Japan now powered by Google Inc.

In officially approving the Google-Yahoo-Japan search and advertising partnership, Japanese antitrust authorities have inexplicably declared that granting Google an increase from ~40% share to ~90% of the Japanese search market wouldn't "immediately" violate antitrust rules. Huh?

It is obvious that this decision will end very badly.

• Japan effectively has chosen to outsource the organization and monetization of the Japanese online economy to Google Inc.
• Japan's online economy is now a de facto subsidiary of Google Inc., because Japan is:
  • Completely trusting the Japanese Google monopoly to serve the best interests of all Japanese users, advertisers and publishers and not Google's; and
  • Implicitly and preemptively giving up on competition and market forces to power the Japanese online economy going forward.
• Astonishingly, Japan has chosen to not have any significant indigenous Japanese company organizing Japanese culture for the Japanese.
  • This is in stark contrast to how its most powerful neighbors and economic competitors, South Korea, Russia, and China have approached their online economies.
  • They have all decided the online economy is central to their nations' economic and cultural prospects, whereas Japan has outsourced it almost entirely to Google Inc.
• Japan's online world and economy is now truly "powered by Google."

This decision is also lose-lose for Japan. 

• The first loss is that they gave up on competition and market forces as an economic system.
  • History and common sense tell us monopolies have little incentive to innovate or anticipate/meet the needs of those it affects.
  • This first loss is largely permanent because once competition is snuffed out in this market, it has no realistic prospect of coming back, because the barriers to entry are mind-boggling.
• The second loss is that this unregulated monopoly will abuse its monopoly power -- as all unregulated monopolies before them have over time.
  • And when it does, Japanese authorities will have to try and fix what they themselves have willfully broken, and  they will have to regulate Google Inc. in Japan to manage the morass of conflicts of interest and abuses of monopoly power that they themselves created.
  • And regulation of Japan's online economic broker engine is the worst of all possible worlds for Japan as it will ensure for a long time that Japan's online economy will lag the world and that Japan will largely be an innovation-free economic zone.

In sum, this inexplicable decision by Japanese antitrust authorities to de facto give up on competition and a market forces system for the Japanese online economy, and to de facto adopt a monopoly and regulation model for Japan's online future will predictably end badly for Japan.

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To see the keynote speech I gave in Tokyo in September to Japanese industry, where I laid out why a Google-Yahoo-Japan monopoly was bad for Japan... click here.