What Does Google Say About a Break Up?

 
 
By Clint Boulton  |  Posted 2010-04-22
 
 
 

Watchdog Asks DOJ to Break Up Google to Stem a Monopoly


News Analysis: In its most aggressive position against Google yet, Consumer Watchdog April 21 asked the U.S. Department of Justice to sue the search engine and suggested the government agency could break up Google into several companies.

Consumer Watchdog advocate John M. Simpson argued that the government must go beyond opposing Google's attempts to grow its search and advertising businesses with services such as Google Book Search and by subjecting Google's $750 million bid for mobile ad provider AdMob to intense scrutiny.

"Google exerts monopoly power over Internet searches, controlling 70 percent of the U.S. market," Simpson wrote in a letter addressed to U.S. Attorney General Eric Holder and his team at the DOJ. "For most Americans - indeed, for most people in the world - Google is the gateway to the Internet. How it tweaks its proprietary search algorithms can ensure a business's success or doom it to failure."

The problem with Simpson's monopoly argument, as Google and legal experts have noted  in the past, is that Google doesn't force what is roughly 65 percent of the people in the United States to use its search. Users come and go as they please and may take their data with them.

It is fair to point out that Google does make it hard for users to want to leave its service because it offers several Web services on top of search, including Gmail and YouTube.

Users who create e-mail and videos with these apps store them in Google's cloud computing infrastructure. Users who opt to use these services are (or should be) aware of this when they sign up and can leave at any time.

The advocate also argues Google tweaks its search algorithms in a deliberate effort to keep down other businesses while serving its own interests. Google search results are based on a number of  mathematically-based signals, but the main arbiter is the PageRank algorithm.

Companies in Europe, such as Foundem, are arguing that this approach hurts their business. These arguments that have yet to be fully tested in court.

More interesting is that the advocate for the first time suggested the DOJ break the company up into several separate companies or at least regulate it as a public utility. Simpson suggested search could be separated from advertising.

He added: "Gmail and its new social networking service, Buzz, could be spun off as a separate entity as could YouTube, a Google acquisition that we believe should have been denied at the time of merger. Enterprise applications could be another separate business."

What Does Google Say About a Break Up?


 

A Google spokesperson addressed this demand for eWEEK: "We totally understand that with size and success comes scrutiny. Although given their track record, even if we broke Google in half tomorrow, Consumer Watchdog would probably insist that we split halves into quarters."

Google's gallows humor aside, breaking up the company is untenable. Google wouldn't make any money. With the exception of search and YouTube, which are popular all over the world, the other services wouldn't survive.

More than 97 percent of Google's revenues come from advertising related to keyword advertising paired with its search engine. Separate those two and Google couldn't support the free services such as Gmail, Buzz or Google Apps, which is offered in free and enterprise versions.

YouTube, by dint of its millions of users, may stand on its own because it is building a display ad business. Gmail, like Google's search, features keyword advertising.

As for Google Apps, there are many online collaboration suites that already don't make money that get bought out by other businesses looking to plug holes.

There is another issue to consider. Microsoft, which was found to be engaging in anticompetitive practices for bundling Internet Explorer with its Windows operating system, was not broken up a decade ago.

A federal appeals court in June 2001 smacked down a lower court's ruling that Microsoft be broken into two companies as a remedy for anticompetitive practices.

If a court could not see fit to break up a convicted monopolist, then how could anyone expect the DOJ to break up Google, which has not been formally accused of such transgressions?

Simpson also argues Google's importance as a gateway to the Web means that the company should be regarded as a public utility and regulated. This is a possibility, but will the DOJ be convinced Google is a utility the way, say, water and electricity are treated in the United States?

Has the Information Age progressed to the point where services provided by Google are as vital to consumers as water and heat? That is an interesting argument.

Failing these solutions, Simpson asked the DOJ to heavily tax Google with financial penalties. "Perhaps the amount could be tied to paying back consumers for monetizing their private information and content without compensating them."

 

Rocket Fuel