Google-Yahoo deal: Washington doesn't understand us

Google-Yahoo deal: Washington doesn't understand us

Summary: Yahoo CEO Jerry Yang made an interesting comment during his appearance at the Web 2.0 Summit this week.

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Yahoo CEO Jerry Yang made an interesting comment during his appearance at the Web 2.0 Summit this week. When asked what caused the pending ad deal with Google to go south, Yang said - among other things - that Washington doesn't understand our industry.

Amen, brother!

Having spent a couple of years working insider the Beltway, I know what it is to have people stare at you with a blank look in their eyes when you talk about anything from 3G networks to Twitter to Blu-Ray. The folks in Washington are smart - don't get me wrong - but there seems to be an unwillingness to gain an understanding about technology. It's so much easier to say, "I don't get tech" and for that to be OK. Maybe no one wants to subject themselves to the ridicule the way Sen. Ted Stevens did when he talked about the Internet being "a series of tubes." For that I can't blame them - but the importance of the tech industry in this country cannot be understated. Consider this excerpt from the Department of Justice's press release about Yahoo and Google ending their proposed deal:

Google and Yahoo! are search engine companies. A search engine allows people to search for information on the Internet. In response to a search request (or query), a search engine presents a Web page listing links to other Web pages that are relevant to the query. Those listings consist of so-called "natural"or "algorithmic" results of the search engine’s canvas of the Web, as well as paid or sponsored search advertisements that are relevant to the query. Google and Yahoo! both display search advertising results above the natural search results, in the so-called "north block," and to the right of the natural search results, in the so-called "east block." Informative, relevant search advertisements provide a uniquely efficient and increasingly important means for advertisers to reach potential consumers. When a person clicks on a search ad, he or she is sent to a Web page designated by the advertiser. An advertiser typically pays the search engine when its advertisement is "clicked on" by a user, and the advertiser hopes the user will perform some action (called a "conversion") when the user reaches the destination page, such as to purchase the advertised product. 

That's a nice, thorough, simplistic explanation of how search advertising works. The statement goes on to talk about third-party syndicated advertising and where Google and Yahoo are positioned in the market. Is this excerpt wrong? No, it's just that... well, I would have hoped that, by now, that the majority of folks out there would know - more or less - how search advertising works. I'm no Madison Avenue advertising executive, but I understand - more or less - how that industry works. I don't fully understand everything about Wall Street or the automotive industry or energy issues - but I'm educated enough to know the basic business practices that make or break those industries.

As we head into 2009, the online advertising business has grown far more complex than just clickable text ads on the results page of a search query. Let's not forget that advertising is still trying to figure out how it will play out on mobile, streaming video, social networks and so on. And yet, Washington is still trying to figure out search advertising. The Google-Yahoo ad deal is a good example of how the fast-moving innovative pace of Silicon Valley can be dragged down by the slow-moving, procedural bureaucratic process that is Washington. When this deal was first announced, Google and Yahoo said they didn't feel they needed regulatory approval. After all, it was a non-exclusive deal. But they wanted to give the government a chance to chime in.

Tick-tock. Tick-tock. In an industry where time is money, Google started to lose patience when Washington took no action on the pending deal, prompting Google CEO Eric Schmdit to make his bold "We're moving forward with or without Washington" statement. But alas, Washington still maintained the upper hand and started throwing red flags, ending with a call to the lawyers to start drafting a suit to block the deal. Again, time is money and Google apparently wasn't willing to waste either.

There's change coming to Washington and, with tech executives named to President Obama's transition team just a day after the election, there's hope that Silicon Valley will finally gain some respect and understanding from the folks in D.C.

On a side note, it appears that Washington has also discovered the Google pretty much dominates the search advertising business. That means Google has become the new Microsoft - the big monopolistic empire that Washington will likely be watching closely from here on out.

Topics: Social Enterprise, Browser, Google

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9 comments
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  • Well, what would expect

    [i]the big monopolistic empire that Washington will likely be watching closely from here on out[/i]

    Well, what would expect from the government?

