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Google Plays MonopolyWhy the search company's ad deal with Yahoo is bad for the Web.

By Farhad ManjooPosted Monday, Oct. 6, 2008, at 5:37 PM ET

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The trouble is that Google doesn't give much guidance on how it calculates relevance. This measure—what Google calls a "quality score"—has been the subject of enormous controversy among advertisers. Google's secret algorithms can decide that one shoe company must pay at least 10 cents for the keyword "shoe" while another must pay 50 cents. To advertisers, these price differences often seem arbitrary, unfair, and even self-serving. Worse, Google isn't very good at explaining itself to advertisers who feel slighted by its pricing decisions. Last month, New York Times columnist Joe Nocera recounted the saga of Dan Savage, an entrepreneur who runs Sourcetool.com, a directory of sites that sell industrial products. Google hiked up Savage's minimum price for ads overnight, and when he pressed the company for an explanation, he was told to "please refrain from repeatedly contacting our team." Savage—who filed a complaint with the Justice Department—now believes that Google was trying to hurt his company in order to prop up Business.com, a Sourcetool rival that's also one of Google's advertising partners.

Did Google hurt Sourcetool on purpose? Probably not—but Savage's concern suggests the kind of fears we'll see if Google were to dominate Web advertising even more than it does today. As it is, advertisers like Savage have few options when they're looking to run ads; Google is already the biggest game in town. But if Google begins to run Yahoo's ads, too, there'll be no recourse—you either take Google's terms or forget about anyone seeing your ads.

It's not only advertisers who ought to worry about Google gobbling up Yahoo: A more powerful Google will also hold greater sway over the millions of Web sites that depend on advertising for their revenue. Many big sites—newspapers and online magazines like Slate, for instance—and millions of small sites (blogs, e-commerce sites, startup firms) run ads provided by Web companies like Google, Yahoo, and Microsoft. As Michael Arrington—the founder of the tech industry blog TechCrunch, one of the most successful new publishers on the Web—points out, Google doesn't share much revenue with sites that run its ads. "The only thing keeping them even close to honest is the fact that Yahoo and Microsoft will occasionally compete for those partners," he argues. Once Yahoo is gone, Google will be able to decrease the revenue given to blogs and other small publishers—a potentially huge blow to a vibrant new medium.

Despite these fears, few in the industry believe that the government will stop the Google deal. When it came into office, the Bush administration rolled over on prosecuting Microsoft, and since then, it has shown little interest in fighting monopolies. The government raised few objections when Google acquired the advertising firm DoubleClick, and Google has been lobbying the government aggressively to approve the Yahoo deal.

Google is also helped by the fact that its biggest adversary, and the biggest critic of the Google-Yahoo proposal, isn't exactly the most admirable company in tech. Given Microsoft's own sorry antitrust history, its promise to help the government fight the deal is something like Hannibal Lecter counseling the FBI on how to catch a serial killer. But if you worry that Google is taking over the world, it's hard not to cheer for Steve Ballmer's Lecter. Google's critics—not only its search rivals but also entertainment companies, publishers, and consumer advocacy groups who've all become alarmed over its growing market power—see the deal as their best chance to initiate a vast antitrust charge against its operations. As Brad Smith, Microsoft's general counsel, told a congressional panel in July, "Never before in the history of advertising has one company been in the position to control prices on up to 90 percent of advertising in a single medium. Not in television, not in radio, not in publishing. It should not happen on the Internet."

At a press conference last month, Google CEO Eric Schmidt argued that the only people who are really worried about the deal are folks who've been brainwashed by Bill Gates and Steve Ballmer. "We are quite certain Microsoft is busy helping everyone get upset about things," he said. That's not really true, but Schmidt's Microsoft reference may remind lawmakers that in the tech industry, giants fall quickly. Ten years ago, Gates and co. looked indomitable. As we look back, though, it's clear that Microsoft let its power get to its head. Blinded by the profits it was reaping from Windows, it didn't notice other innovations coming along—the Internet, Web software, and the awesome profits to be had in search. Google sees itself as a wiser company. But in pushing to join forces with its nearest rival, it may be repeating the last tech giant's biggest mistake.

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Farhad Manjoo is Slate's technology columnist and the author of True Enough: Learning To Live in a Post-Fact Society. You can e-mail him at and follow him on Twitter.

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