigating whether Google used its monopoly power in violation of antitrust laws.

While most of the attention on the investigation is focused on Google’s favored positioning of its own products in its search results, there is more to the FTC’s investigation than search bias.

The FTC is also looking into Google’s use of exclusionary practices to stifle competition and underpay its search partner network. This component of the FTC’s investigation focuses on Google’s AdWords for Search program, which is the primary way many Web publishers make money. Here, the FTC’s case is stronger than its case against Google for manipulating search results.  

Here is how AdWords for Search works: Google places advertisements against searches entered on publisher partner sites. When visitors click on these ads, Google gets paid by the advertiser, and pays their publisher partners a percentage of that revenue.  Almost 30% of Google’s advertising revenue comes from its publisher network. 

The FTC is investigating whether Google is using its market dominance improperly when it requires publisher partners to show Google ads exclusively. If a publisher wants to show any Google ads to their visitors, they can only show Google ad. And since Google dominates the search advertising market, Web publishers are essentially forced to agree to its terms or give up Google revenue altogether.

The more that Google faces competition, the more publishers get to keep of the ad revenue generated by publishers on their own sites.  Of course, Google has a strong incentive to limit competition so that it can keep more for itself and share less with publishers. That is exactly what Google has done. 

Publishers ought to be able to offer their search traffic to more than one advertising partner so that they auction their advertising inventory to the highest bidder. This is a common practice in every other advertising medium – including display advertising, with the rise of real-time bidding auctions. Can you imagine if newspapers or TV stations could only show ads sold from a single broker?

Web publishers would see increased revenue if there was a competitive, real-time market for their search traffic. In turn, they could use this additional revenue to produce more content or provide more free services profitably. This would benefit the consumers of Web content, who make up their online audience. Competition would also bring increased innovation and transparency in the search network advertising marketplace - which would benefit advertisers as well.

The European Commission also understands the danger of Google’s exclusivity requirements:

Google imposes exclusivity obligations on advertising partners, preventing them from placing certain types of competing ads on their web sites, as well as on computer and software vendors, with the aim of shutting out competing search tools.”

A competitive search partner advertising market would benefit the Internet ecosystem.  The FTC doesn’t need to pick winner and losers -- that should be left to the free market. However, the FTC should step in to ensure that dominant companies like Google don’t use exclusive agreements and one-sided contracts to prevent Web publishers from participating in a free market.

The FTC has an opportunity and obligation to protect web publishers, and the consumers who enjoy their advertising-supported content, by preventing Google from forcing online businesses into stifling exclusivity agreements.

Google's One Singularity Sensation

Posted by
Super User
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on Thursday, 02 February 2012
in Industry Report

Google announced a major change to its privacy policy last week. Starting March 1, all of its products will fall under one single privacy policy, instead of each having its own. This singularity may appear benign, but it may severely impact search marketing, the advertising industry, and Google itself.

While I usually appreciate the colloquial tone of Google’s messaging – “This stuff matters” – very much keeping with its everyman, non-corporate vibe, its casualness merely masks the deviousness of the change.

adMarketplace Joins FairSearch.org

Posted by
Super User
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on Thursday, 26 January 2012
in adMarketplace News

FairSearch is coalition of “businesses and organizations united to promote economic growth,innovation and choice across the Internet ecosystem by fostering and defending competition in online and mobile search. We believe in enforcement of existing laws to prevent anti-competitive behavior that harms consumers.”

These are issues we believe in strongly, as we continue to grow and hire and compete with the likes of Google. Our CEO Jamie Hill expressed his concerns in AdWeek about the stifling of competition caused by Google’s antitrust behavior: "Google has a monopoly on the search business, but the question is how they leverage the search business to monopolize their other businesses. We have agencies that are dying for an alternative."

You can read the official FairSearch announcement here.

Google Fights Advertising Monopoly Charges with More Advertising

Posted by
Super User
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on Thursday, 08 December 2011
in Industry Report

Last Friday, the Department of Justice officially approved Google’s purchase of AdMeld. No surprise there.

The bad news for Google is that the purchase of display advertising exchange AdMeld could hurt its antitrust case with the Federal Trade Commission, since it signals even more consolidation. As noted by FairSearch, Google “is seeking to expand its monopoly power in search and search advertising to other aspects of online advertising, where Google is already the 800lb gorilla between its acquisition of DoubleClick in 2008, and multi-billion-dollar annual AdSense business.”

While the US government continues to play footsies with its new friend-with-benefits—benefits in the form of millions of dollars in lobbying fees and contributions—Europe is playing hard to get. The same day the DOJ approved the AdMeld purchase, the Financial Times revealed that the European Commission will soon release a 400-page(!) outline of its antitrust allegations against Google. Not helping its case here or across the pond: a ZenithOptimedia report released Monday that Google controls 44 percent of global online ad revenues.

Google’s strategy is to win back a public becoming increasingly skeptical of its “do no evil” ethos. Along with the ATM it set up in Washington, it has splurged on ads and marketing. Silicon Valley’s Mercury News reports that it has already spent nearly four times more on TV advertising time in the first six months of 2011 than in all of 2010. It seems to be working; Google has had five of the top 10 most effective TV ads by websites so far this year, according to Ace Metrix, which analyzes the effectiveness of TV ads.

But if more stories come out like this one, that Google’s “organic results are filler to pump deceptive ads at consumers,” it will have to spend a whole lot more to buy back the public’s goodwill and trust. At some point, no amount of lobbying or advertising will be enough to save Google from antitrust sanctions. That day seems to get closer with every new revelation.