Posted by Pablo Chavez, Policy Counsel

Later today David Drummond, our Senior VP for Corporate Development and Chief Legal Officer, will take to Capitol Hill to testify before the Senate Judiciary Committee about the latest developments in the online advertising industry, including our acquisition of DoubleClick. You can read David's complete testimony here.

David will tell the committee about some of the benefits of online advertising generally:

"The online advertising business is complex, but my message to you today is simple: Online advertising benefits consumers, promotes free speech, and helps small businesses succeed. Google’s acquisition of DoubleClick will help advance these goals while protecting consumer privacy and enabling greater innovation, competition, and growth."

"In our experience, our users value the advertisements that we deliver along with search results and other web content because the ads help connect them to the information, products, and services they seek. Simply put, advertising is information, and relevant advertising is information that is useful to consumers. The advertising we deliver to our users complements the natural search results that we provide, because our users are often searching for products and services that our advertisers offer. Making this connection is critical. In fact, we strive to deliver the ads that are the most relevant to our users, not just the ones that generate the most revenue for us."

He'll also talk a bit about the competitiveness of the online ad space:

"Some have asked whether this acquisition raises competition concerns. We are confident – and numerous independent analysts have agreed – that our purchase of DoubleClick does not raise antitrust issues because of one simple fact: Google and DoubleClick are complementary businesses, and do not compete with each other. DoubleClick does not buy ads, sell ads, or buy or sell advertising space. All it does is provide the technology to enable advertisers and publishers to deliver ads once they have come to terms, and provide advertisers and publishers statistics relating to the ads."

"The simplest way to look at this is by way of analogy. DoubleClick is to Google what FedEx or UPS is to Amazon.com. Our current business involves primarily the selling of text-based ads – books in our analogy. By contrast, DoubleClick's business at its core is to deliver and report on display ads."

"Our acquisition of DoubleClick does not foreclose other companies from competing in the online advertising space. Rather, the transaction is just one of several that underscore the strong competition in the online advertising space...Each of the acquisitions following our purchase of DoubleClick demonstrates that there are many sophisticated, well-financed, and competitive companies that believe that the online advertising space merits more investment and remains open to strong competition."

And since some have raised questions about privacy in connection with this acquisition, he'll address those issues as well:

"Google's bottom line is this: We believe deeply in protecting online users’ privacy, and we have a strong track record of doing so. We are constantly working to innovate in our privacy practices and policies. Some have asked questions about privacy protections in connection with the DoubleClick acquisition, but for us privacy does not begin or end with our purchase of DoubleClick. Privacy is a user interest that we've been protecting since our inception."

"We make privacy a priority because our business depends on it. If our users are uncomfortable with how we manage the information they provide to us, they are only one click away from switching to a competitor’s services. If you don't believe me, recall that before Google, users clicked on an earlier generation of search engines like Excite, Altavista, Lycos, and Infoseek – each extremely popular in its time. User interests effectively regulate our behavior, and user trust is a critical component of our business model."

You can read more about why we decided to buy DoubleClick, some of the recent steps we've taken to strengthen privacy, and the recent flurry of online ad acquisitions. Here's also some background on the acquisition, and comments that newspapers, independent analysts, and advertising industry leaders have made about this acquisition. Watch this space later for video from the hearing.

UPDATE (6:17 p.m. ET): Check out video below of David Drummond's testimony:

Posted by Pablo Chavez, Policy Counsel

I've blogged before about Google's view that our acquisition of DoubleClick will lead to better, more useful online advertising for consumers, and more choices for advertisers and website publishers. We have also seen that the acquisition has been followed by significant investment, innovation, and competition in the online advertising world. Just yesterday, for example, Microsoft announced that it had added 20 new advertising clients after closing its acquisition of aQuantive, a DoubleClick competitor. We see this as yet more evidence that companies are competing in the online advertising space and the free market.

