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The Russian Federal Antimonopoly Service (FAS) has slammed the door on Google (Nasdaq: GOOG). The search engine giant was trying to buy a local online advertising company, Zao Begun, but FAS regulators decided to block the deal. Google first announced its intent to acquire the Russian company, which is owned by Rambler Media, in July.
Zao Begun's search and contextual advertising business boasts 40,000 advertisers over a network of 143,000 Russian Web sites. The intended deal was valued at US$140 million.
In response to questions from the E-Commerce Times about Google's efforts in Russia, a Google spokesperson stuck to the company's basic script. "We are very disappointed to hear that FAS has come to this decision," Google spokesperson Andrew Pederson told the E-Commerce Times. "We strongly believe that this acquisition will enable us to significantly improve opportunities for Russian users, advertisers and publishers as well as the entire industry. At this time we are reviewing FAS's decision. Once this process is complete, we will decide on our next steps."
Rising World Domination
With Russia's government stifling the Zao Begun acquisition, might a growing Google face additional regulatory pressure worldwide?
"I think it's a country-by-country thing, and I think some regulators are going to be concerned about Google because it's this powerful, global company now, and I think there's probably some Russian nationalism that plays into the decision here," Greg Sterling, principal analyst for Sterling Market Intelligence, told the E-Commerce Times.
"I don't think you can generalize across the board about different international markets except that Google is a very powerful or dominant player in many markets outside the U.S., and that position may influence regulators or anti-trust authorities in those individual countries," he added.
More at Play Than the Game of Monopoly
With much of Google's business aimed at reaching into the hearts of Web sites, there may be some surprising underlying concerns for the company to overcome.
"In addition to the anti-trust fears that are evident, there are also fears about privacy and security that will be natural issues for governments to focus on," Andrew Frank, a vice president of media research for Gartner (NYSE: IT), told the E-Commerce Times.
"Fundamentally, control of media continues to be a controversial topic for governments, and many governments continue not to share America's attitude toward free speech, which can affect Google's business quite directly," he explained.
Still, Google is clearly looking to expand around the globe.
"Geographical diversity is one of the elements that has helped to insulate Google from instabilities in the U.S. market. Also, although search advertising has proven extremely powerful for Google, they need to continue to expand into other related areas of digital advertising to sustain strong revenue growth," Frank noted.
Faster Growth, Troubled Landscape
Outside of the U.S., online advertising growth is much faster, Sterling said, noting that while the troubled U.S. economy is certainly a factor, the U.S. remains a more mature market.
"Europe, Eastern Europe, and the more developed countries in Asia represent great opportunities in online advertising, and Google is obviously in a position to benefit because of its reach and its technology. There's considerable growth potential that exists," Sterling said.
Moving into international markets presents new opportunity for Google, but it also presents new challenges. Cultural business practices obviously rise to the top, making acquisitions all the more important, but regional differences in Internet access require a diverse approach.
"Online advertising is without a doubt a global phenomenon, although there are clearly variations in the form it's taking, with mobile devices being more important in some regions," Frank said.
"I think Google's global expansion will continue to face various forms of opposition, although I think the value they bring will win them many allies as well," he added.
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