Google-Microsoft war of words begins

THE ink is barely dry on Microsoft’s US$45 billion (A$50 billion) bid for search company Yahoo! and rival Google has already cranked up its awesome public relations machinery to try and stop the deal.

In a direct communication with customers and users, Google, which dominates the search market with a global share of more than 70 per cent, questions whether Microsoft can be trusted not to use the deal to crush competition and innovation.

“Microsoft's hostile bid for Yahoo! raises troubling questions,” said Google’s senior vice-president for corporate development and chief legal officer David Drummond in a post on the company’s official blog.

“This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation,” Mr Drummond said.

Microsoft on late Friday made a hostile takeover bid for Yahoo! offering US$44.6 billion for the number two search company.

Google’s response has been immediate, pushing for regulators to closely scrutising any take-over.

“Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies – and then leverage its dominance into new, adjacent markets,” Google’s Mr Drummond wrote on the official blog.

“Could the acquisition of Yahoo! allow Microsoft – despite its legacy of serious legal and regulatory offenses – to extend unfair practices from browsers and operating systems to the Internet?”

Microsoft general counsel Brad Smith issued a statement yesterday countering the Google suggestions, saying the combination of Microsoft and Yahoo would create a more competitive market by establishing a more credible number two search company.

“Today, Google is the dominant search engine and advertising company on the Web. Google has amassed about 75 percent of paid search revenues worldwide and its share continues to grow,” Mr Smith said. “According to published reports, Google currently has more than 65 percent search query share in the U.S. and more than 85 percent in Europe.”

“Microsoft is committed to openness, innovation, and the protection of privacy on the Internet. We believe that the combination of Microsoft and Yahoo! will advance these goals,” he said.

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Microsoft urges Senate to dump Google deal

THE planned acquisition of internet advertising firm DoubleClick by search giant Google would be bad for competition and bad for consumers, Microsoft’s legal chief has told a Senate committee.

Microsoft senior vice-president and general counsel Brad Smith also told the committee that the Google-DoubleClick deal would become a serious threat to consumers’ privacy.

“If Google and DoubleClick are allowed to merge, Google will become the overwhelmingly dominant pipeline for all forms of online advertising,” Mr Smith told the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights.

“This merger will almost certainly result in higher profits for the operator of the dominant advertising pipeline, but we believe it will be bad for everyone else. It will be bad for publishers, it will be bad for advertisers and, most importantly, it will be bad for consumers,” he said.

Microsoft is no stranger to antitrust cases, or the inside of Senate committee rooms, having defended itself many times on many different fronts.

But while Mr Smith acknowledged there was a large degree of self interest in the Microsoft evidence to committee, he said there were genuine concerns about the acquisition would have on the ongoing development of the internet.

“We believe that the future of the Internet will be decided by developments in online advertising,” he said, adding that advertising was the fuel that continued to power the internet and to drive the digital economy.

Microsoft estimates that online advertising is already a US$27 billion (A$30 billion) business, and is projected to double to US$54 billion in the next four year alone.

“To put that in perspective, that will be roughly the same size as the television and radio industries in this country today, combined,” Mr Smith said.

Microsoft believes that the privacy issues related to internet advertising – where search companies collect personal information about computer users in order to better target advertising – is also a antitrust issue.

“Given the nature and economics of online advertising, this concentration of user information means that no other company will be able serve ads as profitably,” Mr Smith said.

“In short, it will substantially reduce the ability of other companies to compete.” he said.

“I appreciate that the technology and business models are new and dynamic, and I fully agree that the internet is continuing to change very rapidly,” he said. “But no one is permitted to buy a dominant position by acquiring its single largest competitor.”

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