Warning: Google is becoming Microsoft's evil twin

Google's monopolistic tendencies, as seen in its Yahoo search deal, are bad for business, bad for consumers, and bad for IT.

During its year of jousting with Microsoft, Google learned a lot from the software giant. Too bad it picked up Redmond's bad behaviors -- behaviors that are bad for both IT and the public at large.

The Google we all think we know is a kind, innovative, positive force. And because Google was the un-Microsoft, we have better tools for search, better platforms for e-commerce, and a whole new world of Web 2.0 applications.

But now it appears that Sergey Brin and the gang that will do no harm have learned the worst possible lesson from Microsoft: build a monopoly and they will come -- because they have to.

The deal to let Google sell its ads on Yahoo's Web site, and share an estimated $800 million a year in revenue, is bad for business, bad for consumers, and bad for IT. It will raise Web advertising rates by more than 20 percent. It ought to be stopped.

Just what we need: a new monopoly

Simply put, it will give Google/Yahoo a near monopoly on Internet advertising. Don't just take my word for it. Here's what Yahoo CEO Jerry Yang told Microsoft's top lawyer Brad Smith: "If we do this deal with Google, Yahoo will become part of Google's pole, and Microsoft ... would not be strong enough in this market to remain a pole of its own."

Normally, I'd be skeptical of a braggadocio story like this, but Smith recounted the conversation under oath Tuesday as he testified in front of a Senate committee looking into the proposed arrangement.

I think Smith is way too smart to perjure himself, but whether he is or not, there's a lot more evidence that the deal is anticompetitive. At the moment, Google's share of the search-related advertising market is about 70 percent, compared to about 22 percent for Yahoo, leaving just 8 percent for third-place Microsoft, according to SearchIgnite.

Remember, monopolies may be noxious, but they are not illegal in the U.S. What is illegal is abusing that power to the detriment of the market. Sound familiar? Of course. Microsoft used its monopoly in operating systems to unfairly stifle competition in the broader technology market.

SearchIgnite, which sells software that companies use to manage their search advertising, studied the Google-Yahoo deal and found that the cost to advertisers of a click from Yahoo's site will go up by 22 percent if Google sells the ads. (The report is available on SearchIgnite’s Web site, but you need to register for access.)

The analysis compared the cost per click of running the same keyword for the same advertiser in the same position on the page across both Google and Yahoo. It looked at 12 million clicks across 15,000 of the 20 million active keywords managed through SearchIgnite's technology.

We should note that the spike in rates only happens if Yahoo chooses to maximize its profits. But given the sad state of the company and the likelihood that

Microsoft will fail in its Yahoo bid, I'd say that's a pretty good bet. Would you really expect Yahoo and Google not to take advantage of a market share of 90 percent?

What you can do: just say no

Higher costs to businesses are bad enough, but the fallout extends further. As MSN loses more and more market share, Microsoft becomes less and less attractive as an e-commerce platform. Similarly, its tools for both search and e-commerce become less useful as they become less popular.

Let me explain. There's a well-known principle of economics called the network effect. In essence, a network becomes more useful as it attracts more and more users. The most obvious example, of course, is the telephone network. It wasn't very useful when almost no one had a telephone. And the Internet wasn't too useful when there were hardly any Web sites.

The same is true of tools and platforms. The more widely they are used, the more useful they become. The reverse is true as well. And while the impact won't be as dramatic as the likely price hikes, the weakening of Microsoft's e-commerce infrastructure will further discourage competition and stifle innovation.

It may seem weird to follow Microsoft's lead on anything that has to do with monopoly and freedom of choice. But the Yahoo/Google deal stinks. It isn't in our interest, and we should let Congress know it.

(Disclosure: I own a small number of shares in Microsoft.)

I welcome your comments, tips and suggestions. Reach me at bill_snyder@inforworld.com.

Copyright © 2008 IDG Communications, Inc.