Google kicks wrong beehive — IAC — which is now stinging over no search neutrality

Serial beehive kicker Google, just kicked the wrong beehive — IAC.

  • Kudos to FT’s Richard Waters for his outstanding front-page story based on an interview with Barry Diller, Chairman of IAC and Chairman of Expedia, on the implications of the Google-ITA deal and Google’s lack of search neutrality.
    • Read the article and visualize the angry bee swarm, whose hive has been kicked and which is pursuing the kicker with a vengence.  

So fixated on stomping on the potential competitive threat posed by Microsoft’s vertical search competitive differentiation strategy, i.e. by buying the dominant airline software supplier ITA, Google apparently did not look down to see that it was trampling on the honey pot of one Google’s biggest and most important partners/allies — IAC and Barry Diller — in buying ITA and abruptly heralding its broader ambitions of invading and conquering the vertical space of its many online content partners.

  • Google made a very big strategic mistake on this deal that will be hard for Google’s legendary PR machine to cover up.  

Why will the IAC sting hurt Google more than other beehives that Google has kicked? 

First, IAC/Diller is one of Google’s largest supposed “partners.”

  • IAC’s signature search engine, Ask.com,with about 2% share, is really a search engine “competitive front” in that most people do not realize Ask.com pays Google for the wholesale use of its search engine. (The Google-Yahoo deal was blocked by DOJ because Google was trying to cartelize search wholesaling/”syndication.”)
  • Moreover, as the FT article reported: IAC “has amassed one of the largest collections of Internet properties,” including Expedia, which would be most threatened by an ITA-enabled Google Travel vertical, because Expedia pays Google “very many hundreds of millions of dollars” a year. 
  • To put this in perspective Google-ITA is akin to a mother eating its young or “the biggest Kingmaker on this earth” taking the property of its online-content-vassals by force –because it can.   
    • This particular Google-online-vassal, IAC, appears to have concluded that Google has unilaterally changed the rules of Silicon Valley Keiretsu “game” so it needs to change sides and fight rather than just pay ever-increasing tribute to the “Kingmaker,” like AOL has done unsuccessfully over the last several years.  

Second, Diller knows how to shout “Search neutrality!” in a crowded Washington theatre.   

  • Until now, Google apologists like Mr. Masnick of Techdirt, have ridiculed those concerned about search neutrality in blogging that “there is no such thing as search neutrality.” 
  • Now one of the leading aggregators of Silicon Valley’s progeny, IAC’s Mr. Diller, is trumpeting to the FT:
    • “I think it is disturbing that Google is moving into serving individual spaces, rather than being search neutral,” Mr Diller said. “It is a dangerous step because it is inevitably going to cause problems with customers and regulatory authorities.”  
  • This is the same IAC that became intimately familiar with the DOJ Antitrust Division this past year in having to make major divestitures and behavioral commitments to get its Live Nation-Ticketmaster deal approved.
    • Given this very recent and painful brush with antitrust authorities, it is particularly telling that Mr. Diller would invite DOJ scrutiny on IAC’s partner Google per the FT article:
      • “Calling the ITA deal “a frontal assault on a core area of internet life”, Mr Diller said that Google was “using its market power” to gain an unfair advantage. He said regulators should deal with the ITA problem “either by conditions or denial”.

    • Besides IAC/Diller’s DOJ contacts and experience, Mr. Diller is also the former boss and mentor to current FCC Chairman Julius Genachowski, who was Mr. Diller’s General Counsel for several years.

      •  This is significant and relevant because the FCC has defended Google strongly and has opposed the concept of net neutrality principles being technology-neutral and applied to a search monopoly like Google that has been sued repeatedly for anti-competitive discrimination: TradeComet, MYTriggers, Foundem, ejustice.FR, Ciao, Navx, My Studio Briefing, etc.

Third, vertical deals may be the soft underbelly of antitrust law, but they are also a huge rats nest of conflicts of interest that will fuel broader calls for a broad monopolization case against Google.    

  • True to form, Google is brilliant in analyzing binary problems, like would Google-ITA deal, by itself, pass antitrust muster — given that it is a vertical deal and that there are not good legal precedents for blocking vertical acquisitions like this.
  • Also true to form, Google has blinders in seeing and appreciating the complexities, nuances, and consequences of its behavior as the largest Internet company on earth with a monopoly in search advertising. 
    • As I wrote when the Google-ITA deal was first proposed, I believe the big implication of the deal is that it puts a big spotlight on the concept of Google’s blatant lack of search neutrality and its anti-competitive discrimination against non-Google-owned content to favor Google-owned content.
    • If Google has kicked the IAC/Diller beehive so hard to get this kind of reaction, there will be other vertically-“disrupted” bees that will join the swarm for calls of a broad monopolization case against Google by the DOJ and the EU.

In sum, the “smartest guys in the [Internet] room” may have outsmarted themselves in the Google-ITA deal.

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