Antitrust

Did Google's CEO Eric Schmidt just say in public to the American Society of News Editors: 

• "he wants to be challenged through technology that directs readers to a story with an opposing view" per Politico? 

It sounds a lot like Mr. Schmidt envisions a Google with some automated technology that "challenges" readers with an automated process that "directs readers to a story with an opposing view?" 

Don't miss an outstanding op-ed by Devereux Chatillon entitled "It's about search Stupid" about the Google Book Settlement.

It is on point, insightful and has great clarity of thought.

It also employs a brilliant metaphor to capture the essence of Google's monopoly power -- search as a map.

• "If websites, databases and other content are the landscape of the virtual world, then search engines are the maps. Without search engines, the landscape is confusing and getting lost a certainty. With them, finding one's way through the dense forest of information is possible if occasionally made difficult with unexpected detours and dead-ends. Disappearing from the results of dominant search engines leads to invisibility. And if one has a website, a blog, an ecommerce site, or a database that no one knows exists, it is useless."
• Please click here to read on.

For skeptics of Google's need for more transparency and accountability, consider the latest disturbing example of Google Chrome not asking tens of millions of Internet users for their permission to gain wide open access to their computers and content -- when it clearly should ask for permission -- like every other Internet browser provider does.    

Per ComputerWorld's article: "Google's Chrome now silently auto-updates Flash Player." 

• "Unlike other browsers, Chrome updates itself automatically in the background without asking for permission or prompting users that security fixes or new features are available." 
• "Google uses a unique approach, they don't ask users [for permission to update], they just do it" said Peter Betlem, Senior Director of Flash Player Engineering.  

What this means is that unlike all other browsers or Google competitors, Google does not believe it needs permission from users to gain wide open access to users' entire computer software and all its private contents.

FTC antitrust concerns over "inter-locking-directorates" reportedly have forced Kleiner-Perkins' John Doerr, to step down from Amazon's board, because he is also on the board of Amazon, a major book and cloud-computing competitor of Google -- per Miguel Helft's and Brad Stone's scoop at the New York Times Bits post.

This is the third (Amazon, Apple, Yahoo) too-cozy-for-antitrust-authorities, Keiretsu-like, Google business relationship that either the DOJ or FTC apparently have broken up. 

• (I will elaborate on each of these problematic Keiretsu-like relationships (Amazon, Apple and Yahoo) later in the post.)

Three different interventions by antitrust authorities involving Google's ties with three different Fortune 500 companies in eighteen months constitutes a pattern and underscores the depth and breadth of antitrust concerns that U.S. antitrust authorities have about Google.

Ever since Google announced it suffered a cyber-attack from China, Google's legendary PR machine has gone into overdrive, opportunistically framing the conflict as a good versus evil story, and positioning Google as the Internet's benign superpower defending free expresssion, and as a new kind of business that puts morality before money.   

• Google understands it is easy to politically demonize China, because China's pervasive censorship and trampling of fundamental freedoms and human rights offend all freedom-loving people.

However, those willing to look behind the curtain of Google's self-serving political rhetoric here, will discover that many of the attributes that offend so many people about China, Google shares to an unfortunate extent.

• Let's review four significant strategic similarities between Google and China -- brought to you in Google's own words.

First, Google's leadership, like China, has affirmatively chosen to not be democratically accountable.

Wow. The evidence Viacom unearthed in discovery in their $1b copyright infringement suit against Google is surprisingly damning. The evidence shows willful, premeditated, deceptive, and organized efforts by YouTube, Google and Google-YouTube to infringe copyrights for anti-competitive and financial gain.

• Read the quote summary first here, then review the copious evidence/history in the 86 page Viacom Statement of Facts here, and then review Viacom's Summary Judgement memo of law here. 

So what are the broader antitrust implications of all this new and serious evidence of illegal activity and misconduct by Google-YouTube?

First, DOJ really blew it for not even asking for a second request of information on Google's acquisition of YouTube.

First there was one-to-many broadcasting, then many-to-many Internet narrowcasting... now it appears we are moving next to a one-to-many GoogleNet unicasting future...

• ...where every company and individual may simply become a subordinate channel on the Googleopoly advertising network, 
• and where content largely would be found only via Google's mono-search guide...

To better understand this troubling ongoing transformation, connect the dots below...

Google's unprecedented mass-accumulation of material non-public information may force a re-thinking and broader definition of the concept of insider information/trading and related securities laws/regulations, in order to continue to ensure the integrity of public markets.

• Public statements by Google's CEO Eric Schmidt last week unwittingly unveiled a new and potentially very serious material weakness in the oversight and integrity of public markets, that should trouble those responsible for policing insider trading and other public securities laws at the SEC, CFTC, FERC, Treasury and the DOJ.
• From Jon Fortt's outstanding not-to-be-missed post in Fortune: "Top 5 moments from Eric Schmidt's talk in Abu Dhabi:"
  • Google CEO Eric Schmidt: "One day we had a conversation where we figured we could just try and predict the stock market..." "and then we decided it was illegal. So we stopped doing that."

Public market regulators responsible for protecting the integrity of public markets are likely to be concerned by this public admission by a publicly-traded Fortune 200 CEO, especially when the statements are put in a broader perspective by connecting the relevant dots.

A very important investigative scoop by Appitalism's Simon Buckingham (that has been submitted to the FTC's Google-AdMob antitrust investigators) uncovers how Google unilaterally, not-openly, and without advertisers' permission, changed the default settings in all of Google advertisers' accounts, which effectively "duped advertisers out of hundreds of millions of dollars."  

In a nutshell, Mr. Buckingham's investigation found that  two years ago, Google quietly changed the defaults of all its advertiser clients' accounts so that their ads were served not only to all desktop pcs/laptops, but also to all IP enabled mobile devices too.

• This significantly expanded the number of ads Google served and advertising revenue generated by Google via clicks, but without a consequent increase in the value delivered to the advertiser customer by Google  in return. 
• As Mr. Buckingham explains it, mobile devices simply can't functionally handle most of the ads Google sends to mobile devices because they require Adobe Flash (which mobile devices generally do not have) and mobile devices have much smaller screens so large-screen-oriented ads are basically dysfunctional in the mobile device market.
• Mr. Buckingham estimates that this deceptive practice likely has costed Google advertisers over several hundred millions of dollars over the last two plus years.

This investigation prompts several disturbing takeaways. 

First, this underscores how truly opaque the Google "Black Box" advertising business model is.

A potential flood of very illuminating documents and information about the inner workings of Google are likely to be released soon by the Federal Court hearing Viacom's $1 billion copyright infringement lawsuit against Google-YouTube, despite strong Google opposition to the court's release of the information Viacom found in "discovery."