MS + Yahoo = Antitrust bait?

The Microsoft monopoly alarm is being raised, but few will listen given Google’s position in the marketplace

What is a monopoly? Wikipedia states, “In Economics, monopoly (also ‘pure monopoly’) is a persistent situation where there is only one provider of a product or service in a particular market. Monopolies are characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods. Alternatively (a modern and less common usage), it may be used as a verb or adjective to refer to the process (see Monopolism) by which a firm gains persistently greater market share than what is expected under perfect competition. The latter usage of the term is invoked in the theory of monopolistic competition.”

Is Microsoft engaging in a monopolistic practice by being allowed (if the U.S. Congress Judiciary Committee agrees on February 8) to purchase Yahoo? Not if you consider the “one seller” aspect that Google and others offer the competition. So even if Microsoft buys Yahoo, it isn’t a monopoly if there is some form of competition out there, and Google is certainly competition. But that doesn’t mean Microsoft faces “fair” competition — after all, it has the ability to spend and spend to trump the existing competitors. (Then again, the Yankees have been accused of this too — spending more money to get the best players. And yet, although they have a great winning streak — winning 26 World Series championships — they don’t win every year, and haven’t won since 2000.)

Is Google happy about this move? Not quite. Using the word “troubling,” it wants regulators to scrutinize the deal. Google is concerned that Microsoft can “unfairly limit the ability of consumers to freely access competitors’ email and instant messaging services.” That is a reasonable concern, although Microsoft knows that it is constantly under the microscope and probably will tread lightly in this regard.

In terms of at least one portion of the market (search, which represents the bulk of Google’s revenue), Steve Ballmer said it best: “Google’s clearly got a dominant position. They’ve got about 75 percent of paid search worldwide.” So in actuality, it is Google that is holding the monopoly position in that particular market. If anyone else jumped in to be the No. 2 competitor, it would be seen as fair, but somehow when Microsoft does it, it’s viewed as a monopoly.

However, David Drummond, Google’s senior vice president, says it is more than a business issue: “It’s about preserving the underlying principles of the Internet: openness and innovation.” It’s commendable that anyone is worried about the “underlying principles” of the Internet (if that is his real concern). He forgot to mention, however, a few of the other cornerstones of the Internet: military (see DARPA), commercialism, pornography …

Although I am a Microsoft evangelist the majority of the time, I don’t believe this acquisition should have Google worrying at all.

True, fourth-quarter 2007 profits were not what everyone hoped for Google. But compared to where Yahoo has been going (down the tubes), the move comes as Yahoo’s business continues to decline. Jeffrey Schwartz wrote in RedmondMag.com: “The company earlier this week reported pullbacks in its business and plans to lay off 1,000 employees. Archrival Google, meanwhile, announced last night fourth quarter revenues of $4.83 billion, an increase of 51 percent year over year.”

Personally, I use Google every day. I use a Gmail account; I use Google search in favor of all the other search engines (including Yahoo and Microsoft Live), and I use Google documents all the time. I love how easy it is to use the tools Google has provided, and I feel comfortable with what I know works for me. I think, currently, it has the better product. And I also have a Yahoo account and have tried all the other types of services available. But I come back to Google. So I have no problem with Microsoft spending some money to buy Yahoo. I don’t think it will affect my use of Google tools whatsoever. Unless the Microsoft/Google combo comes up with a better product. And isn’t that the point? A little healthy competition (or unhealthy competition) never hurt anyone.

What’s your opinion? Do you think the proposed acquisition will stimulate competition or build a monopoly?