The Google Monopoly Begins
December 20, 2007 4:44 PM
One reason historians study the past: Events are cyclical. What happened before happens again. The Federal Trade Commission should have more closely studied past mistakes before approving Google's acquisition of DoubleClick. Google is becoming the new Microsoft, only much worse.
When historians look back on the early 2000s, the DoubleClick merger will likely stand out as the turning point for Google. History isn't yet written. The European Union can still spoil the deal. Early signs aren't good on the continent for merger approval. If the EU clears the acquisition, then the merger will mark the start of the Google monopoly.
The same FTC that six years ago whacked Microsoft for its Passport identification system should have applied a whole lot more scrutiny to the DoubleClick acquisition. Google stands at the cusp of fulfilling predictions made about Microsoft a decade ago.
A History Lesson
In 1997 and 1998, state and federal trustbusters warned that Microsoft would become the toll keeper to the Internet. They cautioned that, if left unchecked, Microsoft would gain control over too much information and essentially collect a tax on Internet access and transactions. Microsoft critics also raised privacy concerns.
As it turns out, the trustbusters were wrong. The Internet was too big for Microsoft to conquer, and its executives had too much of a desktop and server software mindset. Yes, Microsoft impeded Web competition for awhile, but not by besting Netscape. Microsoft won the browser wars and then abandoned the territory. The real consumer harm came during the antitrust case (1998-2002) and a few years beyond, because Microsoft stopped developing the major browser used to access the Internet.
Something else: Microsoft was right. There was competition after all. Microsoft executives may see too many bogeymen in the closets and corners, but occasionally they are real. Google and the Web 2.0 platform definitely compete with Microsoft software.
Then there are Apple and Linux providers. U.S. District Judge Thomas Penfield Jackson defined Microsoft's monopoly as "Intel-based operating systems." Apple's switch to Intel processors created new competition for Windows on the desktop. Linux versions like Ubuntu, which major Windows OEM Dell now ships, further the competition.
Some people might argue that Dell couldn't have shipped Linux without the antitrust case, and that may be so. But Apple's Intel-processor switch is independent of Microsoft's legal troubles. For Microsoft Watch commenters who might disagree about there being Apple competition, just read any of the many positive Mac OS X Leopard reviews and negative takes on Windows Vista.
All that said, Microsoft has a monopoly in desktop operating systems, and Jackson ruled that Microsoft did, in fact, abuse its monopoly position and that consumers were harmed. Microsoft's monopoly developed organically over a long time. The courts didn't find that Microsoft illegally obtained a monopoly just that the company competed unfairly in maintaining said monopoly. There were several junctures where that monopoly could have failed, where there could have been more competition.
A Pound of Prevention
The Google monopoly could be prevented, just as the Microsoft monopoly could have been. To be fair, monopolies aren't necessarily bad, and they certainly aren't illegal in the United States. But Google is positioned to fulfill the decade-old predictions made about Microsoft but as a more dangerous and consumer harming monopoly. Google's monopoly would be over information, and there is just too much opportunity for abuse. DoubleClick significantly cranks up the potential volume of abuse.
Already, Google is considered a search powerhouse, but is its dominance understated by analyst data? For example, Google provides search capabilities for AOL, among other Web properties. But analyst firms like ComScore and Nielsen Online separately tabulate Google and AOL search data. AOL pushes Google share to about 60 percent—and that's ignoring the search providers' service role to other top Web properties.
Why should anyone care about the Google monopoly? Here are my reasons:
Google is already an information gatekeeper. The company's business is all about information access and selling stuff around that information. Google got ahead by shrewd business and technology tactics, as did Microsoft when building its monopoly. Google's dominance gives it unprecedented control over information that is vital to business. What happens if in the future when Google's stock price declines, the company seeks to recoup dollars elsewhere, such as charging for search ranking. Google already is going in that direction, with paid placement, but I'm saying more. Suppose Google required payment for all local searches? Local search is vital to millions of businesses. The company could mollify regulators by arguing that overall search would remain free but local search is a specialty service.
There is inherent conflict of interest between Google information gathering and selling stuff around the information. Google doesn't just offer search, but advertising, keyword search and demographic services around information and businesses pay for this stuff. DoubleClick will greatly enhance the latter activity. Marketers are hungry for demographic information, and they're willing to pay for it. Google provides the door, checks who's coming inside and can pass that information onto marketing paparazzi. The temptation to mine the information will be huge, and that temptation will increase as Google matures, its growth slows and its stock falls to earth. As a young growth company, Microsoft also gave away lots of stuff (anyone else remember free tech support) during its growth years. But as growth slowed (because of overwhelming market share) and dominance seemed threatened, Microsoft acted to protect its monopoly position. I predict Google will eventually do the same, not that the company needs to wait that long. Google wants to get into the big advertising bucket, not just online, and mining demographic data will be one way to conquer new ad markets.
Google has already demonstrated questionable ethics. The company claims that "You can make money without doing evil." Fine words maybe, but I judge people and companies based on their actions. In May, Google invested $3.9 million in co-founder Sergey Brin's wife's biotech startup 23andMe. There is an inherent conflict of interest in the investment, or at least the appearance of it. For a company most people seeking information on the Web put their trust in, even the appearance of a conflict of interest should be deterrent enough. But it wasn't.
Google's business model leaches off the good work of others. Google produces nothing. Shall I repeat that statement? The company's core business is about search and advertising, which relies on the content of other people and businesses. Google doesn't own the information from which it makes nearly all its revenue. Google is the middleman of the information, which it takes for free. At least Microsoft produces software and makes money off the licensing. Microsoft owns what it sells, but not Google.
Google has no respect for intellectual property rights. Google's information grubbing ways come without any asking permission. In one sense, people want their Web sites to be found, for information to be mined. But they're not compensated for something for which Google makes oodles. Google searches libraries of copyrighted books, with no respect for their authors or compensating them. Google bought YouTube knowing full well that Hollywood objected to the television and movie content posted there. Yesterday, Microsoft and Viacom announced a lucrative content and advertising deal. As my Google Watch colleague Clint Boulton observes in a blog post: "Google bought YouTube after the [Viacom] suit was filed. Viacom can take that to mean Google doesn't care that YouTube is infringing on its copyrighted content and believes it will win in court."
With DoubleClick, Google is looking a whole lot scarier and is better positioned to become a true monopoly—and I contend more dangerous than any claims made against Microsoft. My colleague Clint doesn't share the same view. He's the Google guy, and so I should normally defer to his good judgment. But I've covered Microsoft for a long time, and I'm a historian. History will repeat itself unless Google is checked, whether by government regulators or increased competition.
The biggest problem is brand. Like Microsoft in its youth, Google has a bright brand about which people feel good. People like Google. But should they trust Google? People feel good about grifters, too. They win your trust and then take your money. Google is by no means on the grift. But is Google trustworthy? John Dalberg-Acton said, "Power tends to corrupt; absolute power corrupts absolutely." If what he said is true, then the answer is no.
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