The European Parliament has voted to break up Google. The resolution is non-binding. But even if the Commission does pursue a breakup, it’s unclear how the EU could affect the decision. Google is an American company, and the US antitrust authorities have declined to prosecute Google for monopolization under US antitrust laws. I doubt an American court would enforce such a foreign order in that environment.
The EU’s complaints appear to be based on the notion that Google has market power in search and is using that power to advantage its ancillary services. According to the complainants, Google displays its own ancillary services more prominently than competitors. Other complaints include Google copying content from other providers and providing that content in their own search results; not allowing other advertisers to sell advertising on Google’s platform; and restrictions limiting the ability of advertisers to move campaigns to other search engines.
The Economist faults the EU’s decision. They believe “internet monopolies” are inherently transient. Entry barriers are lower; there is little lock-in (consumers don’t “standardize” to search engines as they would with, say, an operating system); and history suggests that tech monopolies, like IBM and Microsoft, don’t truly last.
What the EU, the BBC and The Economist seem to take for granted is that Google is “dominant.” The Economist suggests that they have 68 percent of the “market for web searches” in the US and over 90 percent in “many” European countries.
These numbers do not reflect lasting, entrenched market power in the “market for web searches” and are therefore misleading. At any given moment, a user could search any number of different engines. Consumers pick Google because it produces good results. Performing a single Google search does not make the second search on Google more efficient than on any other engine.
The truly valuable information that Google has assembled is, in effect, a very good “dictionary.” It knows through trial and error what people really mean when they enter information into a search engine. Imagine the search “I am pissed.” A user searching at 9 a.m. on a Monday in Manhattan will mean something very different from a user in Cardiff at 11 p.m. on a Friday. I suspect Google has mastered the nuances of language and meaning to an extent others in Europe have not, and that’s why they are successful in Europe more than others.
This knowledge was developed by Google. It’s their intellectual property and has value. To us Americans, Google should have the right to exploit that intellectual property. The Europeans, it seems, view that knowledge as a utility that should be provided to all without any bias.
The true transience of Google’s position is evident in its “share” in the States. It’s declining. Competitors are developing their own “dictionaries” and are providing alternatives to what Google is offering. One, for example, does not allow advertising. As competing search engines master language and meaning in other languages and cultures, that “share” in those countries will similarly shrink. The fact of the matter is there is no meaningful benefit to me if my neighbor is using Google. There may be a slight, imperceptible benefit insofar as the more people in a community use Google, the better Google will be at understanding meaning within that community and therefore predicting the results that are most interesting to me. But those searches have got to be quite idiosyncratic and therefore increasingly rare.
Indeed, I think Google’s “dominance” in meaning may have already been surpassed by Facebook. Google sells ads based on its understanding of what people mean when they type in a search. The better Google understands meaning, the more likely a user will click through ads and purchase things. Facebook users enter much more personal information covering many more subjects than any Google user. Facebook, through its own site as well as relationships with many other sources like The New York Times, has a much more intimate understanding of who you are. Google may suspect that I may be a groomsman at an upcoming wedding because I searched for “tuxedo rentals.” Facebook knows I’m actually attending a ball because I liked the ball’s FB page. With that extra knowledge, FB could serve up florists as well. As a consequence, Facebook will likely become a much more desirable source of online advertising. That understanding could easily be adapted to web searches. All Facebook has to do is add the feature to its search bar. In fact, Facebook’s entry into search really should be bothering Google. Facebook is ubiquitous worldwide. It’s not just an American toy. So it should be able to enter “foreign” lexicons much easier than American competitors.
That raises another question. How are consumers harmed? They get search (and pretty much every other service Google offers) for free. In the parade of objections, it would appear that the EU is concerned about the advantage Google can give its own ancillary services over those of their competitors. But that advantage hasn’t exactly propelled Google+ to the height of social media, for example. Indeed, the proper question is to what extent search is the gateway to these other services. Is the only way people look for free email or social media by “Googling” “free email” or “social media”? Without a clear correlation between search and those products, it is inappropriate to conclude that because Google is “dominant” in search, it can affect competition in alternative markets. I suspect the complaints are more about leveraging the European system to give them a slight advantage over Google in the market.
Indeed, that is the entire problem with the proposed breakup. Without preferred access to higher listings, Google’s ancillary services will have to compete on the merits, as the reasoning goes. But there does not seem to be any proof that users use Google as the exclusive or even primary gateway to any of these services. Nor are any of these ancillary services so expensive or useful that users couldn’t subscribe to multiple services at the same time. I can have a gmail and yahoo email in addition to my work email and cable company email. The clearest indication that there may in fact be a significant problem with unbundling as a solution in this situation is Google+. Their social network remains almost unused. If Google was a meaningful gateway, why is Google+ not the dominant social network?
Breaking Google up into separate companies each with the complete Google “lexicon” is similarly flawed. Let’s say you split Google into three companies. Company One decides to eliminate advertising and charge subscriptions. Company Two decides to keep offering free search. Company Three decides to go wholesale and license the lexicon to other third parties like Bing, who do not charge for search. Having the ability to use Company Two’s search (and Company Three’s licensee’s search) for free, no one subscribes to Company One. Going out of business, Company One moves back to the advertising model. But having lost users, they have lost valuable insight into meaning. Upon licensing, Company Three’s value is used up. The other search engines now have the same insights as Google at that time. Being wholesale, however, Company Three cannot update their lexicon. Access to Google’s lexicon through Company Three may inspire new entrants attempting to differentiate themselves, like through a “no tracking” or “no advertising” promise. Again, though, only Company Two, which has remained free, will continue to “learn” and therefore have a current product. Company Three’s licensing has empowered other competitors and may make them just as desirable to Company Two, perhaps more, because they will have their own insights into “meaning” that Company Two will not have access to. But in the end, you still have a Google and you could have accomplished the same result by a forced license of the algorithms to Google’s competitors. But that still doesn’t accomplish anything because it’s unclear that Google’s interface is a prerequisite for competition in whatever markets include the ancillary services.
Google needs to be able to adjust its algorithms. It needs to be able to send people to sites they want and avoid being manipulated by websites that seek higher rankings that do not necessarily deserve those ratings. And consumers should want them to have that ability. It’s what makes the product useful. If the EU were really concerned about search placement affecting competition—which I doubt they could prove in any meaningful way—all Google would have to do is provide a list of their services in a separate column to the right, and leave the “natural responses” to the main list. Or on top. That works too.
I think Google has already lost search to Facebook. I think IBM and Microsoft still have meaningful monopolies but in less populous markets. I see a similar place for Google, too, in the years to come. But breaking them up now to protect providers’ services that can be found through search is just silly.