Not “Googly” Enough?

The growing dominance of Google, and the way the company’s business model continues to evolve is causing angst in the ranks of the smallest of businesses to the most powerful and mighty entities. At issue is the much publicized Google-Yahoo! agreement, which would give them a combined 90 percent share of the search advertising market. Recent developments in regards to the agreement include the U.S. Justice Department’s hiring of famed antitrust lawyer Sanford M. Litvak who supposedly will look over the deal, and quite possibly Google’s broader business practices.

An article in this weekend’s New York Times shows how smaller firms have been caught up in Google’s evolving approach to search advertising. Dan Savage, for example, who runs SourceTool.com went from Google’s “AdSense site of the week” to a site deemed not “googly” enough within a very short period of time. Savage’s company lost hundreds of thousands of dollars in revenues because of these changes, which he says was driven by the fact that sourcetool.com had become a competitive threat to Google (since sourcetool.com itself is a search engine – albeit a specialized one.) Savage is telling his story in a 4000-word letter to the antitrust division at the Justice Department.

(For a quick review of Google’s potential anti-trust woes, this BusinessWeek piece provides a quick lay of the land.)

As this TheStreet.com story points out, big business (as represented by The Association of National Advertisers) is demanding that the Justice Department block the deal – but the real losers are little firms as “Online marketing used to be a place where smaller, niche businesses could compete against the big guys. While major corporations poured their ad dollars into TV and splashy magazine spreads, a small business could afford to buy ads targeted to specific Internet searches, reaching the customers it wanted at a relatively affordable price.”

The story quotes Denise Shiffman who says that “If we can only buy ads from Google
across most of the major publishing platforms, Google has a great deal of power in setting the price, rather than the market setting the price," she says. "Small business will get hurt the most, because they need their dollar to go the furthest." The story then delves into greater detail regarding the impact on smaller businesses – specifically their lack of leverage and marketing dollars in this space.

Internet affordability, accessibility and vibrant innovation remain critically important for small business growth and competitiveness. Naturally, affordability and access to online advertising and internet search advertising is an important issue for entrepreneurs and the health of their firms as they increasingly utilize these tools to find new customers.

Here are some questions we’d like to ask Google and Yahoo! as they move to cement this agreement:

• How will the Google-Yahoo! agreement lead to greater value for small business advertisers – e.g.: more options and choices, better prices, quality of service and effective advertising results?

• Given the mysterious process that currently exists for small businesses in how Google and Yahoo! sell their advertising, how will this agreement make the process more clear and transparent for these advertisers?

• How will the deal lead to greater innovation and investment by the companies to improve and enhance internet search advertising for small firms?

• With success in the search advertising business requiring an ongoing flow of investment dollars, how will Yahoo! remain incentivized to stay competitive (invest and innovate) given the deal structure with Google?

• How do Google and Yahoo! view the competitive environment in their industry? Given the 90 percent market share that the companies will have with the agreement, do they really feel they are competing against other independent search engine companies – or, for that matter with each other – given the structure of their deal?

• Small companies are already disadvantaged when it comes to the online model that search engines employ for advertising – how will this improve? Or, does this matter to the companies (e.g., Google) that sell the advertising?

Indeed, the internet has been a great equalizer in allowing small businesses and entrepreneurs to compete with larger players, and in the global marketplace. The internet has enabled many small business owners to grow, go global and develop new markets because of its affordability, and consumer accessibility to a greater number of businesses offering products and services.

Will the Google-Yahoo! agreement hurt or help small business? Let’s hear from you.

Karen Kerrigan
President & CEO