Google: Microsoft-Viacom deal helps our DoubleClick defense

At a Capitol Hill hearing in September, Microsoft's top lawyer skewered the proposed merger of Google and DoubleClick as a sure path to an online advertising monopoly.

"One company will become the overwhelming dominant gateway that connects the universe of online advertisers to the millions of websites that display ads," general counsel Brad Smith told a U.S. Senate antitrust panel in his prepared remarks.

Now Google is pointing to a new, $500 million ad deal between Redmond and Viacom on Wednesday as proof positive that there's plenty of competition in the online ad market--a not-so-thinly-veiled reminder that its planned purchase deserves the green light.

"We have argued all along that the online advertising space is highly competitive and that there are no barriers to switching," spokesman Adam Kovacevich told CNET News.com. "While some have apparently argued otherwise, today's announcement would seem to suggest that those arguments are flawed."

The arrangement with media conglomerate Viacom will lock the into Microsoft's ad-serving platform for five years. All told, Redmond says its Atlas advertising unit acquired as part of its $6 billion buy of ad-tech firm Aquantive has signed up more than 50 new customers since May. (Atlas helps companies handle their own advertising.)

Microsoft spokesman Jack Evans disagreed that the Viacom agreement pokes holes in his company's vocal arguments against the Google-DoubleClick deal, which is valued at $3.1 billion and is currently in what many predict are the final days of Federal Trade Commission review.

"The simple fact is that our transaction covers a small part of the Web and is good for competition, while the Google-DoubleClick merger would hurt competition and consumers by raising substantial barriers and strengthen the parties' already dominant positions," he said.

Besides, it was not an easy proposition to get Viacom to switch from DoubleClick, even without it being a part of Google, Microsoft's Yusuf Mehdi, senior vice president of strategy and partnerships, said in a telephone interview.

"It's quite expensive," Mehdi said of Viacom's decision to switch from DoubleClick to Microsoft's ad platform. "It's a lot of work. We've signed up to pay the costs for all that work. It's not an easily replicable thing."

And if Google and DoubleClick are allowed to combine, he added, they would control more than 80 percent of online advertising, by Microsoft's estimates, making ad-platform switches even more difficult.

Still, there are signs that other factors are at work in the Viacom-Microsoft partnership. If any company would be willing to endure short-term costs to do business with Microsoft rather than Google, it would be Viacom. (For the record, it wasn't immediately clear what those costs are.)

After all, the owner of Comedy Central and MTV, among other properties, has sued Google's YouTube for more than $1 billion in damages, alleging massive copyright infringement of its TV shows. The Financial Times quoted Viacom CEO Philippe Dauman as saying Wednesday that he was "very impressed with Microsoft's attitude toward copyright protection."

Meanwhile, Microsoft has been trying to increase the size of its ad network to better compete against Google. Combined with the remnant Viacom advertising that Microsoft will get to sell as part of this deal, the company has increased its inventory by about 10 percent, Mehdi said.

On the ad syndication side, Microsoft has also recently signed deals to handle advertising directly for Digg, CNBC and Facebook.

CNET News.com's Ina Fried contributed to this report.