Antitrust

To help you better picture how Google leverages its search advertising monopoly via anti-competitive search discrimination in favor of Google information, products and services... and to better connect Google's monopolization strategy with the myriad of current Google actions to embrace and extend its monopoly... please see this one-page chart/PDF: "Google-opolization Through Anti-competitive Search Discrimination." 

For those who really want to understand Google's strategy and how it all fits together, please read and study this one-page chart/PDF, because much valuable work and insight has gone into providing everyone with a big picture conceptualization of Google's monopolization of digital information distribution and the Internet itself.

• The purpose of the one-page chart is to flesh out the skeletal understanding that many have about Google and its anti-competitive actions.
• While the chart is visually packed with information that many may find difficult to unpack or digest, the chart itself is an apt metaphor for both how extensive and powerful Google's monopolization strategy is,  and also how difficult it is for all of us to get our head around all the Google information, products and services Google uses to reinforce and extend its un-precedented market power over much of the world's digital information economy.

Please contact me with any ideas of how to make this more clear or if there is anything I have missed -- this is a work in progress.

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Japan effectively has outsourced the organization, storage and access to its nation's information, culture, history, and online commerce to one entity, Google, in consenting to a national monopoly search engine/ad platform for Japan going forward.  

• Unlike Japan's neighbors, China, Korea, and Russia, Japan apparently has chosen to not promote an indigenous Japanese search engine/advertising platform, or to ensure search competition -- a fateful tacit decision that heralds that Japan will more likely become a de facto third world online economy long term.   

Apparently Japan's Fair Trade Commission or Government have not thought through all the huge ramifications of putting all their information eggs-in-one-basket from a competition, cultural, political, economic, privacy, or national security perspective.

Google again seems to be presumptuously trying to make official announcements for sovereign governments.

• In announcing for the Japanese antitrust authority, that the Government of Japan has approved Google's proposed monopolization of search advertising in Japan (by allowing Yahoo-Japan to outsource its search advertising engine and platform to Google), Google appears to be once again imperiously trying to dictate outcomes to sovereign governments in advance and in public.
• Just like Google tried and failed to dictate outcomes to China over the first six months of this year, it appears that Google has learned nothing about "face" and due respect from its China fiasco and is once again treating a sovereign nation, Japan, as someone that works for Google.   

Doesn't Google's announcement strike anyone else as over-the-top presumptuous?

Google now has 93.8% of U.S. revenue share of search advertising as Google has taken ~20% of the search advertising revenue share that they did not have a year ago.  Google continues to relentlessly gobble up massive search advertising revenue share from its only two significant competitors, Yahoo and Microsoft, in part because:

• Google's relevant revenues are 20x bigger than Yahoo's and 57x bigger that Microsoft's; and
• Google is growing its huge base so much faster -- +24% to Yahoo's -8% and Microsoft's +13%. 

Given that these revenue share calculations are relatively easy to do (explained in detail below), and that the key revenue numbers are publicly available, it is amazing how no one in the press that reports on Google antitrust issues discuss revenue market share, which is what really matters in antitrust investigations trying to prove monopoly power.  

The fateful policy decision by the FTC/DOJ to exclude privacy as a factor in antitrust enforcement has fostered a perverse market dynamic where many online advertising companies now effectively compete on the basis of who can most take advantage of consumer privacy fastest, rather than compete on the basis of who can best protect consumer privacy. 

• Consumers' online privacy Waterloo was the FTC's failure in its 2007 review of Google-DoubleClick to fundamentally understand the online advertising business model, i.e. that consumers are not the "customer" of online advertising, but the "product" that Google and DoubleClick effectively sell to advertisers and publishers.
• In getting it wrong that consumers are the real "customer" in Google's online advertising brokering-triangle of advertisers, publishers and users, when users don't pay Google at all, the FTC fundamentally misunderstood consumers' real interests.
• The FTC unwittingly aimed the worst part of this business model's privacy arbitrage at consumers' vulnerabilities rather than aiming it at protecting consumers' privacy. 

