Google

Google has reportedly signed onto the new Global Network Initiative, where it supposedly agrees that privacy is "a human right and guarantor of human dignity."

How does Google square this new high-minded assertion with its abysmal track record on privacy?

Hello? Is anyone with formal NASA oversight responsibilities looking out for the taxpayer? 

·    The New York Times Bits blog reported that Google executives added a fighter jet to "their growing fleet of private airplanes" which uniquely enjoy private landing/parking rights at NASA's Moffet airfield, a couple of miles from Google's headquarters -- an exceptional corporate perk by any measure.

Google and its minions expect all of Google's competitors to be 'open' -- but not Google. 

• If openness and net neutrality are such important principles, why doesn't Google abide by them?
• And why don't Google's net neutrality allies insist that their leader, Google, lead by example, and not tarnish them with an obvious double standard? 

Consider the following troubling and mounting evidence that Google itself is becoming the anti-competitive threat that they claim all their big competitors are.

Google's G1-phone (Android): Per CNET's review of the G1-phone, "There's no option to change the search box to use search from Microsoft or Yahoo." How is that open or neutral? Especially given Google's unquestioned dominance of search?

• Remember Google has 70% share of search queries per Hitwise, and now produces 95% of all Internet advertising profits in the US.
• Also remember the FCC's net neutrality principles clearly apply to Google: "...consumers are entitled to competition among network providers, application and service providers and content providers."

Google's Chrome Browser: Google's new Chrome browser has an "omnibox" which bundles Google's dominant search business with the address bar.

Famed philosopher of power, Nicocolo Machiavelli, would have to smile at Google's maestro market power performance in the storied Google-Yahoo affair.

• As Machiavelli would have advised, Google is laser focused on enhancing its market power.
• Let's review this modern-day Machiavellian plot.  

First, Google successfully thwarted what it recognized as the single most serious potential competitive threat to Google -- a Microsoft-Yahoo merger or search alliance.

• From the start, Google publicly made clear that it was opposed to a Microsoft-Yahoo combination and bent on stopping it. 

Second, given the deep ties between Google and Yahoo's founders -- Google understood Yahoo's founders were emotionally, philosophically, and culturally opposed to aligning with Microsoft.

Yahoo's earnings provide another excellent window into why the DOJ has serious antitrust concerns with the proposed ad partnership between Google and Yahoo.

• Yahoo's discussion of its 4Q08 earnings provides the DOJ with substantial fresh evidence that Yahoo continues to lose revenue and profit share to Google.
• Moreover, Yahoo's earnings report showed Yahoo was clearly caught off guard that the Google-Yahoo ad agreement did not get cleared by DOJ, as evidenced by the big whipsaw in Yahoo's headcount plans.

I.  Evidence Yahoo is losing revenue/profit share to Google:

While Yahoo tried to put the best face on Yahoo's search business growth, in the comparisons that matter to the DOJ, Yahoo slid much further behind Google.

From 3Q07 to 3Q08, Yahoo grew overall revenues by $.018b or 1%, and search revenues $.063b or 17%, while Google grew search revenues $1.310b or 31%.

• In other words, in the last year, Google grew 20 times more revenue than Yahoo in absolute terms.

In 3Q08, Yahoo's operating income was $.070b, a decrease of 53% from 3Q07, while Google's operating income was $1.743b, an increase of 32% from 3Q07.

Kudos to Cade Metz of the Register who has some dead-on and pertinent insights to the pending Google-Yahoo decision by DOJ  in his July piece: "Eye of newt: Inside Google's Adwords auction." Don't miss the whole article. Below are some wonderful snippets.  

• "If AdWords is an auction, it's an auction where your $10 bid may lose out to a bid of 5 cents, where you may be banned from bidding unless you outbid the rest of the field, where some bids are ignored from time to time and others are ignored all the time, where you don't know the rules - and the rules are always changing."...

• "But, again, this isn't eBay. It's not the bids - or, at least, not the bids alone - that determine where you finish. Each bid is multiplied by a mysterious something known as a "quality score," and its this black-box calculation that decides where your ad ends up. The trick is that quality score varies from advertiser to advertiser, from keyword to keyword, and sometimes from day to day. And no one knows how it all works except the Oompah Loompahs inside Googleplex."

• "But Google isn't just playing favorites. It's driving prices higher by limiting the number of clicks available at low prices."

   

Bottom line:

Google's 'auctions' are certainly not how a competitive market works.

Yahoo's reported job cuts of over 1,000 of their 14,300 employees is a helpful window into the real prospects for the pending Google-Yahoo ad partnership that is under serious investigation by the DOJ.  

First, the job cuts signal Yahoo is pessimistic about getting the proposed ad agreement with Google approved by the DOJ.

• If Yahoo was confident the deal was near approval, Yahoo would be more patient in awaiting the beginning of an ~$800m annual revenue infusion to begin in 4Q08, not obviously hunkering down to go it alone.
  • To put this ~$800m in perspective, 1,000 job cuts would save Yahoo about $100m annually, or the equivalent of a couple of months of the Google ad deal.
• In other words, if the ad deal was likely to get approved, Yahoo would be doing what it told the DOJ it would do -- investing not disinvesting.

Second, the job cuts underscore how dependent Yahoo would be on the Google ad partnership. 

• Google's proposed ad bailout of Yahoo was masking what Yahoo knew all along, that Yahoo is clearly losing the competition with Google.
  • So "if you can't beat em, join em." 
  • Being on the good side of the "mono-pole" is better than being on the bad side of the "mono-pole." 

Finally, the job cuts are evidence of "The Google Effect" more than "The Walmart Effect."

Google's earnings provide an excellent window into why the DOJ has serious antitrust concerns with the proposed ad partnership between Google and Yahoo.

• Google's discussion of its 4Q08 earnings provides DOJ with substantial fresh evidence that Google is:
  • Exercising substantial pricing power; 
  • Not running fair and competitive 'auctions;' and 
  • Anti-competitively self-dealing.

I.   Pricing Power Evidence:

Any economist will explain revenue is simply volume times price. In 4Q08, virtually all of Google's revenues continued to come from search monetization. Google reported that its 'volume' i.e. "aggregate paid clicks... increased approximately 18%" over 3Q07. Google reported that 'revenues' increased by 31% over 3Q07.  

Google is proactively blocking Internet access in direct contradiction to their stated support of net 'neutrality' principles and leadership of the net neutrality movement.

• See Googling Google and Google Blogoscoped for reports of how Google is blocking Chrome access to certain countries.

This is more evidence of Google's Double Standard that net neutrality restrictions and principles should apply to everyone else -- but not Google, the world's single most used gateway to access the Internet.

Where is the insta-indignation from SaveTheInternet or Free Press whenever net neutrality principles are violated? 

• The best way for these supposedly independent grassroots organizations to prove that they are not Googles poodles, is for these organizations to stand up for the principles they claim to believe in -- and criticize Google -- when Google tramples on their principles.
• I am not holding my breath...