With the the Antitrust Subcommittee of the Senate Judiciary Committee taking a look at online advertising later this week, we thought you'd appreciate seeing what several independent folks have said about competition in the online advertising space and about the DoubleClick acquisition:

Los Angeles Times - Editorial
"The market for advertising online is still in its infancy… And neither Google, DoubleClick nor anyone else dominate the emerging market for video advertising, which in the broadband era may emerge as the most effective and lucrative sector yet." (Los Angeles Times, Editorial 4/17/2007)

Financial Times - Editorial
“Google and DoubleClick are different kinds of business. Buying DoubleClick does not increase Google's share of the total web audience, a more meaningful measure of the market.” (Financial Times, Editorial, 5/25/07)

James B. Stewart, Columnist, Wall Street Journal
"For starters, Google and DoubleClick aren't direct competitors. Google specializes in online search and accompanying text ads. DoubleClick specializes in so-called web display advertising, especially video. It's hard to see how the combined companies would dampen competition when they don't compete to begin with." (Wall Street Journal, 4/18/2007)

Thomas Eisenmann, Harvard Business School
“If the merger is approved ‘there ought to be room for multiple players’ in the online advertising space…’Natural monopolies are very rare, and this is not one of them.’” (Technology Daily PM, 7/18/07)

Andrew Frank, Analyst, Gartner
"'It seems there is a clear distinction between Google's business and the business it is entering with the acquisition of DoubleClick,'..If so, Google is not acquiring extra market power through the proposed deal." (Financial Times, 4/16/2007)

John Deighton, Professor, Harvard Business School
"Google has had a long history of resisting the impulse to exploit individual surfing histories. I think they understand that it's even more important to show that restraint now." (Los Angeles Times, 4/17/2007)

Gene Munster, Senior Research Analyst, Piper Jaffray
“Fears that advertisers are worried about sharing info [between Google and DoubleClick] are likely overblown.” (Note, 4/23/07)

Posted by Pablo Chavez, Policy Counsel

Online advertising is still a relatively new industry, and the recent flurry of acquisitions in this space – by Google, Microsoft, Yahoo, AOL, and other companies – has drawn even more attention to the issues it raises, including privacy. That's why we're glad to see that the Federal Trade Commission is planning a Town Hall for November 1 and 2 to look at some of the issues surrounding online behavioral advertising. The public discussion of behavioral advertising and its privacy implications is an important one, and we believe that it is one best had with a broad set of stakeholders and a full picture of the online advertising business.

With that in mind, late last week we sent comments recommending that the Town Hall address two additional topics. We did so in response to the FTC's request for suggested Town Hall topics in addition to the very timely questions it already plans to pursue. Specifically, our letter recommended that the FTC consider:

• The rapidly changing business landscape of online advertising, and the role it plays in providing free, accessible, user-friendly, and high-quality content to consumers. Since 2000, annual online revenue in the U.S. alone grew from $8 billion to over $17 billion. The growth in online advertising has also spurred innovation, competition, and investment in the online advertising space – all of which produce consumer benefits in the form of more online resources and more relevant information. In our experience consumers value the advertisements that we deliver along with search results and other web content, which connect them to the information, products, and services they seek. Simply put, advertising is information, and relevant advertising is information that is useful to consumers.
  
  
• The ways in which online advertising is contributing to a healthy and vibrant small business community. We know that many website owners can afford to dedicate themselves to their sites more fully – and sometimes full-time – because a significant percentage of the revenue we earn from advertising ends up in their hands as publishers of blogs and other websites and our advertising partners. In 2006, Google paid $3.3 billion in revenue to our partners. Our advertising network helps small businesses connect in an affordable and effective manner with otherwise unreachable consumers, including consumers in small, remote, or niche markets. An advertiser decides exactly how much money to spend on advertising, and can tie its spending directly to the response of a potential customer.

Of course, we continue to focus our attention on the privacy of our users, and privacy ought to be an important component of the Town Hall. We recognize that user, advertiser, and website publisher trust is critical to the success of our business, and we've taken a number of recent steps to help bolster our already strong privacy policies. We also think our acquisition of DoubleClick provides an opportunity for us to bolster privacy even further.

We're looking forward to talking more about these issues at the Town Hall.

