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