posted by David Adams on Thu 25th Feb 2010 04:19 UTC
IconMy colleague Thom wrote an excellent evaluation of the European antitrust investigation of Google yesterday. I agree with much of what Thom says in his article, including the statements that the investigation isn't surprising and that it's fishy that the complaining companies have ties to Microsoft. What I don't agree with is the offhanded comment that Google has "pretty much a monopoly in search." There was a lively discussion on this point in the comments, but I thought that rather than join the fray there, I'd exercise my monopoly power and put my thoughts into an editorial.

Google dominates the search market. Not only do 60+ percent of web searches happen on Google, but it's so dominant in people's minds that "to google" has entered the lexicon as shorthand for "search the internet." As the recent Facebook Login brouhaha demonstrates, for a large number of people, Google is the internet; it's where you go to see the web sites. I think I can safely say that more than a few people literally think that the internet is stored inside Google somewhere. But it's not. It's that kind of thinking that makes people think that Google has a monopoly.

Microsoft has a near-monopoly. In most of the world, the chances of running across a PC running anything but Microsoft Windows in a shop is nil. Many software programs only run on Windows. Even some web sites require Windows (though thankfully, this is mostly a thing of the past). Microsoft used its market dominance to prevent PC makers from offering alternative operating systems, and used its desktop OS dominance to discourage users from, for example, using a non-Microsoft web browser, then used its browser dominance to thwart web standards, thus locking in its browser dominance. Thus, Microsoft is a monopoly, which in itself is neither illegal nor immoral, and has also stood accused of leveraging that monopoly for anti-competitive purposes, which to many people is both illegal and immoral. Due in large part to government intervention (or the mere threat of it), Microsoft's monopoly is on the wane, as is its abuse of said monopoly.

Google, due to its power in the market, has taken to throwing its weight around in order to enter new market segments. It has offered services for free that other companies charged money for, putting them out of business. It periodically changes its algorithms and page design, which benefits some web sites and harms others, to the degree that they depend on Google searches for traffic. It recently, launched its Buzz product which took advantage of the private data it possesses and potentially violated its users' privacy. Any way you look at it, it's violated its own "don't be evil" policy on numerous occasions. But it hasn't been a monopoly. Why? Because with an open internet, it's extremely difficult (maybe impossible) for any web site to be a monopoly.

Telecom and cable TV companies, electric utilities, transportation networks: all of these things are frequently monopolies, and they're usually regulated by (or run by) the government because of this. For many people, if they don't like their cable company or their local transit authority, they are stuck. If they're lucky, they can find an acceptable alternative, such as satellite TV or riding a bicycle, but sometimes they can't. If you want to search the internet but don't want to use Google, then use one of the dozen other search engines. Nothing is preventing you. Let's imagine a world where Google's dominance of search gives it such an R&D advantage that it works 50 times better than the next best search engine. Does it have a monopoly then? Still no. You could say it has a de-facto monopoly, but it still wouldn't have a monopoly in a legal sense, because there would be no artificial barriers to someone making a better search engine and you using it. Now let's imagine that Google was owned by Comcast, and there was no net neutrality, and Comcast blocked access to any other search engine besides Google. That would be a monopoly, al least for those users who had Comcast internet service, particularly those users who had no alternative choice for broadband. But even in a hypothetical situation wherein users received internet service from a Google-managed municipal network (certainly not a far-fetched scenario), as long as those users were free to access any web site without interference, there would still be no monopoly.

No matter how much better Google's search is, or how much more popular it is, those facts alone will never make it a monopoly. If I were to invent a new flavor of ice cream that was so good it made all other ice cream taste like dog crap, and people stopped buying all the other kinds of ice cream, I still wouldn't have a monopoly on ice cream. I would just be a very rich guy with an awesome secret ice cream recipe. I would only have a monopoly on ice cream if I abused my market position to artificially make other kinds of ice cream unavailable. Let's say I told retailers that in order to sell my ice cream, they'd have to not sell my competitors' ice cream, or I somehow made it impossible for other ice cream makers to buy cream or sugar because I strong-armed suppliers, or lobbied the government to make other kinds of ice cream illegal. China could easily create a situation wherein one search engine had a monopoly in that country. Alas, it won't be Google.

Other than total governmental control over the network, the only way that Google, or any web site, could ever have a monopoly, would be under one of those network neutrality horror scenarios, wherein a major last-mile provider of internet service were in cahoots with Google to prevent people from using alternative web sites, or if Google were to work with OS vendors (or use its own OS) to make it difficult to use another search engine. Both of these scenarios would only be possibly by piggy-backing on an already-existing network or OS monopoly, though.

Google doesn't have 60+% marketshare because people are forced to use Google any more than McDonald's is the worlds most popular restaurant chain because people are forced to eat at McDonald's. And in fact, McDonald's is much closer to being a monopolist, at least in a regional sense, since I've been to various places where the only place to eat at that particular time was a McDonald's. Under no circumstances have I ever been online and not been able to access an alternative web browser.

Social networking is a slightly different story, because there's a network effect, which can give a de-facto vendor lock-in to a popular site. If most people are on Facebook, you can't just switch to another social network and get the same value from it. A startup social network is virtually useless until is has a rather large critical mass of users. Google wishes it had this kind of market advantage, but so far its attempts to gain this kind of lock-in have been quite unsuccessful, from its early social network Orkut to the incomprehensible Wave, to its latest project, Buzz. Most of the Google services, from Gmail, to GTalk, to Google Voice are all interoperable with estabished standards and are intended to communicate with non-Google users. I'd say that Facebook is way closer to holding a monopoly on social networking than Google is on search. Of course, you can certainly make the case that searching the internet is a much more important activity than social networking, and therefore it's more urgent to guard against a search monopoly. I think that would be a reasonable assertion.

So should the European anti-trust authorities be investigating Google? I don't think there's much harm in it. Though I lean strongly libertarian on many issues, I think that one of the essential roles of government is as a watchdog on the most powerful companies, which have a fiduciary duty to their shareholders to run roughshod over citizens (if given the chance) to make a few extra bucks. Once a company gets to be a certain size,t he only bulwark against the worst abuses is going to be a government, which maintains its dominance by holding a monopoly on all sorts of powers, such as the use of force. So even if it's technically impossible for Google to have a search Monopoly, it's probably not a bad thing for it to get a little warning about throwing its power around too indiscriminately. But, if these authorities end up branding Google a monopolist, then I'll be the first one to stand up and cry foul.


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