Posted by Andrew McLaughlin, Director of Global Public Policy and Government Affairs

Among the many excellent things about Australia (think: kangaroos, koalas, wombats, emus, kookaburras, the Great Barrier Reef, the Sydney Opera House, the Go-Betweens, shiraz, and footy) is this: it is one of a handful countries where voting by all citizens is compulsory. Well, it's an excellent thing if you're a political junkie (like me), and the result is an Australian political culture that features an astute and engaged electorate. At the moment, Australians are highly attuned to politics, as the country prepares for a federal election before the end of this year.

While voters wait for Prime Minister John Howard to call the election, they can stay informed at Google Australia’s election website and on the Australia Votes YouTube channel, which we launched today.

The Internet is starting to live up to its potential to deepen political debate and engagement; these tools are a useful example of convergence, as the mechanisms of electoral democracy and political debate move online. Our hope is that they enable Australian voters to learn more about the issues and candidates, to compare and contrast, and to share their own views.

The Australian election website is designed as a central location for Australian federal election video, news, trends, maps, and Google Earth layers. We have created a Picasa Web Album to showcase some of these world-first tools. And just like your Uggs, this product was developed in Australia.

Check out all the details at the Google Australia blog.

Posted by Peter Fleischer, Global Privacy Counsel

As I've noted before, everyone has a right to privacy online -- and governments have an obligation to keep their citizens safe. Yet despite the international scope of even the most ordinary Internet activity, the majority of the world's countries offer virtually no privacy standards to their citizens and businesses. And even if every country in the world did have its own privacy standards, this alone would not be sufficient to protect user privacy, given the web's global nature. Data may move across six or seven countries, even for very routine Internet transactions. It is not hard to see why privacy standards need to be harmonized and updated to reflect this reality.

The problem of international data flow and privacy is not new. Potential problems were identified as early as the 1980s. At that time, the Organization for Economic Cooperation and Development (OECD) established the first "fair information principles." Twenty years after they were first established, OECD guidelines are now but one voice in a large chorus of local privacy standards.

There are a number of factors that contribute to the need for global privacy standards today more than ever before. First, globalization. Today, all business is potentially international business, and this scale calls for organizations and those within them to operate in multiple countries. As data crosses geographic boundaries, the policies controlling it change.

Second, the growing recognition of privacy rights creates a need for global standards. Experts are not the only ones talking about privacy anymore; now ordinary citizens have entered into the debate. Increased attention to privacy among the general public has resulted in more national and local privacy laws which, in turn, have increased the fragmentation of global privacy policy.

Third, technological development also contributes to the need for global privacy standards. As technology develops, more and more information travels around the world faster and faster each day. Development of this kind increases the productivity of business and consumer transactions, but can potentially endanger privacy protections.

In addition to these factors, new threats to individual privacy emerge everyday and, without global standards, solutions to these problems will continue to be fragmented and ineffectual. All of these factors contribute in making the status quo of localized policies no longer acceptable. Countries cannot and will not be able to write effective privacy legislation without global cooperation. And as long as there are no global standards for privacy protection, individuals and businesses will remain at risk as they operate online.

In light of this, Google is calling for a discussion about international privacy standards which work to protect everyone's privacy on the Internet. These standards must be clear and strong, mindful of commercial realities, and in line with oftentimes divergent political needs. Moreover, global privacy standards need to reflect technological realities, taking into account how quickly these realities can change.

Although this seems a tall task, we are luckily not without guidance in the creation of global privacy standards. To my mind, the APEC Framework is the most promising foundation on which to build. The APEC framework already carefully balances information privacy with business needs and commercial interests, and unlike the OECD guidelines and the European Directive, it was developed in the Internet age. Moreover, APEC involves countries with very divergent privacy traditions: from Peru to the Philippines, from New Zealand to Vietnam. Surely, if privacy principles can be agreed upon within the 21 APEC member economies, a similar set of principles could be applied on a global scale.

Whatever route we choose to pursue in solving the problem of global privacy standards, there is no question that the problem must be solved. It is time that data -- the most globalized and transportable commodity in the world today -- become treated in a similar way as other subjects of international trade. It is time that privacy policy, like the data its meant to protect, become global.

