Now bigger, Google prepares to get smaller

Although yesterday's completion of the Google + DoubleClick deal gives the combined business a big boost against Yahoo and Microsoft, Google is already planning staff layoffs.

"I'm pleased to share the news that we completed our acquisition of DoubleClick today," Google Chairman and CEO Eric Schmidt wrote in his blog yesterday, when the ink on the deal was still barely dry. "An immediate task we'll undertake over the new few weeks is matching and aligning DoubleClick employees with our organizational plan for the business...As with most mergers, there may be reductions in head count. We expect these to take place in the US and possibly in other regions as well."

Beyond the impact upon any Google or DoubleClick employees who will now lose their jobs, fallout from the merger is also being felt by privacy groups that opposed the pact, along with rival companies in the search and online ad industries.

Google's great financial sucess so far has stemmed mainly from revenues from its search advertising business, in which advertisers buy keywords and sponsored listings show up in search results. That contextual advertising business was completely different, Google had argued, from the display advertising business that DoubleClick established, and with which Yahoo and Microsoft both compete.

With both context and display sewn together in one operation, Yahoo and Microsoft may now be perceived as genuinely competing with Google, where in fact their only prior direct competition had been for page views.

On the privacy side, the Electronic Privacy Information Center, Center for Democracy and Technology, and US PIRG filed a joint complaint last April with the US Federal Trade Commission, asking it to halt the acquisition pending an investigation.

After the FTC allowed the buyout to go ahead in December, EPIC gave testimony in January before the European Parliament, urging the EC to establish privacy safeguards as a condition of the merger.

But with another and possibly bigger threat now coming along the pike in the form of a possible merger between Microsoft and Yahoo, EPIC now seems rather resigned to the EC's decision. In a posting on its Web site today, EPIC states rather simply, "The European Commission today approved the proposed Google-DoubleClick merger under its competition authority."

EPIC also contends, however, that "though the Commission did not consider privacy in the merger review, it did reaffirm the obligation of Google-DoubleClick to comply with European privacy laws."