Google and antitrust: looking at the good and bad effects of monopolies

This is the last in a multi-part series on Google and antitrust.

Part 1: Competing in Web search against Google would be extremely hard

Part 2: How Google favors its own products

Part 3: Looking at the good and bad effects of monopolies

Disclosures: I worked on AOL Search from 2004-2007, where Google was our algorithmic search partner. Any assessments of financial models are based on publicly released information and not any specific information I had access to regarding the terms of the AOL-Google deal or our negotiations with Google and Microsoft. My brother is currently employed by Google and I have many friends there. I went to high school with Google CEO Larry Page.

Benefits of monopoly

I don’t believe Google is an evil company. I use Google products every day, including search, Maps, Places, Gmail, Docs and Android.

Google’s monopoly profits from AdWords support a lot of potential for the improvement of society.

Google is one of the few companies that does active research on things that have no short-term value and that many investors would object to. At a time when “science” and “intellectual” have become dirty words in our political discourse and NASA budgets are being slashed, it’s good to see a company investing in research that will move the human race forward. Google’s research into self-driving cars and alternative energy are risky bets that most publicly traded companies wouldn’t make and few private companies can raise the capital to pursue.

We’ve seen this before. Bell Labs used monopoly profits from the phone system to fundamentally change communications. This video on YouTube chronicles some of the highlights from Bell Labs:

Note how much of that video is in black and white. After AT&T’s breakup, a lot of the monopoly profits went away. I don’t know many people that would consider today’s AT&T innovative. (Bell Labs itself is a shadow of its former self and is now part of the French Alcatel Lucent.)

My first reaction when I saw the video was “What will the Google song include?”

Dangers of monopoly

Google’s monopoly profits also allow it to nurture products and provide them at a loss. From a consumer standpoint, I love Google Maps and the free navigation that I get on an Android phone. But Google has largely destroyed the market for portable navigation devices and paid navigation apps on mobile phones.

The core business of Skyhook Wireless, a company that pioneered WiFi-based geolocation, is drying up because Google and Apple have developed their own mechanisms.

Although the “What if Google gets into your space?” question hasn’t dried up venture capital investment in companies, it does seem that many companies are being built specifically to be sold, not to thrive into large businesses. Better to position yourself as something that plugs nicely into Google and sell early than to take the risk of building something audacious that could be the next Google. (Facebook is the obvious exception here.) In that way, Google’s dominance extends influence beyond its own capital investments.

As innovative as Bell Labs was, we’ve also seen huge innovations in communications from companies after AT&T’s breakup, including Skype, Apple and Google.

Would we be better off if investors were swinging for the fences and solving Really Big Problems rather than funding features disguised as companies that could be sold for $50 million-$200 million to one of the bigger internet players? Probably.

Does antitrust law matter?

As much as some enjoyed seeing Schmidt being called in front of Congress, the Senate hearing was largely for show.

Antitrust law when it comes to technology is largely irrelevant. By the time the wheels of policymakers produce an outcome, it’s too late. (Ask Netscape or Real how their antitrust “victories” worked out for them.)

Even when regulators make changes or stipulate conditions on deals for approval, they can often be worked around. For example, even lthough the agreement with the Justice Department requires Google to continue to license ITA’s travel software to competitors until 2016, it doesn’t require Google to license enhancements that Google makes:

Nothing in this Final Judgment shall require Defendants [Google and ITA] to provide to any third party any product, service, or technology (or feature thereof) that Defendants develop exclusively for use in the Google Services, nor shall any such product, service, or technology, or the relative functionality of one or more Google Services (including, but not limited to, the Google Consumer Flight Search Service) when compared to third-party websites using QPX, be considered in determining Defendants’ compliance with any provision of this Final Judgment.

Google’s new Flights product likely falls into that bucket. And although the initial version is rough around the edges, it’s so blazing fast that it will likely displace my use of Kayak as a flight search tool. Kayak, which depends on ITA for its search engine, likely won’t have access to the enhancements that make the speed possible.

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About Rakesh Agrawal

Rakesh Agrawal is CEO of redesign | mobile. Previously, he launched local and mobile products for Microsoft and AOL. His personal blog is at http://blog.agrawals.org and tweets at @rakeshlobster.
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3 Responses to Google and antitrust: looking at the good and bad effects of monopolies

  1. Rocky,

    As you framed the argument by first alluding to all of Google’s benevolence, you failed to recognize the impact Google’s domination will have on innovation in a holistic sense. It’s great that Google has deep pockets to allow them to continually invest in R&D and innovation, but what about the adverse effect that has on others to do the same. Concentration of resources, surely, cannot be argued as a net positive outcome.

    Google satisfies its own interests first and foremost, after all, they have a fiduciary duty to so.

    The question being debated at the moment in the media, government and society at large is whether it’s FAIR or ANTI-COMPETITIVE for Google to engage in these tactics not IF they are doing it… they most certainly are doing it, you don’t need to be a rocket scientist to recognize this.

    Now the real question becomes, will today’s less than expert regulators around the world, with their own sets of motivations, objectives and political bias, conclude that the current REALITY is in the best interests of the public at large?

    There’s no doubt that we live in F.A.G. era (Facebook, Apple, Google). With that being the case, do we want to live in a world where F.A.G. dominates the space and ultimately becomes the gatekeepers of success on the web? Pretty poignant question to consider I’d say.

    Finally, as I spend most of my time in the travel industry, I thought you might like to know about Everbread’s Haystack technology (www.everbread.com). It will make Google’s flight search product look like child’s play. In fact, Google tried to recruit, unsuccessfully, the lead architect of Haystack to help them improve the Google Flights platform.

    I recommend you check it out when it’s released in full to the public very soon.

    Cheers,

    Huge Fan.

  2. Pingback: Google and antitrust: competing in Web search against Google would be extremely hard « reDesign

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