Posted by Chris Sacca, Head of Special Initiatives

As loyal readers of this blog know, earlier this year the Federal Communications Commission took some significant steps to giving consumers more choices when it comes to high-speed wireless Internet access. The FCC set rules for the upcoming 700 MHz spectrum auction which said that consumers would have the right to download any software they want, and that consumers could use their handsets with whatever wireless network they want.

This was a big step for consumer choice and competition. "FCC airwave auction rules to give consumers more choice," said USA Today. "Consumers will be able to use any cellphone and software they want," wrote the Washington Post.

Apparently, one of the nation's major existing wireless carriers doesn't think consumers deserve more choices.

Earlier this week, Verizon Wireless filed a lawsuit against the FCC's rules that would require the eventual winner of the spectrum offer open devices and applications. They called the rules “arbitrary and capricious, unsupported by substantial evidence and otherwise contrary to law.”

The nation's spectrum airwaves are not the birthright of any one company. They are a unique and valuable public resource that belong to all Americans. The FCC's auction rules are designed to allow U.S. consumers -- for the first time -- to use their handsets with any network they desire, and download and use the lawful software applications of their choice.

It's regrettable that Verizon has decided to use the court system to try to prevent consumers from having any choice of innovative services. Once again, it is American consumers who lose from these tactics.

Posted by Johanna Shelton, Policy Counsel and Legislative Strategist

Millions of people use Google’s search engine every day but don't realize that the balance inherent in U.S. copyright law helps enable it to exist. Here at Google, we strongly support the intellectual property rights of content creators and the protection of copyright. We think creators deserve to be rewarded for their work, and support the balance of copyright law as fundamental to promoting future creativity.

While protecting the rights of creators, the Constitution and the courts place limits on the rights of copyright holders. For example, copyright laws encourage others to make use of content in limited ways without seeking anyone's permission through the doctrine of "fair use." By enabling journalists, scholars and the general public to quote from and comment on others' writings, the fair use doctrine underscores basic rights of free expression.

Fair use also assures that technological innovations such as the Internet itself can operate without violating copyright law. For instance, Google crawls the web, analyzes and indexes its content and makes a copy of each page on our servers. Our index is made up of the content of every web page which is crawled, optimized and stored in a variety of locations all over the world, to deliver results to users in a fraction of a second. In this way, we provide an opportunity for content creators to promote and capitalize on their creativity.

We've known for a while that fair use has allowed entire new industries and companies to grow, and to bring beneficial new services and innovative devices to consumers. Now, an interesting new study released yesterday by the Computer and Communications Industry Association (of which Google is a member) attempts to quantify the contribution of industries relying on fair use to the economy.

The study -- which I encourage you to check out -- concludes that the "fair use economy" in 2006 accounted for $4.6 trillion in revenues (roughly one-sixth of total U.S. gross domestic product), employed more than 17 million people, and supported a payroll of $1.2 trillion (approximately one out of every eight workers in the US). It also generated $194 billion in exports and significant productivity growth. Using a methodology similar to a previous World Intellectual Property Organization guide, the results of the study demonstrate that fair use is an important economic driver in the digital age.

Copyright law involves a delicate balance, and here in the U.S. fair use is an important part of that equation. This study suggests that it's also an important part of the U.S. economy.

Posted by Pablo Chavez, Policy Counsel

As Internet use continues to spread in the U.S., the government should pursue policies that help promote investment in, and greater consumer access to, faster and more robust broadband services. The current Internet tax moratorium is one policy that Congress has enacted to help make the internet a universally accessible, free, and open platform capable of delivering a rich variety of services to consumers.

With that moratorium due to expire this November, Google recently joined Don't Tax Our Web, a coalition of companies and associations dedicated to extending the current moratorium and reducing barriers to the Internet's continued growth.

The current moratorium prohibits three things: state and local taxation of Internet access, multiple taxes on a single e-commerce transaction, and taxes that discriminate against online transactions. We support a permanent extension of the moratorium because multiple or discriminatory taxes on internet transactions could damage internet-based commerce, a critical and growing component of our economy.

