Google And The Monopoly Paradox

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With the deep inclusion of Google+ into Search, Google is tempting fate. We’ve been over this. A lot. And this story is going to continue for some time to come. It sure looks like Google is almost asking for an inquiry into potentially anti-competitive practices (and it’s coming). Which is insane. So the next logical question is why? Why is Google risking so much to do this?

My colleague Eric had a very interesting theory earlier. Maybe Google’s real motive is to get the government to also look into Facebook’s often-unfair practices with regard to their network ahead of their IPO. If social and not search is indeed the future, call this pre-subversion. And if there’s any shred of truth to this theory, more power to Google — it’s rather genius (though still extremely risky).

But the more likely answer as to why Google is doing Search+ is much simpler. At a high level, they believe social elements are going to be an extremely important part of search going forward. Given that the two biggest players in social, Facebook and Twitter, don’t give them full access to their data (Twitter used to but the relationship ended, Facebook never did), Google is doing the only thing they can in their minds to still get the data they need: bolster Google+.

That makes sense. The problem, again, is how they’re doing it — with Google Search, a property which has a (natural) monopoly.

Google will argue that they have no choice due to the lack of data from Twitter and Facebook. But that’s not good enough.

First of all, they do have enough data to equalize the two most troublesome areas of Search+: the “People and Pages” box (let’s call it the Google+ Juice Box), and the social profiles in Google Search drop-downs.

Second, Facebook and Twitter can likely argue that giving Google access to such data would be a huge detriment to their respective businesses. Again, Twitter used to give access, but then they could not reach an agreement on new terms. It was all about money. Google saying that Twitter “chose” not to renew reads like a public shakedown, in that light.

And this points to something deeper going on behind the scenes here, which is likely the actual crux of this problem. Google believes it’s their right and duty to perfect their search engine at all cost. That’s the only way you can explain some of their actions (not only this, but surfacing some of their other data over competitors as well). But because of their market dominance, Google’s rivals believe the measures the search giant is taking in order to improve their product are unfair.

This makes for a great battle because both sides have a valid point. But ultimately, Google’s point may be rendered invalid. Because Google is so successful, it may actually impede further success that they could otherwise pursue openly.

This is the problem with having a monopoly. Even if you don’t intend to use it for “evil”, you end up doing just that because “evil” is relative. If Google was the number four player in the search market, no one would care if they included Google+ data. In fact, people would likely applaud it because it is well done.  In Google’s view, all they’re doing is improving their product. In Facebook and Twitter’s mind, it’s evil.

You can make the “with great power comes great responsibility” argument — that is, Google should recognize their position of power and temper their actions accordingly. To some extent, I’m sure they do. But it’s a hard predicament to be in. You’re essentially forced to hold yourself back from being the best company you can be. And this often means changing some of the practices that got you into your position of power in the first place.

When Microsoft bundled Internet Explorer with Windows in the 1990s, the courts ultimately decided that it was anti-competitive. But you could certainly argue that IE was actually the best browser at the time. And if you believe that, you believe that it made Windows a better product as a result. I’m not saying that situation is the same (it’s obviously not), but perhaps some of the lines of thinking were similar — and perhaps it suggests how companies find themselves in these (seemingly obvious) bad situations.

When you consider Apple, things get even more interesting — I am the Apple columnist, remember.

By many standards, Apple is the most powerful technology company right now. And by many standards, they’re also the most controlling. How on Earth can a company that is the most dominant and most controlling get away without many of the anti-competitive concerns that their rivals run into? It’s a question that has come up more than a few times this week.

The answer is that their model is genius. Whether it’s by accident or on purpose, Apple has largely fortified themselves against the anti-competitive argument, at least with regard to monopolistic practices.

Because Apple focuses on profit and not market share, it’s more or less impossible to pin a monopoly case on them. With the exception of MP3 players (which is a dying market) and tablets (which is a burgeoning market), Apple doesn’t dominate any market they’re in from a market share perspective. Sure, they make the majority of the money in smartphones and computers, but they do so as an “underdog”.

This position protects Apple and allows them to do things like control their entire ecosystem and bundle all the software they want. It also allows them to branch into new businesses without much fear of government intervention. Google, as not only a market leader but again, a company with a natural monopoly, does not have this luxury — just as Microsoft before them did not have this luxury and were ultimately burned as a result.

That last bit is another key. It’s not just Google’s drive to improve their product that’s at work in this sticky situation, it’s also the bottom line.

You can certainly argue — as I have — that Google has spent much of the past few years spreading themselves way too thin. What started as a killer product, Google Search, has evolved into dozens upon dozens of products, some of which are successful, but many of which are pure “meh”.

When they have such a great business with Search (and subsequently advertising), why does Google keep bringing the “meh”? Because they have to.

As a public company, Google needs to keep growing revenue or they may as well be dead to investors. Some companies can keep growing revenue by focusing on and improving current products. But for almost all companies, there’s a strong desire to accelerate growth by finding new revenue streams — this includes Apple, by the way (though I’d argue that they move into new businesses in a much smarter, more methodical way).

More, more, more.

The problem with more, more, more when you’re Google is again the monopolistic aspect of your business. If you attempt to leverage your strongest asset (Search) to help along these new potential revenue streams, it goes from looking smart to looking evil. Again, it’s all about perspective.

Just in case it’s not clear by this point, I’m trying to form an argument as to why Google is doing what they’re doing as of late. It seems batshit crazy, but I have to believe it’s not. When people like Matt Cutts — who seems genuinely forthright in situations like this — writes posts extolling the virtues of Search+, I have to believe he actually believes it’s a good thing. That’s why I think much of Google may just have blinders on to this whole situation.

But that’s no excuse. Google may say they’re trying to do what’s best for their users, but that’s not 100 percent true. What would be best for their users is to incorporate Facebook and Twitter data into Search+. If they can’t do that (which again, they can to some extent), they should come out and say as much and be completely transparent as to why. They shouldn’t try to pretend like Google+ is God’s gift to internet search — it’s not. At best, it’s second rate.

Essentially, Google should say what I just said for them. Yes, they have a monopoly — a monopoly which they earned, mind you. Because of this, it’s hard to innovate without pissing off rivals. This makes negotiations with said rivals hard as well. But they’re trying to do what’s best for their users. That’s all that matters.

Instead, we’re getting nonsense and doublespeak. It makes it seem like Google is looking out for one entity and one entity alone: themselves. That never wins. I’m not sure when “don’t be evil” and “don’t be disingenuous” diverged, but they have.

For Google, it’s a hard place to be in. Especially when your main rival has beaten the system. Apple only has a monopoly in profits.