Technology Pundits: Google Response to Anti-Trust Investigation Challenged May 9, 2009 – By Rob Enderle
Consumer Watchdog just did a lengthy fact check (http://www.consumerwatchdog.org) on Google's claim that
they aren't a monopoly and are committed to "Competition and
Openness". The non-profit organization takes exception to almost every
argument that is made citing coverage from major publications that suggest
that Google is intentionally making false and misleading statements.
Anti-Competitive and Non-Transparent
The organization maintains that despite Google's testimony the firm is
anything but what they claim. For instance, with regard to openness, the firm
requires that companies that work with them are open while remaining closed
and proprietary themselves. For instance Ad Auctions, quality scores, Google
Page Rank, Collection/Integration/profiling of private user's data, and the
massive secrecy that surround the firm is unprecedented. This suggests that
Google uses openness as a competitive weapon where firms have to share what
they are doing while Google does not have to reciprocate effectively
controlling much of the market.
Out of Date Information
One of their biggest examples are headlines from over a decade ago, and
before Google was a power citing other companies as market leaders. Yet a
decade before Microsoft was found to be a monopoly IBM actually had a larger
Software business. It is interesting that Google appears to be trying to get
regulators to live in 1997 but, like Microsoft did in the 90s, Google rolled
over all the firms they cite as competition and Google now owns 72% of some
of the related critical markets.
DoubleClick Threat
In this area they are very pointed. While Google is arguing plenty of
competition Consumer Watchdog.org is pointing out that the number 2 and 3
vendors combined only control 15% of the market and that Google controls the
vast majority of what is left. Claims on privacy appear only validated by
organizations that Google controls. According to Comscore 2/09 Google is the
"largest ad Network in the world" with a whopping 75% of the
international, and 76% of the US market.
Buying the US Government
Google argues they are tiny when compared to Microsoft, AT&T, Verizon, or
IBM. However, in terms of lobbying, if you account for donations of services,
Google donates $277 million to programs that influence government, the next
closest in Verizon at $13M. In addition when Microsoft was first reviewed by
the DOJ the firm made $3.7B, Google makes $21B. While I don't think revenue
matters that much, it is control after all, the money and services going to
government does appear to be of some significant concern.
Not Open or Favorable to Competition
While Google claims otherwise the watchdog group says that Google is actively
working to eliminate publishers, newspapers, booksellers, search competitors,
and independent advertisers. In addition, Google is only open in segments
they don't dominate, advertisers are nearly extorted into paying for services
they can't validate, and advertisers complain they have no bargaining power.
This last is sourced from Business Week on April 29th 2009.
Tradcomet.com has complained that Google has tried to force them out of
business. They claim that once Google determined that TredeComet was a
competitive threat Google raised the price 100 times and stripped it of 40%
of its traffic which cost the firm millions of dollars of revenue.
While Google has argued that it is easy for users to change, Consumer
Watchdog.org says no and provides a list of technologies that lock customers
into an unbreakable cage owned by Google.
According to Jimmy Wales "Search should be transparent, open, and
participatory… Internet search is plagued by the same problems that
bedeviled software – a lack of accountability, transparency,
freedom". According to the New York Times (6/08) many existing experts
describe Google as a "giant black box that they struggle to comprehend,
and that advertisers remain in the dark. The Mercury news is cited as saying
that "Google closely guards its top-secret formula for ranking web
sites, making it impossible for a publisher to know why a site might enjoy
front-page ranking one day and drop to page 100 the next" on 8/07.
They point to a misleading survey from Google that says that consumers are
willing to switch providers but avoid the very real problem that advertisers,
who control the revenue, can't switch. According to Watchdog Google also
tries to use the technology efforts of their search competitors to showcase
competition but they do this to cover up their market ownership in
advertising. It really isn't about search it is about controlling Ad dollars.
They then use a quote from Eric Schmidt from May of 2007 that indicates
Google has passed an inflection point and has reached a level of scale that
is now unbeatable.
Wrapping Up and Closing Off:
While the report (http://www.consumerwatchdog.org) and the arguments debunking it
go on for another 10 or so pages the overall effort is well argued and to
point. It is worth reading and it is very similar to the failed path that
Microsoft took in the '90s. I think this showcases that companies, once they
reach a certain size, lose track of the outside world and get into an
executive circle where each is able to tell a peer what they want to hear and
then agree with it.
This is why Google's arguments are so transparent and easy to disprove, they
didn't even attempt to vet them internally, because, in their unique world
Google is everything they believe it to be. Some also believed the world was
flat, this kind of behavior showcases that belief and power, unless it is
absolute, don't overcome truth and Google, fortunately, doesn't yet have
absolute power. They do appear to be a monopoly though and one that bears
watching.
Technology Pundits: Google Response to Anti-Trust Investigation Challenged
