Approval for Admeld Deal Could Make Google Another Category Killer

As the Federal Trade Commission continues its investigation into allegations that Google is abusing its monopoly power to the detriment of consumers and innovation, another agency appears poised to approve Google’s latest step toward global domination of the Internet, according to a report by AllThingsD.

The anonymously sourced online story says the Justice Department is preparing to approve Google’s acquisition of Admeld, though “it’s unclear whether the DOJ will impose any restrictions on the deal.” Remember, conditions would mean that the Justice Department first finds that the transaction would violate antitrust laws, and then forces Google to accept conditions to mitigate those harms (exactly what happened with DOJ’s review of Google’s acquisition of ITA Software).

We already know Google has monopoly power in search advertising. Google Chairman Eric Schmidt admitted as much, “that we’re in that area” in his testimony before the Senate Antitrust Subcommittee on Sept. 21, 2011.

So what is the Admeld deal really about for Google? The company is seeking to expand its monopoly power in search and search advertising to other aspects of online advertising, where Google is already the 800 lb. gorilla between its acquisition of DoubleClick in 2008, and Google’s multi-billion-dollar annual AdSense business.

The next frontier for display advertising is ad exchanges, which function as clearinghouses that aggregate and sell ad space for websites online. Websites increasingly rely on exchanges for huge chunks of their ad inventory. Google is already on a glide path to becoming the dominant display ad exchange, and one of the only few companies standing in Google’s way, until the acquisition was announced, was Admeld.

Now, if the AllThingsD report is accurate, Google will gobble up its competitor Admeld, just like it did YouTube, DoubleClick, AdMob, and ITA, and like Google tried to do with Yahoo!, until the Justice Department stepped in to block that deal in November 2008.

Allowing Google to acquire Admeld and the network effects associated with ad exchanges will only serve to further insulate Google’s own ad exchange from competition, and could tip the market for online display advertising irrevocably in Google’s favor.

If that happens, the FTC will bear even more responsibility to closely scrutinize Google’s overall business operations and what the company’s plans for the Internet’s future will mean for the rest of the Internet’s users looking in from the outside.