FTC and EU Prep Google Anti-Trust Cases … Gimme a Break!

I think it is fair to say that I am very critical of Google – mostly because of the old adage ‘trust least those who claim to give you something for nothing’. My basic view of Google is that they have successfully leveraged ‘free’ into a way for people to open up their most personal data and allow Google to sell it to the highest bidder.

But at the same time I see a real problem in which since Microsoft, ANY company who has a monopoly (or at least huge market share) is immediately eyed by many for anti-trust actions. People wanted Yahoo! investigated (remember them?), and Palm, and Blackberry and Nokia and other people you don’t remember. It has happened with Apple over pretty much every new product category, and now it is coming to Google.

How is any of this DIFFERENT than what happened to Microsoft?

In short, what Microsoft did was leverage one monopoly in order to throttle competition and establish a new monopoly. And it worked – while the courts were fiddling around Netscape died, Opera languished, and Internet Explorer (the worst of them all) skyrocketed to the top. They did it by wrapping EVERYTHING in the operating system up with Internet Explorer – with the thought that it shouldn’t matter if you are browsing files or sites. In theory that sounds great, but in reality it leveraged the power of their existing monopoly to exert further control … and in an anti-competitive way.

I will go into more detail in a bit, but Google simply doesn’t have that degree of reach – they are the dominant player in Search, but Amazon owns a higher ebook market share and Apple owns more of the music download world, and Google doesn’t own the desktop workspace and therefore someone needs to choose to use it.

How is any of this SIMILAR to what happened to Microsoft?

There are a couple of areas of similarity: cost and control. In terms of cost, Microsoft got in trouble because while Opera and Netscape were paid products (or at least shareware) Internet Explorer was free and had no inherent revenue stream. This meant that the product cost money to make but generated no revenue, so that it had to make more money elsewhere to be worthwhile. Similarly, Android is free to use but certainly not free to develop, meaning that the revenue needs to come from elsewhere – namely mobile search and advertising.

But what really got people upset about Microsoft was the idea of control: the thought that with MSN and Internet Explorer they were trying to essentially lock everyone into a Microsoft world using their 95% OS market share. Google controls ~66% of global Search share, and therefore have the power to direct people wherever they want, including all of those companies they have bought and relabeled through the years for billions of dollars.

So at least by appearance there are some similarities.

What are the potential anti-trust charges?

There are actually a couple. As reported here, the FTC is investigating Google for using their Search monopoly to manipulate what customers see and where they go.

Google rivals specializing in travel, shopping and entertainment have accused Google, the world’s No. 1 search engine, of unfairly giving their web sites low quality rankings in search results to steer Internet users away from their websites and toward Google products that provide similar services.

This is a bit confusing when you dig into it, and deals with the intersection of vertical and horizontal search and how search engines deal with them – horizontal search is the classic ‘look everywhere’ search engine that lacks context, whereas vertical search is specific such as searching for images using an image search browser. Google – and Bing, for that matter – now use ‘universal search’ that tries to determine context and provide you the most useful solution to your query.

Google recently had to pay a fine for subverting privacy (i.e. ‘Do Not Track’) settings in Apple’s Safari web browser. The obvious reason to do something like that is to be able to more precisely target customers for advertising.

In the EU, Google is being simultaneously investigated for Search and for reports that they are ‘dumping’ Android into the market in order to gain dominance in mobile search and advertising:

The concern in Europe is that making Android free to handset makers constitutes a form of predatory pricing, said David Wood, a lawyer at Gibson Dunn who also advises Icomp, a lobbying group funded by Microsoft, which opposes Google’s search dominance. “If you never expect to get the money you put into something back, then it’s essentially a gift, commercially speaking,” Wood said. “But if there’s intent to recoup the cost, then behaviour relying on its cost to drive others out could be construed as predatory. It’s a well-established form of abusive commercial behaviour.” Microsoft charges handset makers for licences to its Windows Phone mobile software.

Why don’t I think it makes any sense

Let’s start with Android. If you look at the EU statement above it seems to state that because Android is free and Windows Phone costs Nokia and HTC and others ~$10-20 per phone, depending on differing statements. That looks like a huge differential – and if you look across the 30 million Samsung Galaxy SIII units it could mean as much as $600 million saved on OS licenses! Surely that is a huge indication of predatory pricing?

But wait – do you know who made loads of money from the Samsung Galaxy SIII aside from Samsung? Microsoft. Samsung is reportedly licensing patents for ~$10-15 per device, meaning that Samsung is paying ~$450 million in licenses – and suddenly the difference isn’t clear, nor is the indication of predatory pricing.

The other argument is that Google gets money back through Search and Advertising on Android. This is most certainly true – though they have had a difficult time converting users to dollars in this realm. But it isn’t a condition of usage – for example, I love my Amazon Kindle Fire HD – but do you know how much Google got out of their usage of Android OS as the core? Nothing … never will. It is simply part of how the Android OS open source system works.

Now for Search. First, let me be very clear that Google EARNED their monopoly of Search based purely on the merits of their system. I used to use AltaVista for Search and was very slow to switch, but Google was just so much BETTER. And based on not liking some things Google was doing, I made a concerted effort to switch to Bing earlier this year – but kept coming back and eventually gave up. It was based on merit, not anti-competitive practice.

Vertical Search gets much more complicated. Personally, when I look for restaurant reviews I will use Yelp, for travel and hotel opinions I check TripAdvisor (and have gotten some great feedback on a review I did there), and so on. These are ‘vertical’ – they are very specific to a task. For me it is the same as when I am searching for album art to embed in a review if it didn’t come with the review files – I head to Google Image Search.

But the ‘universal search’ option means I could just type ‘restaurant review’ or ‘hotel opinion’ or ‘album art’ in my Google or Bing search bar and the engine would do the best to provide a focused list of things that met my needs by integrating multiple vertical search paths. Here is a question – do most people want to get a link to another search site as an output of their search? Absolutely not! In fact, when I was searching for an art review for something obscure recently I was directed to a site that ended up being an aggregator site that had just the right keywords but no information.

But the bottom line is that when we search for where to buy a LEGO Star Wars Cabbage Patch doll, we want to be directed to placed where we can BUY the LEGO Star Wars Cabbage Patch doll, not to a shopping search site. When you search on Bing or Google, you get plenty of sponsored links, things that Wal-Mart or Target or others have paid to end up higher on the results list. It is clearly marked as paid promotion, but if it gets you what you want for the right price, is there an issue if Bing or Google gets a cut?

And the bottom line is this – everything that Google is doing with Search, Yahoo has already done at a less sophisticated level years ago, and Bing is also doing right now.

So why should we punish Google? I agree that there are enough irregularities to warrant oversight and occasional smackdowns, but these investigations go too far and seem to amount to nothing more than political moves by competitors … and that should NEVER be the motivation for a government body to act.

What do you think?