The frothiness of digital marketing M&A activity may work in Google's favor.
The Federal Trade Commission (FTC) has opened an anti-trust inquiry into Google's proposed acquisition of DoubleClick, the agency and Google confirmed today.
The probe, which the FTC is calling an investigation, is an expected step in light of the deal's price tag and the objections of several competitors and privacy groups. It's unlikely the action will result in the merger being blocked, most industry watchers agree.
Yet the FTC investigation also marks a point of no return for Google on its path to dominance in digital advertising, if only in terms of its industry identity. While the company long ago cast aside the mantle of scrappy start-up, the phrase "anti-trust investigation" erases any doubt it's a power player, if not the power player, in the industry.
"It's not a surprise, although I think maybe it marks a rite of passage for Google. It confirms they have transcended being the upstart to being the target of governmental scrutiny to ensure fair competition," said Eric Goldman, assistant professor at Santa Clara University School of Law and director of the High Tech Law Institute.
On Friday, the FTC notified Google that it would conduct an inquiry into antitrust concerns regarding its proposed acquisition of DoubleClick. At the time, the agency made a "Second Request" for information, which sparked The New York Times headline "Google Deal Said to Bring U.S. Scrutiny."
However, several lawyers and industry groups characterized the FTC move as a standard step given the objections of Microsoft, AT&T and several privacy groups, as well as the merger's $3.1 billion price tag.
"We are confident that upon further review the FTC will conclude that this acquisition poses no risk to competition and should be approved," said Don Harrison, Senior Corporate Counsel for Google, in a statement. "Numerous independent analysts and academics have determined after looking at this acquisition that the online advertising industry is a dynamic and evolving space -- as evidenced by a number of recently announced acquisitions -- and that rich competition in this industry will bring more relevant ads to consumers and more choices for advertisers and website publishers."
Many privacy and consumer advocates have been after Google for years for practices ranging from contextual targeting in Gmail to complicity with the Chinese government in censoring Web content. However, privacy groups may find themselves disappointed with the results of the FTC antitrust probe, since existing antitrust laws take no umbrage with consumer privacy issues.
"There are reasonable questions to ask about privacy, reasonable questions about consumer protection...I think there's some hope on the part of privacy advocates that the FTC's scrutiny will also focus on the privacy issue," said Goldman. But he added, "I don't think there's any room in the anti-trust inquiry to fold that in."
One factor working in Google's favor is the sheer volume of deal making and acquisitions in digital ad technology, which implies a healthy, competitive industry. Since the Google/DoubleClick agreement, the industry has seen three other major acquisition announcements: that of Right Media by Yahoo, 24/7 Real Media by WPP Group and aQuantive by Microsoft. Additionally, AOL agreed to buy European ad management firm Adtech.
Time will tell whether any of those deals face the same scrutiny as this agreement, but Goldman speculated the FTC may pass on taking action on the grounds the space is simply moving too fast, saying in effect, "'You guys are going a mile a minute...and we're just not built to keep up,'" Goldman said. "It wouldn't surprise me in the least if ultimately that's the conclusion."
The FTC confirmed its inquiry but declined further comment.
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Until March 2012, Zach Rodgers was managing editor of ClickZ's award-winning coverage of news and trends in digital marketing. He reported on the rise of web companies, data markets, ad technologies, and government Internet policy, among other subjects.
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