Antitrust Analysis of Google and Doubleclick

October 2, 2007
Lexero LLC

 

A new legal article, entitled “An Antitrust Analysis of
Google’s Proposed Acquisition of DoubleClick” takes a look at the relevant
product markets necessary to evaluate the potential merger.

 

Proponents of the acquisition argue that the two firms do
not compete because Google primarily provides search and text based
advertising, while Doubleclick provides graphic-based advertising. Thus, the
merger would not lead to higher prices.

 

The authors, taking the opposite view, propose that
suppliers of online advertising provide three primary inputs: (a) advertiser
tools, (b) intermediation services, and (c) publisher tools. The authors go on
to explain that the integration of such services is a key point in evaluating
potential deals. Furthermore, the authors argue that product markets are best
defined by the response of buyers to relative changes in prices.

 

Based on a survey of online retailers, the authors conclude
that a significant share of online advertisers would substitute among the three inputs in
response to relative changes in prices, and
significant share of DoubleClick customers would turn to Google before
any other supplier in response to an increase in the price of DoubleClick’s
advertiser tools.

Bottom Line: This
interesting article provides a good discussion of the various issues involved
in online advertising competition. Rather than relying on the method of
displaying advertisements to customers, the authors correctly consider the
method via which advertising purchasers are served. Because, the buyers and
advertisers are the market that matters this is a more appropriate manner via
which to evaluate the deal.

 

Finally, it is worth noting that the authors mostly ignore
the numerous market alternatives available “offline” in their analysis. While
fine for an academic discussion, any true antitrust analysis has to consider
the numerous advertising opportunities available offline, as well.


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