Much Ado About DoubleClick

Uncle Sam's scrutiny likely won't derail Google's $3.1 billion deal, but it may result in some limits on the search king

by Catherine Holahan

There was little doubt that the Federal Trade Commission would thoroughly investigate Google's (GOOG) planned acquisition of DoubleClick. Google's undisputed dominance of Web searches (see BusinessWeek.com, 5/30/07, "Google Is Making You Dumber") and the related $8 billion search-advertising market all but guaranteed scrutiny of any move capable of extending the search titan's online influence. The fact that DoubleClick places ads for many of the leading Web publishers made a government inquiry inevitable, say antitrust experts.

But, there's even less doubt that the FTC will eventually sign off on the $3.1 billion deal. Even some who see red flags in the transaction don't seriously think it will be blocked. "We are not foolish enough to think the FTC will say you can't buy DoubleClick," says Jeff Chester, executive director of the Center for Digital Democracy.

His group is nonetheless concerned over the combination of the leading aggregator of information on who's searching for what on the Web with a company that tracks Web surfing behavior to help advertisers measure the effectiveness of their ads. Putting the two companies together leaves consumers' privacy at risk, Chester says. And he's hoping the scrutiny by Uncle Sam will result in some conditions placed on the transaction.

Limiting Google

In particular, Chester and other critics hope the government will put limits on the amount of data Google can collect and use to place targeted ads throughout the Web. Google already collects data on searches, using the information to locate ads related to queries. DoubleClick tracks when individual computers visit the Web sites, and click on ads, in its vast client network. Though DoubleClick has stressed that the Web surfing data belongs to its advertiser and publisher clients—and thus cannot be turned over to Google—privacy advocates fear Google could eventually access that vault by, say, offering to waive ad serving fees in exchange for sharing data. "Privacy is put at risk given the aggregation of tremendous amounts of personal information by these digital giants," says Chester (see BusinessWeek.com, 4/16/07, "Google's DoubleClick Strategic Move").

So what concessions may Google have to make? That depends on just how important the FTC deems the role of computer-user information in setting online ad budgets. If the FTC determines that the market for online advertising is largely determined by the amount of information a company has on a given computer, the government will want to ensure that one company does not have a monopoly on the information, says Mozelle Thompson, chief executive officer of Thompson Strategic Consulting who served as an FTC commissioner through 2004. Such a monopoly could force advertisers looking to target their ads to deal with one company, giving that company undue influence over pricing, says Thompson. "It has yet to be seen that the role of database analysis and whether the control of those databases…will result in any conditions," says Thompson.