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An Antitrust Analysis of Google's Proposed Acquisition of DoubleClick


Robert W. Hahn


University of Oxford, Smith School; Georgetown University

Hal J. Singer


Economists Incorporated

February 1, 2008

AEI-Brookings Joint Center Related Publication No. 07-24

Abstract:     
By serving as a key revenue source for online content providers, online advertising has been instrumental in the development of innovative websites. Continued innovation among content providers, however, depends critically on the competitive provision of online advertising. Suppliers of online advertising provide three primary inputs - (1) advertiser tools, (2) intermediation services, and (3) publisher tools. Certain suppliers such as Google provide a platform that combines the inputs into one integrated service. In this paper, we focus on the overlapping products sold to advertisers by Google and DoubleClick - namely, the supply of advertiser tools. Because the supply of advertiser tools is highly concentrated, Google's proposed acquisition of DoubleClick raises important questions for antitrust authorities. Proponents of this acquisition argue that Google and DoubleClick do not compete - that is, buyers of search-based or contextual-based advertising (the two advertising channels in which Google participates) do not perceive graphic-based advertising (the advertising channel in which DoubleClick participates) to be substitutes. Thus, they conclude that the proposed acquisition would not lead to higher prices.

In this paper, we examine economic evidence and legal precedent to help identify the relevant antitrust product market for Google's proposed acquisition of DoubleClick. According to the Federal Trade Commission and Department of Justice Horizontal Merger Guidelines, product markets are defined by the response of buyers to relative changes in prices. To inform how buyers - in this case, online advertisers - would respond to relative changes in price across the three online advertising channels (search, contextual, and display), we analyze the results of a survey of online retailers. The survey suggests that (1) a significant share of online advertisers would substitute among the three channels in response to relative changes in prices, and (2) a significant share of DoubleClick customers would turn to Google before any other supplier in response to an increase in the price of DoubleClick's advertiser tools. In particular, the survey indicates that a combined Google-DoubleClick would likely have a greater incentive to increase the price of DoubleClick's advertiser tools relative to a stand-alone DoubleClick offering.

Number of Pages in PDF File: 44

Keywords: Google, DoubleClick, antitrust, online advertising, market definition, search, merger analysis

JEL Classification: K21, L40, L41, G34, L11

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Date posted: September 27, 2007 ; Last revised: October 25, 2012

Suggested Citation

Hahn, Robert W. and Singer, Hal J., An Antitrust Analysis of Google's Proposed Acquisition of DoubleClick (February 1, 2008). AEI-Brookings Joint Center Related Publication No. 07-24. Available at SSRN: http://ssrn.com/abstract=1016189 or http://dx.doi.org/10.2139/ssrn.1016189

Contact Information

Robert W. Hahn (Contact Author)
University of Oxford, Smith School ( email )
Oxford
United Kingdom
Georgetown University
Georgetown Center for Business and Public Policy
Washington, DC 20057
United States
Hal J. Singer
Economists Incorporated ( email )
2121 K Street N.W.
Suite 1100
Washington, DC 20037
United States
202-747-3520 (Phone)
HOME PAGE: http://www.ei.com/viewprofessional.php?id=71
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