Fightin’ Words from Google on Microsoft's Yahoo Offer

At Google’s blog today, David Drummond, the company’s chief legal officer and senior VP for development, comes out with phasers set to kill against the Microsoft bid for Yahoo. A week ago in Europe, I ended up at a small dinner and a few other events with Drummond. He’s a serious guy with a stoney glare. I’ll bet he could stare down Steve Ballmer in a contest.

Implicit in Drummond’s and Google’s argument is that Microsoft is a closed company in the open internet. He contends that Google is the better agent of that openness. It sounds rather like a presidential debate: Who is the agent of change? Says Drummond:

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?

One should never underestimate the power of Microsoft. Nonetheless, I think the internet’s openness is precisely what has kept Microsoft from monopolizing it, as some feared. I’d say that the precedent of AOL taking over and then slowly killing Netscape is relevant here: I’ll bet that Microsoft is just as likely to destroy as to exploit what it gets from Yahoo. That is often the history of these takeovers, when a company tries to buy the strategy it doesn’t have: AOL and Netscape, Time Warner and AOL, Yahoo and Broadcast.com, and on and on.

And if I were Google, I’d be a bit careful trying to call someone else too big, since some are trying to paint Google as the new overblown boogeyman. In Europe, newspapers are trying to stop Google’s acquisition of Doubleclick for similar reasons (though Reuters says EU approval is likely). Personally, I don’t think regulation is needed in either deal. But Google does:

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.

It’s hard to believe that Google is actually scared of Microhoo but is merely using PR and regulation to try to throw some marbles on the ground in front of them. Google does indeed understand the open internet better than either of these young dinos and that is its greatest competitive advantage. In this case, size doesn’t matter. Openness and smarts do.