What are these "multiple or discriminatory" taxes, exactly? Imagine a web user who purchases a music file (maybe "One Week" by the Barenaked Ladies, which was released in 1998, the year the original moratorium was signed into law by President Clinton). Under current law, the transaction couldn't be taxed at a higher rate than if the sale had occurred in a physical store or through any means other than the Internet. In addition, the moratorium prohibits more than one state, or more than locality, from taxing the transaction. Protecting internet-based transactions like this from multiple and discriminatory taxes makes a lot of sense to us.

Keeping Internet access tax-free is also another way that government can help further the growth of the web to all corners of the U.S. At a time when American policymakers are working to increase broadband penetration rates and improve the quality of broadband services to consumers, we believe that increasing barriers to access -- whether they are created by the government or by the private sector -- will only frustrate our common goal of greater access to better broadband for all consumers.

We look forward to working with the members of Congress championing this issue and with the Don't Tax Our Web coalition to extend the internet tax moratorium.

by Johanna Shelton, Policy Counsel and Legislative Strategist
and Michelle Lee, Head of Patents and Patent Strategy

Many of our nation's founding fathers (most notably Ben Franklin) were inventors, and from America's earliest days we've been a country that has promoted innovation. To protect and promote invention, those same founding fathers gave Congress the power (in Article I, Section 8 of the U.S. Constitution) "to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." Inventors have relied on the patent system to protect those rights (check out Google Patent Search to see for yourself).

Unfortunately, the patent system has not kept pace with the changes in the innovation economy. Google and other technology companies increasingly face mounting legal costs to defend against frivolous patent claims from parties gaming the system to forestall competition or reap windfall profits. The National Academy of Sciences has said the current patent system shows “areas of strain, inefficiency, excessive cost on one hand and inadequate resources on the other hand that need to be addressed now.” And the Supreme Court's consideration of several patent cases in the past two terms is evidence of growing consensus that patent law needs to be rebalanced in order to protect patent owners while ensuring that patent rights are not abused.

A growing chorus of business leaders and companies spanning the technology, financial services, and traditional manufacturing industries has joined with legal scholars, economists, consumer and public interest organizations, government institutions and major editorial boards in calling for patent reform.

Bipartisan patent reform legislation is likely to be considered by the full House of Representatives later this week, and is moving through the Senate as well. As a member of the Coalition for Patent Fairness, we support this legislation and have urged Congress to address these issues in particular:

• Damages apportionment. Damages should be calculated based on the fair share of the patent’s contribution to the value of a product, and not on the value of a whole product that has many components. So for example, a windshield wiper found to an infringe a patent should not spur a damage award based on the value of the entire car.
• Restricting forum-shopping. Certain district courts have become notorious for rarely invalidating a patent, and have tilted the balance too often in favor of plaintiffs. We support judicial venue provisions to ensure that patent lawsuits are brought only in district courts with a reasonable connection to the case.
• Post-grant review. The patent system should include a meaningful second chance for the U.S. Patent and Trademark Office to review potentially problematic patents in a timely way, thereby promoting high-quality patents.
  
• Willfullness. Patent infringers can be forced to pay triple the damages in cases where they are found to have "willfully" infringed a patent, but that standard has been devalued. Punitive triple damages should be reserved for cases of truly egregious conduct.

The product of six years of legislative debate and compromise, the bipartisan Patent Reform Act would achieve many of these goals in a fair and targeted manner. It clarifies the standard for calculating damages based on the value of the invention, establishes fair criteria for where patent cases can be brought, improves post-grant review and applies to patent law the traditional standard for punitive damages. These reforms will go a long way toward modernizing the patent law system to ensure it continues as an engine for economic growth and innovation.

Some have argued recently that reforms to the patent system would somehow make the U.S. less competitive in the world. That couldn't be further from the truth. Low-quality patents and escalating legal costs are currently hurting the ability of U.S. companies to compete globally, and that in turn hurts U.S. workers and consumers. Without a modernized patent system, U.S. companies are at a competitive disadvantage, spending resources on unnecessary litigation and unwarranted licensing instead of on innovation.

We'll be talking to House members and their staff this week to tell them just how important this is.