Updated below: European regulators on Tuesday approved Google's purchase of DoubleClick setting up the search giant's big splash in the display advertising market.
According to the EU's competition committee, Google's $3.1 billion purchase of DoubleClick isn't a threat to competition because Microsoft, Yahoo and AOL are credible alternatives for placing ads. Meanwhile, Google and DoubleClick weren't competitors.
The Commission's in-depth market investigation found that Google and DoubleClick were not exerting major competitive constraints on each other's activities and could, therefore, not be considered as competitors at the moment. Even if DoubleClick could become an effective competitor in online intermediation services, it is likely that other competitors would continue to exert sufficient competitive pressure after the merger. The Commission therefore concluded that the elimination of DoubleClick as a potential competitor would not have an adverse impact on competition in the online intermediation advertising services market.
The Commission also analysed the potential effects of non-horizontal relationships between Google and DoubleClick following concerns raised by third parties in the course of the market investigation. These relationships concern DoubleClick's market position in ad serving, where Google, by controlling DoubleClick's tools, could allegedly raise the cost of ad serving for rival intermediaries, and Google's market position in search advertising and/or online ad intermediation services, where Google could allegedly have required purchasers of search ad space or intermediation to also purchase DoubleClick's tools.
The Commission found that the merged entity would not have the ability to engage in strategies aimed at marginalising Google's competitors, mainly because of the presence of credible ad serving alternatives to which customers (publishers/advertisers/ad networks) can switch, in particular vertically integrated companies such as Microsoft, Yahoo! and AOL. The market investigation also found that the merged entity would not have the incentive to close off access for competitors in the ad serving market, mainly because such strategies would be unlikely to be profitable.
In any case, it's time to move onto the next big questions:
- How will Google fare in display advertising amid a weaker economy?
- How will Google integrate DoubleClick's system?
- How will Google fare with courting advertisers?
- Will Google be able to use DoubleClick to juice YouTube's advertising? YouTube monetization was a big topic at the Bear Stearns conference on Monday.
- How much ground can Google gain on Microhoo with DoubleClick in the fold?
Update: Google CEO Eric Schmidt has commented on the deal in a blog post. He says:
An immediate task we’ll undertake over the next few weeks is matching and aligning DoubleClick employees with our organizational plan for the business. This will involve determining the right staffing levels for all functions and will ensure that we have the right people assigned to the right responsibilities within Google. We plan to complete this process in the U.S. by early April.
Outside the U.S., the steps we will propose are subject to consultation with employee representatives where applicable, and of course any decisions will be made in accordance with local law. The exact timing of the process outside the U.S. will vary based on the needs and requirements of each region.
As with most mergers, there may be reductions in headcount. We expect these to take place in the U.S. and possibly in other regions as well. We know that DoubleClick is built on the strength of its people. For this reason we’ll strive to minimize the impact of this process on all of our clients and employees.