Google Defends the DoubleClick Deal

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Google said it would welcome global privacy laws governing how Web companies obtain, combine, retain, and use the massive amounts of data collected on the Web surfing and searching habits on individual computers. But it doesn't want those rules to apply solely to its deal with DoubleClick. Through its general counsel, Brad Smith, Microsoft also said it would support privacy legislation.

Pipeline or Choice?

However, Smith and Scott Cleland, president of Precursor, a telecom research and consulting firm, also argued vehemently for rules that would treat Google differently from its main search competitors. According to Smith and Cleland, Google's dominance of search and access to the advertisers and sites that work with DoubleClick would enable the company to become a "pipeline" through which most of the Web's relevant data would flow. The reason, they argued, is that Google's ability to reach the majority of U.S. Web surfers on the most highly trafficked Web sites would be so great that advertisers would be forced to work with the company.

And, with Google's access to advertisers, any publishers not working with Google would also feel they had to work with the company, further increasing Google's reach. As a result, Google would be able to potentially collect Web surfing data on most Internet users, which would also lead to increased advertiser reliance on the company. "In a lot of ways it would be like combining the New York Stock Exchange and the NASDAQ," Microsoft's Smith said. "Somebody could build an alternative exchange, but would anybody go there to take their company public?…this merger is about creating a single pipeline."

Drummond argued that Google—whose main business is selling ads based on search keywords and then displaying those ads on its search pages, as well as the partner sites those same searchers visit—is not in the same business as DoubleClick, which delivers ads that an advertiser and Web publisher have contracted for outside of DoubleClick's site. "There is no pipe," said Drummond. "A user, at a moment's notice, can go use another [search engine] and they do all the time…there are all kinds of choices."

Whether the government will single out Google at all is an open question. The hearing was the first round of what Senator Herb Kohl (D-Wis.) called a "heavyweight fight." In the next round, Google, Microsoft, and others plan to speak about privacy issues before the FTC at a two-day "town hall" meeting, starting Nov. 1.

Holahan is a writer for BusinessWeek.com in New York .