This analysis will show: 

• The implications of exempting privacy from antitrust enforcement;
• Why privacy is an antitrust issue;
• How consumers are harmed by exempting privacy from antitrust enforcement; and
• In conclusion, how Google has become the "poster child" of this problem.  

I.   Implications of exempting privacy from antitrust enforcement.   

In ominous cross-pond agreement for Google, the Financial Times and the New York Times agree that Google needs more antitrust accountability:

• See the FT editorial; "Google should be watched carefully"
• The the NYT editorial: "The Google Algorithm."

Google itself has put the issue of "search neutrality" on the map with its FT op-ed and Google blog post and by saying they are for now for search bias after being against it.

Google's proposed acquisition of ITA software to beef up the Google Travel vertical, has put on everyone's radar screen the anti-competitive potential of Google continuing to extend, tie,and leverage its global search monopoly into content verticals like travel.

The FT got the concern over vertical abuse right: "...the potential for antitrust abuse through the tying of vertical services to search raises clear concerns."  

However, the NYT missed the mark on vertical abuse: "Forbidding Google to favor its own services -- such as when it offers a Google Map to queries about addresses -- might reduce the value of its searches."  

Google strongly legitimized the problem of "search neutrality" in arguing in detail in an FT op-ed today why Google's search should not be neutral. 

Today Google publicly admitted for the first time that its purported "neutral" and "unbiased" search algorithm is not completely-automated or computer-algorithmic like Google has long and consistently represented to the public. 

• In a stunning first-time disclosure in a Richard Waters FT article by "the Google engineer responsible for its ranking algorithm," Mr. Amit Singhal:   
  • "Google’s Mr Singhal calls this the problem of “brand recognition”: where companies whose standing is based on their success in one area use this to “venture out into another class of information which they may not be as rich at”. Google uses human raters to assess the quality of individual sites in order to counter this effect, he adds." [Bold added for emphasis.]

Wow. After a decade of passionate public representations that Google's vaunted search algorithm is "neutral' and unbiased, we now learn it has substantial regular human intervention to discriminate what site gets what ranking, who gets found and who does not, and who wins and who loses in the business of online content.

• From Google's website:

Serial beehive kicker Google, just kicked the wrong beehive -- IAC.

• Kudos to FT's Richard Waters for his outstanding front-page story based on an interview with Barry Diller, Chairman of IAC and Chairman of Expedia, on the implications of the Google-ITA deal and Google's lack of search neutrality.
  • Read the article and visualize the angry bee swarm, whose hive has been kicked and which is pursuing the kicker with a vengence.  

So fixated on stomping on the potential competitive threat posed by Microsoft's vertical search competitive differentiation strategy, i.e. by buying the dominant airline software supplier ITA, Google apparently did not look down to see that it was trampling on the honey pot of one Google's biggest and most important partners/allies -- IAC and Barry Diller -- in buying ITA and abruptly heralding its broader ambitions of invading and conquering the vertical space of its many online content partners.

• Google made a very big strategic mistake on this deal that will be hard for Google's legendary PR machine to cover up.  

Why will the IAC sting hurt Google more than other beehives that Google has kicked? 

In buying travel software leader ITA, Google Inc., the self-described "biggest kingmaker on this earth," seeks to expand its ever-expanding digital information empire into the $80b online travel market and establish a dominant "Google Travel" vertical.    

What's most critical here is pattern recognition in order to get perspective on what this Google-ITA transaction means more broadly. 

Pattern 1: Extension of market power via strategic acquisition of first-mover potential competitors.

This proposed ITA acquisition is the latest example of a well-established Google monopolization strategy -- i.e. to buy the dominant or first-mover player in a strategic vertical as a platform to extend its search market power into those markets much faster than it could organically. Note the pattern in the examples below. Google's: