Merger Mania

cleland.jpg Interesting post here on Scott Cleland’s Percursor Blog:
A major reason why the stakes are so high in the FTC’s review of the Google-DoubleClick merger is how remarkably fast online advertising is overtaking other advertising industry segments that have been around for decades.

Online ad trends show the huge stakes in the Google-Doubleclick merger, by Scott Cleland, Precursor Blog, Wed, 2007-09-05 17:38.

Interesting especially in that I don’t recall him having any similar trepidations about the AT&T-Bellsouth merger.

He quotes eMarketer as saying that:

a recent report from equity firm Veronis Suhler Stevenson predicts that the Internet will displace television as the No. 1 ad medium by 2011.” [bold added]
Cleland did not provide a link to eMarketer or to VSS.

A little googling finds the VSS press release about its report, which actually says:

Internet advertising is expected to become the largest ad segment in 2011, surpassing newspapers.

New Veronis Suhler Stevenson Forecast: Shift to Alternative Media Strategies Will Drive U.S. Communications Spending Growth in 2007-2011 Period; Consumer Media Usage Expected to Level Off Going Forward, Press Release, Veronis Suhler Stevenson, 7 Aug 2007

VSS says newspapers: not television. Looks like somebody had television on the brain.

Of course, referring to “the Internet” as a single medium is like referring to “radio waves” as a single medium, not taking into account that the RF spectrum is used by a number of different media, including radio, TV, wireless Internet access, ham radio, etc. The VSS report has a longer version of the above sentence that is more perceptive about that:

In what would be a watershed moment in communications history, VSS predicts that Internet advertising – including pure-play websites and digital extensions of traditional media – will replace newspapers as the largest ad medium in 2011.
Although the distinction VSS is making is between online versions of traditional media and everything else on the Internet. Elsewhere they do also distinguish gaming, but they appear to be referring to standalone gameboxes. I think that immersive online gaming environments such as World of Warcraft probably will be recognized as media as distinct from, oh, search, as TV is from newspapers.

Sure, online search and advertising consolidation is an interesting question, and not a new one; see, for instance, Googlezon.

However, there’s a basic difference between advertising consolidation inside the Internet and access consolidation at the edges of the Internet. With only one or two ways to buy access to the Internet in most locations, those two companies (usually the telephone company and the cable company) can limit what people see however they please. Without regulation, that duopoly can choose your search and advertising (and gaming and news and everything else), and there’s no appeal. From that point of view, the Internet really is one medium, because the first-mile access company has a stranglehold on everything in it.

Meanwhile, inside the Internet, if you can get there without such a stranglehold at the access bottleneck, there’s always the possibility that someone may come up with something better than PageRank and rise to compete with Google just like Google rose to compete with Yahoo! Not to mention there still are Yahoo! and ask.com and others. So these are different categories of concerns. Funny how Cleland is only interested in the one that might adversely affect the duopoly.

You know, with real competition in first-mile Internet access, we might see access speeds increase remarkably fast, too, like they have in Japan and Korea.

-jsq