Should the Government Stop Google from Acquiring Big Fish?

 
 
By Clint Boulton  |  Posted 2010-12-16 Email Print this article Print
 
 
 
 
 
 
 

For the third time in December, Google found itself defending its business practices from allegations of monopolistic and anticompetitive behavior.

After refuting claims that it is squeezing out search engines in Europe and local review sites in the U.S. Google disagreed with Washington Post columnist Steve Pearlstein, who suggested Google's acquisition wings should be clipped.

Google has acquired about 45 companies this year that we know about. Most of these have been small.

Googlebot.png

AdMob took regulatory heat from the FTC and ITA Software is still not under Google's wing, with the Justice Department looking at it and online travel companies crying foul.

Pearlstein, who asks how much "bigger and more dominant we want this innovative and ambitious company to become" wrote:

Where I have a problem, however, is in allowing Google to buy its way into new markets and new technologies, particularly when the firms being bought already have a dominant position in their respective market niches.

He pointed to YouTube, DoubleClick and AdMob as examples, along with Google's proposed $700 million acquisition of ITA and whiff of Groupon, which would have cost $6 billion.

He then goes on to explain that antitrust law is supposed to preclude such industry-changing acquisitions to protect markets but doesn't and that:

One at a time, these deals might appear to be relatively benign. But taken together, they allow Google to increase the scale and scope of its activities and to further enhance its controlling position across a range of sectors.

There are so many areas of Pearlstein's argument to attack. Start with Google's sound defense, which notes that all companies mull build vs. buy and do so versus other rivals.

Then be sure to read Matt Ingram's third-party post at GigaOm, where he notes: "Antitrust laws were designed to prevent companies from using their monopoly power to negative effect in specific markets, not simply to keep companies from becoming large.

I can't do better than either. What I will say is that in a capitalistic market it's silly to want to hamper a company from buying other big companies simply because those target companies are market leaders.

So Google should only buy the Phonetic Arts and Widevines of the world and leave the bigger fish be? Maybe he also wants to tell the shark to eat tuna and not barracuda? Sorry, but in a free market, anything is fair game.

Moreover, prove how Google owning the larger companies hurts choice, let alone consumers. It's a numbers game.

Google has 66 percent U.S. search market share today. Most Web searchers are Google users.

Similarly, ITA Software propels 65 percent of online flight searches at airline Websites in the U.S, according to FairSearch.org, which is opposing Google's bid. People who search for flight info on most major travel sites are seeing ITA's data.

So if you plop ITA's data to search results in Google, won't you by sheer numbers, be helping the majority of flight info seekers?

It's the network effect in action. If you improve search data on the search engine where most people search, you're benefiting the majority of consumers.

This is in turn helps Google. That's what we call a win-win.

A lot of monopoly talk in Microsoft's technology is linked to software bundles, the notion that is you bought A, you had to use B.

You could argue that the more time you spend on Google properties, the more data you create and leave in its cloud, making it harder to want to leave.

Google isn't keeping you from using another service so in that sense the "competition is a click away" mantra, while excruciatingly trite, is technically true.

That's a productivity and psychological barrier you may have to reconcile with yourself, but it's hardly covered by antitrust law.

That points to what may be the real issue of Pearlstein's piece. He wrote:

The ease with which Google has been able to extend its dominance reflects, in large part, the inability to adapt century-old antitrust laws to the quite-different economics of a high-tech economy that is susceptible to winner-take-all competition.

So urge Congress to rewrite antiquated antitrust laws, but don't punish Google for it.

Pearlstein also ignores the looming competition: he neglects to mention how Facebook is devouring Internet user engagement.

At the end of the day, Google can buy 100 companies but they still won't necessarily add up to more eyeballs and time logged at Google properties than what Facebook can do.

Google is defending its turf making these buys, ensuring the ad machine keeps churning dollars.

Dated antitrust laws or not Pearlstein's argument is that while we can't prove Google is a monopoly now, if we keep letting it buy the market leaders in various Internet sectors, it will be.

Sorry, but potential monopoly is not actual monopoly. Don't hate the players, hate the game. And if you hate the game, try to get it changed. Google is playing the old game with the new Internet rules.

To Pearlstein's final point, we let Google do it because it's done within the rules.

 
 
 
 
del.icio.us | digg.com
 
 
 
 
 
 

Submit a Comment

Loading Comments...
 
 
Manage your Newsletters: Login   Register My Newsletters























 
 
 
 
 
 
 
 
 
 
 
Thanks for your registration, follow us on our social networks to keep up-to-date
Rocket Fuel