David Drummond testifies at Senate Judiciary Committee (1)

December 12, 2019

Chairman Kohl, Senator Hatch, Members of the Subcommittee. Thanks very much for inviting
me here today. The internet is a dynamic,
competitive environment due to the openness that has always
been its hallmark. Our nonexclusive commercial
agreement with Yahoo will maintain and expand
that competition. It creates new efficiencies that
will benefit consumers, advertisers, and publishers,
while protecting privacy and spurring innovation. When Yahoo chooses to use our
technology, consumers will see more relevant ads that better
connect them to the products and services they’re
interested in. Advertisers will benefit from
better ad matching capability, improving the way that they
reach their customers. And Web publishers who place
Yahoo’s ads on their sites will also see more revenue
from better ad matching. That’s why large and small
advertisers, ad agencies, and publishers have expressed
their support for this agreement, including such names
as Publicis, Digitas, Overstock, and even Microsoft’s
own in-house ad firm, Avenue A Razorfish, who
called it, quote, good news for advertisers. Now, the fundamental point I’d
like to make today is that this agreement promotes ongoing
competition in online advertising. Let there be no doubt about this
point: Google and Yahoo will remain fierce competitors
in search, in online advertising, and many other
products and services. Yahoo has said that it will
reinvest revenue from this agreement into improving
its search engine and its other services. This continued competition
will help fuel innovation that’s good for the internet,
good for internet users, and good for the economy. Now, the fact that this
arrangement is made between competitors is not unusual. Commercial arrangements between
competitors are commonplace online and in
many other industries. And I trust authorities have
recognized that consumers can benefit from these arrangements,
especially when one company has technical
expertise that enables another one to improve their
product quality. And we’re also excited that as
part of this agreement, Yahoo will make its instant
messaging network interoperable with Google’s. That’s a big step forward in
making instant messaging more like email, with users able to
communicate across platforms more easily. Now, I’d also like
to clear up a few things about this agreement. First, unlike the other
alternatives, such as Microsoft acquiring Yahoo’s
search assets or taking over all of Yahoo, this agreement
will not remove a player from the competitive field. Yahoo will remain in the search
advertising business and will continue to be a
vigorous and aggressive competitor. Now, some would also have you
believe that the agreement will result in Google
controlling nearly all of search advertising. The agreement does
no such thing. Yahoo will continue to operate
its own search platforms, sell ads to its longstanding and deep
base of advertisers, and continue to operate its
own ad auction. The agreement merely gives them
the option show Google ads in cases where Google
ads are likely to generate more value. It’s important to note also that
this agreement is limited to the US and Canada, and
excludes emerging fields such as mobile. Second, the agreement does not
increase Google’s share of search traffic because Yahoo
will continue to run its own search engine. So simply put, Yahoo will have
every incentive, as you’ve heard from Mr. Callahan, they
have every intention, to continue to expand their search
advertising business. Third, the agreement will not
set any legal price floor. Microsoft would have you believe
that the additional revenue that Yahoo and Google
might make from the agreement will come solely as a result of increased advertising prices. Nothing could be further
from the truth. And this reflects a fundamental
misunderstanding of how search monetization
actually works. The fact is, we expect that
the primary driver of additional revenue will be
more relevant ads being delivered to more users, who
will then click on those ads in greater numbers. In other words, we’re
not looking to sell ads at higher prices. We’re looking to
sell more ads. This is good for everyone. Users are going to see more
relevant ads, advertisers will connect with more interested
users, and Yahoo and its partners will sell more
advertising space. Fourth, the agreement also
upholds Google’s deeply held commitment to protecting
user privacy. As Google supplies ads to
Yahoo and its partners, personally identifiable
information of internet users will not be shared between
the companies. So let me conclude today with
some frank talk about what’s going on here. The most energetic critic of
this agreement is Microsoft, who, of course, is a significant
competitor of ours and not exactly a mom
and pop shop. This is the same Microsoft whose
CEO said he was going to, quote, kill Google, unquote,
along with a lot of other salty language I can’t
repeat in this setting. And it’s also the same Microsoft
that has a 90% share of operating systems, a 90%
share of productivity software, and an 80% share of
the browser market, a desktop monopoly that Microsoft could
use to harm the next phase of the internet, namely,
cloud computing. Most importantly, this is the
same Yahoo that is actively trying to buy, or at least
destabilize, Yahoo, thereby eliminating one of its
biggest competitors. Now, if you think all of that
gives Microsoft an incentive to oppose this agreement,
you’d be right. Let’s also remember that
Microsoft came before this committee 10 months ago with a
host of extremely dramatic arguments about our acquisition
of DoubleClick, even though they themselves
had recently acquired DoubleClick’s largest
competitor. The regulatory agencies were
right to reject Microsoft’s arguments then, and they’ll be
right to reject them again. So in conclusion, openness,
interoperability, and competition are central to
Google’s culture, the vibrancy of the internet, and the
growth of free markets. Unlike with the desktop,
competition on the internet is always just a click away. Thanks, and I look forward
to taking your questions.

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