By David Lawsky - Analysis
BRUSSELS (Reuters) - European regulators are likely to approve Google’s $3.1 billion takeover of ad firm DoubleClick, despite rivals’ worries the deal could squeeze them and make Web advertising more expensive.
The European Commission, tasked with preserving competition in the 27-country European Union, is about to decide whether it will express serious doubts about the deal, which would combine Google’s dominance in pay-per-click Internet advertising with DoubleClick’s market-leading position in display ads.
But Commission-watchers on both sides say after the deal won U.S. approval in December, Brussels is likely to follow suit: for 6 years it has given the green light to every all-U.S. merger that passed muster in Washington.
A lawyer acting for a client concerned about the deal said it was “disappointing but true” that the Commission had not sent Google a “statement of objections” -- a formal outline of its problems with the deal.
“If they had serious doubts, we’re at the point where ... if you don’t send (such a statement), you don’t have time to complete the case,” the lawyer said.
Given the EU watchdog’s track record, critics can at best hope for some conditions to safeguard competition. The Commission will make its final decision by April 2.
But rivals say DoubleClick knows where they sell ads and for how much and that if Google owned DoubleClick, it would have that sensitive proprietary information.
They have other concerns too.
Among its services, DoubleClick is part of a chain that helps advertisers get their ads placed on Web sites where they have the highest chance of reaching likely customers. DoubleClick software takes into account demography, Web site content, keywords and other information.
It then funnels the advertising of its clients down the chain to one of several “ad networks”, such as Google’s AdSense, which work directly with Web sites.
DoubleClick uses a sophisticated algorithm -- a step-by-step mathematical formula -- to match ads to Web pages. The algorithm is tweaked to handle new information in the marketplace.
DoubleClick also reports to advertisers, telling them whether their ads were seen by the people they tried to reach.
Rivals and customers say if Google owned DoubleClick it could shift the algorithm, subtly favoring Google’s own AdSense rather than other merchants.
Or Google could reveal the tricks of the algorithm to AdSense, which could use them to get the nod from DoubleClick more often.
Google dismisses such concerns as misplaced, saying it would be impossible to hide poor performance.
“Ad servers provide very clear reporting metrics which inform advertisers and publishers when the ads are shown and how often they are shown,” the company told Reuters.
“In short, an advertiser and publisher would soon find out if their ad server was delivering poorly performing ads,” Google said in a statement.
A rival said that missed the point. “The ads might perform as well but AdSense would get more,” the competitor said.
Google’s pre-eminence in Web searching gives it dominance in search ads, but rivals and customers say the adjacent market for display ads has held down prices. They say after a merger search and display advertising could converge, allowing Google to raise prices.
Rivals including Microsoft and Yahoo have been vocal in expressing their concerns about the deal, as have consumer groups and customers who say Google would gain privacy information with the planned merger.
All of this matters because of the strength of DoubleClick, rivals say. Some make back-of-the-envelope estimates that privately held DoubleClick has more than 60 percent of the European market. Google expressed doubts about the accuracy of such estimates but declined to give its own.
A spokesman for the European Commission declined to comment.
Editing by Dale Hudson and Quentin Webb