Feeds

Google antitrust? Ask the one man who can (almost) answer

To know the unknowable

Choosing a cloud hosting partner with confidence

Exclusive Outside of Google, no one really knows how the company makes its money. We know that most of Google's billions come from AdWords, its search advertising system. But no one really knows how AdWords works. By design, AdWords is a black box. If the world knew how it worked, Google says, unscrupulous advertisers would game the thing.

That may be true. But the black box also makes life difficult for legitimate advertisers. And with Google's search engine now controlling 85 per cent of the market — according to one research outfit — there's an added conundrum: How do you really know if AdWords deserves antitrust scrutiny? Google says that it doesn't control prices on the ad platform, that AdWords is an auction where prices are set by advertisers. But AdWords pushes the boundaries of the traditional auction, and we have no way of knowing just how far it pushes.

The best we can do is ask Preston McAfee.

Preston McAfee is Yahoo!'s chief economist. Overseeing the company's microeconomics and social-sciences research group, he's among those who drive Yahoo!'s "Panama" search-ad system — an attempt to mimic Google AdWords — and he helped rebuild the company's display-ad exchange with an auction-like real-time pricing system. Yahoo! CEO Carol Bartz owns a sweat shirt emblazoned with his math.

McAfee joined Yahoo! in 2007, after 28 years as a professor of economics at the California Institute of Technology and the University of Texas at Austin. Auctions were his speciality. In the early 90s he helped build the simultaneous ascending auction, which governments across the globe have since used to license over $100 million in wireless spectrum. But he was also an authority on mergers and antitrust. He testified as an expert witness in the FTC v Rambus case, in which the Federal Trade Commission charged Rambus with violating antitrust laws, and USA v Oracle, in which the government sued to stop Oracle's acquisition of Peoplesoft over antitrust concerns.

"I've worked on pricing and auctions and antitrust. So when I came to Yahoo!, I thought 'This will pretty much cover everything I've done, except for antitrust,'" he told The Register in an interview earlier this year, before a sly acknowledgement that antitrust eventually came into play as well: "Little did I know."

In 2008, as Microsoft attempted a forceful takeover of Yahoo!, McAfee's company inked a search pact with Google. But Mountain View eventually pulled out of the deal when the Department of Justice threatened an antitrust suit. Microsoft never did acquire Yahoo!, but the two companies eventually signed a search pact of their own. Microsoft Bing now underpins Yahoo!'s organic search, and soon, Redmond's AdCenter will drive Yahoo!'s search ads as well, replacing Panama.

Preston McAfee

Preston McAfee

In objecting to the Google-Yahoo! pact, Microsoft said that the deal would give Google more than 90 per cent of search-advertising market. But according to one source familiar with Mountain View's internal data, Google was approaching 90 per cent of the market even without Yahoo!, and with preliminary investigations underway in the European Union and in Texas over AdWords as well as Google's "organic" search results, the antitrust questions still linger.

Secure remote control for conventional and virtual desktops

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
Google Glassholes are UNDATEABLE – HP exec
You need an emotional connection, says touchy-feely MD... We can do that
Lawyers mobilise angry mob against Apple over alleged 2011 Macbook Pro crapness
We suffered 'random bouts of graphical distortion' - fanbois
Just don't blame Bono! Apple iTunes music sales PLUMMET
Cupertino revenue hit by cheapo downloads, says report
US court SHUTS DOWN 'scammers posing as Microsoft, Facebook support staff'
Netizens allegedly duped into paying for bogus tech advice
Feds seek potential 'second Snowden' gov doc leaker – report
Hang on, Ed wasn't here when we compiled THIS document
Verizon bankrolls tech news site, bans tech's biggest stories
No agenda here. Just don't ever mention Net neutrality or spying, ok?
prev story

Whitepapers

Choosing cloud Backup services
Demystify how you can address your data protection needs in your small- to medium-sized business and select the best online backup service to meet your needs.
Getting started with customer-focused identity management
Learn why identity is a fundamental requirement to digital growth, and how without it there is no way to identify and engage customers in a meaningful way.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.
The Heartbleed Bug: how to protect your business with Symantec
What happens when the next Heartbleed (or worse) comes along, and what can you do to weather another chapter in an all-too-familiar string of debilitating attacks?