Rivals appeal to feds to slow Google dominance

Opponents see one last chance to cut Google Inc. off at the pass before the Internet giant attains total global dominance - by staging an old-fashioned regulatory ambush. The behind-the-scenes battle over federal approval of Google's proposed $3.1 billion acquisition of DoubleClick Inc. could shape the Internet's future. At stake is control of the $21.7 billion online advertising market. ''Google dominates half the online ad market. It wants the other half,'' said Jeffrey Chester, executive director of the Center for Digital Democracy, which has joined other public-interest groups in asking the Federal Trade Commission to block the deal unless privacy safeguards are put in place. ''Once it does that, it is unstoppable.'' Blair Levin, an analyst at brokerage Stifel, Nicolaus & Co., said competitors such as Microsoft Corp. are trying to take advantage of the edge they enjoy in the nation's capital over Google, a relative newcomer to Washington. Competitors and public interest groups sprang into action earlier this year when Google moved to solidify its dominance as the leading Internet search engine and provider of text ads by buying DoubleClick Inc., a leading online advertising company. Led by Microsoft, which lost out in the bidding for DoubleClick, they complained to federal officials that Google was on the verge of amassing too much power over Internet advertising and the trove ofpersonal information that comes with it.

''By putting together a single company that will control virtually the entire market . . . Google will control the economic fuel of the Internet,'' Microsoft General Counsel Bradford Smith said two days after the purchase was announced. Microsoft was joined in the fight by AT&T Inc., which increasingly sees Google as a competitor in the online and wireless markets. Not lost in the debate is the fact that Microsoft and AT&T have faced their own antitrust issues. The Federal Trade Commission announced in May that it had launched an antitrust review of the Google-Double Click deal. The European Commission announced recently that it would conduct a review, as well. Key Senate and House lawmakers plan to conduct hearings. ''This is the first time where government actually holds the key to Google moving forward,'' Levin said. He believes the FTC would approve the deal but possibly with conditions that would limit Google's ability to access DoubleClick's data about customers and thus making the acquisition less valuable. Google makes its money by selling targeted text advertisements. They appear alongside results from its industry-dominating search engine and on thousands of Web sites, which contract with Google and share the revenue from those ads. Google is estimated to capture 27.4 percent of online advertising market, according to eMarketer. DoubleClick doesn't sell ads but provides software that delivers large, display advertisements - the ones with pictures and graphics that appear at the top of Web sites or in pop-up windows - and tracks who sees them. Both companies gather information about users to help better target advertisements. Display ads are a growing share of the online market, 22 percent last year, up from 20 percent in 2005, according to the Internet Advertising Revenue Report. So, large Internet companies have been scrambling to buy online ad companies. Google has argued that the market is still evolving, pointing to the deals done by its competitors in its wake. After Google announced its purchase of DoubleClick, which sold for only $1.1 billion two years ago, Microsoft spent $6 billion in May for aQuantive. Yahoo and AOL also have made purchases recently to shore up their online advertising activities. Google is fighting back. It has expanded its Washington presence and has five senior lobbyists on staff. To help make its case with regulators, Google also has hired the law firm of Brownstein Hyatt Farber Schreck, according to federal lobbying records. Among its lobbyists is Makan Delrahim, who was deputy assistant attorney general in the antitrust division of the Justice Department from 2003 to 2005. But Google's opponents are working hard against the deal. Scott Cleland, president of Precursor, a technology research and consulting company, produced a 35-page study arguing Google and DoubleClick are really the only competitors in a broader market of ''targeted online advertising.'' ''The more people learn about this merger the more concern is going to develop,'' Cleland said.