Google (Nasdaq: GOOG) was scheduled late last week to defend its proposed $3.1 billion acquisition of online advertising company DoubleClick Inc. in front of the Senate Judiciary Committee. The deal faces opposition from consumer privacy groups that are pressing the Federal Trade Commission to block it unless Google alters its privacy practices.
In addition, Microsoft, which had bid to buy DoubleClick, has raised antitrust concerns about how Google would control much of the online advertising market following the acquisition. On his blog, former securities analyst Henry Blodget has characterized the showdown on Capital Hill as a battle between two tech titans, Google and Microsoft. Current DoubleClick owners Hellman & Friedman and JMI Equity bought DoubleClick in 2005 for $1.1 billion.
“If Google had bought DoubleClick three years ago, when the company could barely give itself away, the deal would have sailed through,” Blodget says.
The U.S. Senate cannot block the deal, but members of Congress can influence the decision of FTC regulators. Already, Rep. Bobby Rush (D-Ill.) wrote the FTC in July that there is “growing alarm over the implications for consumer privacy from the practices of these companies [Google and DoubleClick] especially if they combine.”
DoubleClick places and tracks online ads for its customers, and in the process collects data on consumer Web surfing habits. Google, which operates the world’s largest search engine, retains information on its users’ searches. David Drummond, chief legal officer at Google, was scheduled to address the company’s recent privacy initiatives, according to a written copy of his testimony.
The company has said it will make the search requests it stores anonymous after 18 months and has called for international privacy standards. The acquisition comes as the online ad industry has consolidated. Soon after Google announced its acquisition of DoubleClick, Microsoft said it would buy Seattle-based online advertising firm aQuantive Inc. for $6 billion, and Yahoo Inc. agreed to buy Right Media Inc. for $680 million.
These subsequent deals are evidence of “strong competition in the online advertising space,” says Drummond in his testimony.