    When Schmitt makes a statement like [i]?We?re moving forward with or without Washington? [/i]
    the translation is [b]"who does the government think they are? We do not care what they think; we are Google! We do what we please"[/b]

    The government is pretty much forced into slapping them back into place.
    GuidingLight
  • Missing a lot

    Let's see.

    You're quoting a government press release. Government press releases always include as much uncontroversial material as possible.

    Lulling.

    If the government were to announce the end of the world, the press releases would be half a history of prior predictions and the other half hedges of the prediction announced.

    The announcement itself would be something like, "The interstitial event [time between world existing and world not existing] has been projected to occur on approximately Tuesday ..., at 9:32:48 am EST.

    To say that a government press release explains the well known at confusing length is to ... write a government press release.

    To avoid giving that impression, I'll observe:


    Not knowing anything about tech is a sign of high status.

    The reference to internet "pipes" was obviously someone's metaphor for a politician's education. No one criticizing the use of "pipes" has suggested better, that I've seen.

    The Google/Yahoo deal was obviously to stymie Microsoft's interest in Yahoo. When it looked expensive, Google cut.

    And yes, Google is an evil monopolist. I look forward to the EC's efforts to cripple Google for Microsoft's benefit in search, just as the EC has redesigned Windows and given away Microsoft's IP to benefit competitors.

    Maybe the EC can make Google search worse than it is at present. Which would be the greatest technical achievement of these... confident regulators.
    Anton Philidor
    • Google

      Let's all hope Google isn't too big to fail...gulp!
      john.rauscher
  • Market definition too narrow? No narrower than in MS-DOJ

    Regarding the government's antitrust concerns, Yang said: "They have a market definition that is too narrow."

    Tell that to the DOJ's lawyers and Judge Jackson during the Microsoft antitrust trial. They had a market definition which *excluded* the Mac OS. In today's world, especially given Apple's determination to portray the Mac as a better choice than Windows, it is clear that this was way too narrow of a market definition.
    PB_z
    • Irony: Judge Jackson defined away the Mac...

      ... by calling the market Intel-compatible pc's. Apple's move to Intel demonstrated how significant that distinction was not.
      Anton Philidor
    • Judge popped the tech bubble

      It was this flaw in legal reasoning that proclaimed Microsoft to be a monopoly. If you look at Dow Jones, Standard & Poors or Nasdaq, you will see that they dropped almost immediately afterwards the judge ruled on Microsoft. The date was March, 1999.
      sboverie
  • It didn't cost Google anything, but Yahoo.....

    On the other hand has now painted themselves (aka: Jerry Yang and cronies) into a corner.

    Unless the economy magically comes back to pre-February levels and advertising becomes big again then I don't see how Yahoo is going to survive.

    Oh, they can extend the pain by layoffs every 6 months but when the talent is gone so is Yahoo.

    I think the DOJ & FTC did the right thing in this case as Google is already too big and the joint operation would only reduce the number of Internet advertising portals for clients thus raising the cost.

    The irony in this is that once Yahoo is gone then MS is bound to pick up some of their traffic thus increasing MS's share in Internet search and advertising.

    Yang and company totally blew it when they didn't take the MS offer as MS would have been left holding the bag now instead of the Yahoo stockholders.

    Can you say "Penny Stock"??
    dunn2
  • Government doesn't understand tech

    The government has been so far behind the trends for so long that it is surprising government can function. In the early 1990's I had to support a couple of big contractors that made radar systems and similar things for the government. The government insisted that time tracking be done on 80 column punch cards. My take on that was that some bureaucrat demanded a hard copy of time tracking and the hard copy that he would accept was punched cards.

    Another example is the early days of the space shuttle. The shuttle had 3 onboard computers that were modified IBM 360. If the wind blew the wrong way too strongly or too much, the computers would have to be reprogrammed using punched cards.

    I have not heard that punched cards are used anymore, but would not be surprised if they are used somewhere.

    By the way, it is a real weird trip to work on a machine that is older than you and still working, like the IBM 026 and 029 keypunch machines.
    sboverie
  • RE: Google-Yahoo deal: Washington doesn't understand us

    It is interesting that the big older Blue Chip companies like AT&T and Pacbell was allowed to merge, as several oil giants?

    It seems that how much money and power you have is more important than then good of the public.
    as901