Google Inside

Here is what David Drummond, Senior Vice President, Corporate Development and Chief Legal Officer of Google has to say about the USD$44.6 bid that Microsoft put out on Friday to acquire Yahoo!

The openness of the Internet is what made Google — and Yahoo! — possible. A good idea that users find useful spreads quickly. Businesses can be created around the idea. Users benefit from constant innovation. It’s what makes the Internet such an exciting place.

So Microsoft’s hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It’s about preserving the underlying principles of the Internet: openness and innovation.

Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies — and then leverage its dominance into new, adjacent markets.

Could the acquisition of Yahoo! allow Microsoft — despite its legacy of serious legal and regulatory offenses — to extend unfair practices from browsers and operating systems to the Internet? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the Internet. Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors’ email, IM, and web-based services? Policymakers around the world need to ask these questions — and consumers deserve satisfying answers.

This hostile bid was announced on Friday, so there is plenty of time for these questions to be thoroughly addressed. We take Internet openness, choice and innovation seriously. They are the core of our culture. We believe that the interests of Internet users come first — and should come first — as the merits of this proposed acquisition are examined and alternatives explored.

I think that Microsoft is making a stupid decision to try to acquire Yahoo!, that I certainly believe. However, I do not feel that it is a “hostile” move on Microsoft’s part in order to dominate the current and adjacent markets.

Google has tried to press Microsoft on the market domination topic before, and failed. Does this mean they will fail again? It is certainly not a guarantee they will fail, but I have my doubts that they will success in intervening.

Microsoft has a lot of things going for them, but possibly just as many things going against them. Microsoft has slowly released new products and acquired other companies in the past couple of years.

But please do not be under the impression that this has all been a Google-hates-Microsoft story, it goes both ways. Google has lost a few things to Microsoft which may present a reason to want to “attach” Microsoft.

So where does this leave us? It leaves in a place where the FCC is most likely going to step in again, like it did in the DoubleClick/Google acquisition.