Washington’s War on Big Tech: Must There Be a Google?

 

If Washington’s War on Google has begun, when will it end? The Justice Department is apparently gearing up an investigation of the internet giant. And for what reason exactly? That’s unclear. But one 2012 Federal Trade Commission analysis might give us a hint. It described Google as “engaging in tactics that resulted in harm to many vertical competitors, and likely helped to entrench Google’s monopoly power over search and search advertising.”

Overseas, the European Commission has thrice fined Google for business practices deemed uncompetitive. The most recent came last March when regulators hit the company with a nearly $2 billion fine for past “abusive practices.” The EC said Google “abused its market dominance by imposing a number of restrictive clauses in contracts with third-party websites which prevented Google’s rivals from placing their search adverts on these websites.”

But hefty fines and, say, better ad placement for Yelp and TripAdvisor, may hardly be punitive or radical enough given the dramatic complaints of some activists and policymakers. Alphabet-Google, tweeted Sen. Elizabeth Warren, “has too much power, and they’re using that power to hurt small businesses, stifle innovation, and tilt the playing field against everyone else.” (At minimum, she would “unwind” past Google acquisitions of DoubleClick, Nest, and Waze. Others would split off YouTube. On the right, nationalist populist leader Steve Bannon sees nationalization, at least partial, as a possible answer. Other activists would go further.)

Given the trendy activism against Google and the rest of Big Tech — with government now involved (“Google, Facebook and Apple take a hit from reports of antitrust probes) — it can be easy to forget a few things on the other side of the ledger. For example: People think Google offers a pretty valuable service. One recent paper found that consumers said they would need to be paid nearly $20,000 to forgo using search engines — and they probably didn’t mean Bing or DuckDuck Go. Also, there are some key ways in which Google hardly acts like a monopoly whose dominant position is well secured. The company invested $21 billion last year in R&D and is considered one of the most innovative companies in the world. It also spends billions every year trying to figure out the next big thing. (And here’s how the company itself looks at the economic value it generates.)

Why would a company so dominant — with 90% of search activity — act so much like one in which competitors are hot on its heels. Maybe because in some key ways they are. In “Google’s Dominance Is No Longer a Sure Thing,” reporter Dan Gallagher points out that “Alphabet’s most recent quarterly results showed a significant — and surprising — slowdown in Google’s ad business” even as the challenge from Amazon grows. Moreover, everything Google tries hardly becomes a mega-success. From the same piece: “Its Pixel smartphone has less than 1% of the global market despite Google’s home-field advantage of owning the operating system that powers 85% of the world’s handsets. And Google trails both Amazon and Microsoft by a wide margin in the fast-growing market for cloud computing services.”

And if Google isn’t a forever dominant company, some of the more existential attacks look even less compelling. Microsoft once seemed as dominant as Google — until it wasn’t. And I am deeply skeptical that 1990s federal anti-trust action played a role in distracting the company. As tech analyst Ben Thompson also argues:

The 2001 DoJ consent decree did not make Microsoft miss mobile. The 2001 DoJ consent decree did not make Microsoft misunderstand the internet. The 2001 DoJ consent decree did not introduce the SaaS model, making Microsoft’s enterprise business vulnerable. The curse of culture, solipsistic leadership, and a monopoly hangover mattered far more, along with good ol’ fashioned disruption; the most important contribution of the Microsoft antitrust case to the company’s eventual struggles was as an excuse.

Alphabet-Google remains a great American company (nearly $30 billion in annual profits, 100,000 workers, and a $700 billion market cap) that supplies massive value to consumers and innovation to the economy. Good to remember that as we wait to see what the DOJ investigation finds.

Published in Economics, Science & Technology
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There are 8 comments.

  1. CarolJoy, Above Top Secret Coolidge

    As a researcher, I know that Google has become very Orwellian. It used to be that if you searched for a particular item, you could find it. Now everything is geared to whatever Newspeak notions are being allowed, especially regarding science investigations regarding biology.

    Ask Google about the research done by the scientists at the University of Caen regarding GMO seeds and foods, and instead of getting that original research, you will instead get 4 gazillion pages of how the original report has been discredited. Only those of us in the know understand that in order to discredit the original researchers, the entire editorial staff at the original science journal who published the original report had to be booted out and replaced. But to the casual person making a casual question about this, to perhaps write a report for their college freshman biology class, they won’t get to the meat of the matter.

    Google is Fake Archival of Actual Truth. The Truth is buried. I am well aware of how this works. The President has managed to address this too: “Fake News.”

    My most recent FB post addresses it as well, although more with a look at such things as the Associated Press:

    There was once an indie reporter by the name of Carol Sterritt. She had 37 news articles published. Her 38th article,…

    Posted by Carol Joy on Monday, June 3, 2019

    Sure there are currently small time competitors such as DuckDuckGo and dogpile.com, but I for one hope that The Justice Department can take Google in hand.

     

    • #1
    • June 3, 2019, at 6:33 PM PDT
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  2. Stina Member

    Look, I supported Google’s position against Microsoft back in the day for the same reason I think they are in the hotseat now.

    They wanted to live by these tactics.

    But I’m not an anti-anti-trust person.

