Entrepreneur Watch

The Google/Microsoft/Yahoo/DoubleClick/AOL/Time Warner merger!

I have one important thing to say about advertising: Remember relevancy!

But I'll say more anyway.

The Wall Street Journal reports that Microsoft and Google are both bidding for DoubleClick to expand their advertising empires. (Well, in Microsoft's case, it's more like an advertising fiefdom trying to farm the rocky shores of Aran.) They're contending with rumored bids from Yahoo and AOL.

The Journal says the bidding has passed $2 billion, which is pricing it out of Microsoft's range. Geez,  remember when Google paid $1.6 billion for YouTube? I'm sure Microsoft could come up with the bucks.

Merger speculation is more fun than falling naked out of a pine tree. And it's often about as productive. People forget that most big mergers don't work. Remember when AOL "bought" Time Warner?

There's a simple logic to mergers. Combine your traffic and ad customers with mine and, hey, we're a superpower! Like Mighty Mouse!

So why not create a supermightybigmouse by merging Google, MSN, Yahoo, Time Warner/AOL and DoubleClick? That ought to scare the bejesus out of those other media fat cats.

The simple logic is simple-minded. Most of these companies are struggling in online advertising, and acquisitions of struggling companies tend to end up as the equivalent of buying another anchor to make your ship sail faster. The nasty business of merging people, technologies and corporate cultures tends to get in the way.

Except for Google, all these companies forget about the mantra: Relevance, relevance, relevance. Google really does believe its ads add to our online experience, not detract from it. And it does everything it can online to make that happen.

The rest do not. Look at the DoubleClick ads mucking up MySpace. What makes them think I'm interested in "Red Line -- the Movie!" Nothing but annoyance. Same with Yahoo, Msn and AOL. The ads make our online experience worse. What do you think this is, television?

If Google makes an acquisition of, say, DoubleClick, it will gain advertising relationships only. It will have to get rid of management in order to bring the company around to its philosophy of making online customers happy instead of annoyed. What a concept. And if Google wins, the others will claim it's building an advertising monopoly and complain to the SEC that the big kid stole their marbles.

Here's a scenario for you: Google takes DoubleClick and Microsoft takes Yahoo. Microsoft and Yahoo have similar philosophies, they like to irritate customers, cripple free products to force us to upgrade to paid versions, and they're both trying to become media companies saving their butts by creating their own content that their ads cannot support.

Search Insider speculates that Microsoft could take both DoubleClick and Yahoo.

Let's mention Google's mistakes as well. It's entering into the TV ad realm. Won't work, for the same reason that its other offline ad efforts don't work. Google is trying to bring its system of auctioning for ad space to new media. But the auctions aren't what make Google ads great.

Guess what is?

Until Google figures out how to make offline ads relevant to the people seeing them, it has no real advantage. I'm tired of late night TV ads for "male enhancement" products. I'm male enough already.

Is Google too powerful?

Rob Hof and colleagues have written an excellent overview of Google, the cover story in this week's Business Week. It outlines Google's growing power, speculates about how powerful it could get, and argues both sides of the "too powerful" question.

There is a terrific quote that sums it up:

Google's phenomenal ad machine, in short, has the potential to vaporize the profits of any industry that traffics in bits and bytes and to shift the economics to the advantage of Google, its users, and its cadre of partners. "It's Google's world," shrugs Chris Tolles, vice-president of marketing at Topix Inc., which makes money from running Google ads on its news aggregation site. "We just live in it."

Yes we do. Whether Google is too powerful depends on your viewpoint. Certainly in the eyes of Internet portals, software companies, telecommunications companies, Hollywood companies, newspaper and other publishers, and any company that "traffics in bit and bytes" it is too powerful. It is transforming their industries and stealing revenues.

In any disruption due to a powerful new technology, a few leaders emerge, the landscape sifts, companies go out of business and new ones are created. Most of the lawsuits against Google are attempts to stop that inevitable scenario from happening.

To anyone using the internet, Google should not be considered too powerful. Unlike Microsoft, which created a powerful means of locking in customers through its operating system, we are free to use other services if we wish.

And Google will not transform the world alone. It is leading the leaders, and hundreds, if not thousands,  of startups are learning from Google's approach to business on the internet. Even Microsoft is putting big bucks into a program to create software services to run on the internet. Microsoft is a smart company.

The internet is the disruptive entity that will change industries. Google is the catalyst.

On the other hand, is Google becoming so powerful it could end up a target of terrorists bent on crippling the U.S. economy or our self-defense system? The article has a bold statement from George Dyson, author of Darwin Among the Machines: The Evolution of Global Intelligence ... who sometimes advises the Defense Dept. on potential threats: 

Google's vast network, now a substantial piece of the Internet itself, is "very quickly becoming vital national security infrastructure." Should anything happen to the company, he says—through market forces, terrorist attacks on server farms, or something else—that could compromise national defense.

Others think Google's success will increase the backlash against it and stifle its growth:

"Ecosystems always organize to curtail entities that get too powerful," notes Geoffrey A. Moore, author of The Gorilla Game: Picking Winners in High Technology and a managing director at corporate strategist TCG Advisors.

True, but how long will that take? IBM got into the computer business in 1952. Microsoft was started in 1975 and catalyzed IBM's decline until it shifted business strategies in the late 1990s. That's about 35 years in the computer business. Microsoft has been in the software business for about 32 years so far. Google has about 25 years to go.