During its year of jousting with Microsoft, Google learned a lot from the software giant. Too bad it picked up Redmond's bad behaviors -- behaviors that are bad for both IT and the public at large.
The Google we all think we know is a kind, innovative, positive force. And because Google was the un-Microsoft, we have better tools for search, better platforms for e-commerce, and a whole new world of Web 2.0 applications.
But now it appears that Sergey Brin and the gang that will do no harm have learned the worst possible lesson from Microsoft: build a monopoly and they will come -- because they have to.
The deal to let Google sell its ads on Yahoo's Web site, and share an estimated US$800 million a year in revenue, is bad for business, bad for consumers, and bad for IT. It will raise Web advertising rates by more than 20 per cent. It ought to be stopped.
Just what we need: a new monopoly
Simply put, it will give Google/Yahoo a near monopoly on Internet advertising. Don't just take my word for it. Here's what Yahoo CEO Jerry Yang told Microsoft's top lawyer Brad Smith: "If we do this deal with Google, Yahoo will become part of Google's pole, and Microsoft ... would not be strong enough in this market to remain a pole of its own."
Normally, I'd be skeptical of a braggadocio story like this, but Smith recounted the conversation under oath Tuesday as he testified in front of a Senate committee looking into the proposed arrangement.
I think Smith is way too smart to perjure himself, but whether he is or not, there's a lot more evidence that the deal is anticompetitive. At the moment, Google's share of the search-related advertising market is about 70 per cent, compared to about 22 per cent for Yahoo, leaving just 8 per cent for third-place Microsoft, according to SearchIgnite.
Remember, monopolies may be noxious, but they are not illegal in the US. What is illegal is abusing that power to the detriment of the market. Sound familiar? Of course. Microsoft used its monopoly in operating systems to unfairly stifle competition in the broader technology market.
SearchIgnite, which sells software that companies use to manage their search advertising, studied the Google-Yahoo deal and found that the cost to advertisers of a click from Yahoo's site will go up by 22 per cent if Google sells the ads. (The report is available on SearchIgnite's Web site, but you need to register for access.)
The analysis compared the cost per click of running the same keyword for the same advertiser in the same position on the page across both Google and Yahoo. It looked at 12 million clicks across 15,000 of the 20 million active keywords managed through SearchIgnite's technology.
We should note that the spike in rates only happens if Yahoo chooses to maximize its profits. But given the sad state of the company and the likelihood that Microsoft will fail in its Yahoo bid, I'd say that's a pretty good bet. Would you really expect Yahoo and Google not to take advantage of a market share of 90 per cent?