    • #2
    • June 3, 2019, at 6:35 PM PDT
    • 2 likes
  3. CarolJoy, Above Top Secret Coolidge

    Of course, in dealing with Google, to either re-structure it or bring it down, the Justice Department would be declaring war on the CIA. From a 2010 zero hedge article: https://www.zerohedge.com/news/2017-08-28/how-cia-made-google

     

    Authored by Nafeez Ahmed via Medium.com,

    Inside the secret network behind mass surveillance, endless war, and Skynet…

    INSURGE INTELLIGENCE, a new crowd-funded investigative journalism project, breaks the exclusive story of how the United States intelligence community funded, nurtured and incubated Google as part of a drive to dominate the world through control of information. Seed-funded by the NSA and CIA, Google was merely the first among a plethora of private sector start-ups co-opted by US intelligence to retain ‘information superiority.’

    Full article at link above.

    • #3
    • June 3, 2019, at 6:39 PM PDT
    • Like
  4. Stad Thatcher

    James Pethokoukis: It described Google as “engaging in tactics that resulted in harm to many vertical competitors

    I don’t see how this is possible given the other search engines out there. I’ve switched to DuckDuckGo because I’m tired of targeted ads. I buy my daughter one purse for her birthday, and I’m innundated with purse and handbag ads for the next month. I also installed an ad-blocker for my Internet Explorer, and I ignore any web site that blocks its use, or demands I enable cookies.

    • #4
    • June 4, 2019, at 6:34 AM PDT
    • Like
  5. DonG Coolidge

    I am not worried about Google. Sure, they act evil sometimes, but I think their free ride is over. They got big in an unregulated internet. But people are starting to put up limits on data privacy that greatly hurt their business. The Europeans don’t care about Googles profits and rules will spread to other countries. The privacy-oriented browsers will have an impact in areas where privacy regulations are not put in place. I think the big question is, what parts of Alphabet are still around 10 years from now. 

    • #5
    • June 4, 2019, at 7:08 AM PDT
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  6. Misthiocracy secretly Member

    When Congress goes after Luxottica’s (arguable) monopoly power over the eyeglasses industry, I’ll start to take their overwrought hand-wringing seriously. Luxottica (arguably) has way more control over that market than Google has over any of the markets in which it competes. There are lots of other industries with way more concentration of ownership and/or control than currently exists in online services. Congress doesn’t go after those industries because they aren’t the ones in the news.

    • #6
    • June 4, 2019, at 8:59 AM PDT
    • 2 likes
  7. Randy Weivoda Moderator

    Stad (View Comment):

    James Pethokoukis: It described Google as “engaging in tactics that resulted in harm to many vertical competitors

    I don’t see how this is possible given the other search engines out there. I’ve switched to DuckDuckGo because I’m tired of targeted ads. I buy my daughter one purse for her birthday, and I’m innundated with purse and handbag ads for the next month. I also installed an ad-blocker for my Internet Explorer, and I ignore any web site that blocks its use, or demands I enable cookies.

    Yeah, and the thing to remember is that the king of an industry today can be a punchline ten years down the road. Remember Blockbuster Video? The king of their industry, but now wiped out largely by Netflix, a company few had heard of 10-15 years ago. Gateway used to be one of the big names in personal computers, gone now. The biggest brands in television sets 20 years ago are not the big names today. Sears was a giant among retailers for what? 100 years? More? They are sadly gasping for breath. If a person forgets about everything but the last five years it’s easy to imagine that Apple, Google, and Amazon will still be the giants of their sectors for eternity. And maybe one of them still will be the king at the end of the century, but the odds favor them becoming AOL. 

    • #7
    • June 5, 2019, at 7:53 PM PDT
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  8. Al Sparks Thatcher

    I’ve mixed feelings about this. I’m not an expert on anti-trust law, but from what I’ve read in the Wall Street Journal editorial page, it apparently is vague. There’s no clear definition of what a monopoly is under the law.

    So apparently anti-trust action is selective. Which means it can get political.

    As someone who worked in the server end of IT at the time, mostly in the Unix/Linux server space (and I still work in the field, though not limited to Linux servers), I had a bias against Microsoft.

    Philosophically I knew that what the government was doing was probably bogus, but I was glad to see Microsoft getting so much grief.

    I feel the same way about Google (and Facebook). The anti-trust is probably bogus, but I’ve grown to despise, not just disagree with, the politics of Silicon Valley.

    And unlike the era of Microsoft, and before then, IBM, the politics has gotten mean. The root of my contempt is because of not only their contempt they have for my politics, but the extent they are willing to go in fighting those who share my political views, including firing employees who express those same views.

    The OP makes a compelling conservative argument against anti-trust action towards the Silicon Valley bigs.

    But emotionally, I can’t get worked up against the government’s threatening noises towards them.

    If they stayed out of politics, even knowing that most of the people who work there are on the other side, I wouldn’t feel that way.

    But in my defense, I’ll point out that they do use the political power they’ve accumulated to engage in rent seeking, including their lobbying for net “neutrality”. Again, if they stayed out of the political arena, I wouldn’t feel that way.

    • #8
    • June 5, 2019, at 9:49 PM PDT
    • 1 like