US: AT&T, Microsoft ask for review of Google deal

Companies urge antitrust regulators to closely watch Google's deal with a major advertisement firm

Taipei Times
Wednesday, April 18, 2007

Microsoft Corp and AT&T Inc asked regulators to review Google Inc's US$3.1 billion purchase of DoubleClick Inc, saying the acquisition gives the company too much control in the Internet advertising market.

The deal should be "stringently" reviewed by antitrust authorities as Google is positioning itself as the sole broker of online ads, AT&T said in a statement on Monday. Microsoft said the purchase of New York-based DoubleClick deserves "close review and scrutiny."

"Our competitors including Google have been quick to urge antitrust authorities to scrutinize our practices and new products," Brad Smith, Microsoft's general counsel, said in an interview. "I don't think it's ironic for us to suggest that the antitrust rules should in fact apply to everyone."

DoubleClick extends Google's lead over rivals in the US$28.8 billion global online ad market and bolsters its efforts to expand beyond the plain-text ads it shows next to Internet search results.

Companies such as MTV Networks and Sports Illustrated use DoubleClick's Dart program to place display ads on their Web sites and monitor how many customers they reach.

"This transaction raises some significant competitive issues and we expect the government will look into it," Time Warner Inc spokesman Ed Adler said.

Google said after announcing the purchase on April 13 it is confident the deal will be approved by regulators.

"There remains tremendous choice" on the Internet, Google vice president Tim Armstrong said. "Users tend to switch products based on how well the products perform for them."

Microsoft itself has been found to violate antitrust laws in the US and Europe.

A judge ruled in 2000 that the software maker illegally defended its Windows monopoly by requiring Internet service providers to feature its Web browser.

In Europe, regulators said the company quashed competition for server programs as well as Internet video and audio software.

"Our real concern is about this very substantial concentration that this acquisition will create," Smith said.

He said the purchase would give Google more than 80 percent of the market for ads that are displayed on third-party sites across the Web.

Google's announcement also sparked concern from analysts that the company may be paying too much for DoubleClick. Google executives declined to disclose DoubleClick's financial results or give details on plans for integrating the company's products.

"They just don't tell you anything," said Gene Munster, an analyst at Piper Jaffray & Co in Minneapolis.

He estimates that DoubleClick will have sales of US$330 million this year and that Google may lose about US$150 million a year in interest income.

Anthony Noto, an analyst at Goldman, Sachs & Co, said in a note to clients that while the price is too much for DoubleClick's business on Monday, it could be justified over time. The acquisition will let Google sell packages to customers that bundle text ads tied to search results with so-called display ads that often include pictures or video, he said.

"Google did not want anyone else buying this asset," said Scott Kessler, an equity analyst at Standard & Poor's in New York. "It's an excessive price."

Date Posted: 4/18/2007