Antitrust

Google generated probably the strongest annual revenue growth, 17%, of any large U.S. company this past quarter. 

• Given that Google is exceptionally non-transparent, the minimal guidance and insight that Google is required to provide as a public company always provides a rare glimpse into what is really going on at Google. 

What are the big takeaways from the earnings call?

First, Googleopoly continues to gobble revenue market share at a voracious rate because we know Google's revenues are up 17%, and Google's only significant competitors, Yahoo and Microsoft are continuing to lose ground, (as Yahoo is expected to report a revenue decrease on Tuesday so its search revenues can be assumed to badly lag Google's 17%, and Microsoft Bing's modest search share gains are not keeping up with Google's torrid search growth in a weak economy.)

Second, Googleopoly continues to show strong evidence of its dominant market power in pricing as its revenue growth of 17% is outpacing its paid click growth of 13% -- by roughly 30%. There is no stronger evidence of monopoly power than pricing power and Google clearly has pricing power aplenty.

• Google is very good about keeping its pricing power hidden from public view by letting no relevant market information escape Google's "Black Box" auction process.    

Third, Google's CEO Eric Schmidt reaffirmed that Google is on an acquisition spree with some "big" buys coming -- and with almost $25B in cash and roughly $10B in annual free cash flow -- Google can afford to buy most whatever it wants.

In a brief but very important WSJ story, Google abandons any pretense that it is a neutral search engine/advertiser. See the WSJ piece: "Google advertises its China position with search ads."

• The story is worth re-reading a few times, because it becomes more disturbing the more one realizes all the implications of it.

The story reports that Google is doing something new in taking the top Sponsored Link ad position for itself in searches like "Google and China."

What this tells us, is Google, the search advertising monopoly per the DOJ, not only claims the top search result for itself for many searches in areas that Google owns content, like GoogleMaps, and Youtube, but now it also lays claim to the most valuable top advertising position as well to promote Google's public policy agenda. (If Google is willing to promote its China policy, why would it not promote its chosen political candidates? or its public policy positions of a variety of social issues targeted to users intentions/profiles that only Google happens to know?)

Google's behavior here belies its repeated representations that Google is a neutral search engine and runs neutral ad auctions. This should seriously concern the DOJ and FTC antitrust authorities, which are both investigating if Google is anti-competitively leveraging its monopoly position to dominate new markets that it enters.

While I generally disagree with ZDNet's open source columnist, Dana Blankenhorn's views, I regularly follow what he writes and respect his analysis and clarity of thought. 

Given all the talk of Google's many antitrust issues and Google's own denials that it is a monopoly, Mr. Blankenhorn's candor as a Google ally, was refreshing in his piece: "Open source and the Google Cloud:"  

•  "Google has achieved such economies of scale in delivering transactions and storage that competing with them over the long run looks foolish."
• "Unless you have a breakthrough that can balance out those cost disadvantages you’re really at their mercy. If Google decides to “embrace and extend” its cloud dominance into software and services you’re going to lose."
• "It’s Google’s world, in other words. Open source just lives in it."

Mr. Blankenhorn is on the mark in his analysis. Google's domination of search advertising has afforded it the cybrastructure scale and scope that no one can compete with and that can easily be repurposed to enter into and dominate any digital information or digital distribution business -- almost at will.

Why so many are concerned about Google and antitrust is because of what Mr. Blankenhorn candidly asserts: 

In a strategically important development, three antitrust complaints were filed against Google in Germany per Bloomberg. 

The big takeaway here is Google's antitrust liabilities are clearly proliferating globally.

Since U.S. antitrust authorities already determined Google has a monopoly in search advertising and search advertising syndication as a result of the ill-fated proposed Google-Yahoo ad agreement, and since Google's market shares are higher in Europe than they are in the U.S., it was only a matter of time before antitrust cases were filed against Google in Europe.

The strategic significance of this Germany/EU development is that now both sides of the Atlantic will be focusing on Google's monopoly power and limitless ambitions to organize the world's information.

Google unwisely chose to trumpet Apple's purchase of Quattro as evidence that the mobile advertising market is competitive -- and by implication that the Google acquisition of Admob therefore should be approved.  

First, the FTC surely remembers that Google CEO Eric Schmidt indignantly said only last year that Google and Apple were not competitors, so there was no reason for Mr. Schmidt to have to step down from Apple's board, despite an FTC antitrust investigation into potentially illegal Google-Apple inter-lockiing directorates.

News reports that the DOJ, and not the FTC, will conduct the antitrust review of the Comcast-NBCU deal is a very good development for the companies. 

First, DOJ's filing to the FCC on the National Broadband Plan just this week showed that the DOJ clearly understands that the cable industry is competitive and that DBS competition has improved innovation, content choice, and customer service in the market, and that telecom competitive entry has provided pricing pressure to the cable market as well. (See pages 15 & 16 of the DOJ filing.) 

Second, that same DOJ filing shows that DOJ rejects the radical thinking of FreePress that competition must be commodity-like to be competition and that pricing should be based on incremental costs. If the DOJ does not agree with FreePress' approach to analyzing competition in the National Broadband Plan they are unlikely to agree with FreePress' approach to analyzing competition in this Comcast-NBCU merger review. Simply, DOJ does not analyze competition and antitrust like FreePress does. DOJ is professional and driven by the facts and the law -- not politics. 

Third, the DOJ merger review process, because it is overseen by a single antitrust enforcer/prosecutor and not a commission with additional consumer protection responsibilities, is a much harder process for FreePress to politically influence/manipulate than the FTC. 

In a filing to the FCC on the National Broadband Plan, the DOJ Antitrust Division, the U.S Government's leading expert in assessing the state of competition in communications markets, implicitly rejected net neutrality proponents' core thesis of broadband market failure.

• This DOJ filing, which represents the most recent U.S. Government expert assessment of broadband competition, could make it extremely difficult for the FCC to legitimately conclude in the coming months the factual opposite --  broadband market failure.
• Without a sound factual finding of broadband market failure, it also could be extremely difficult for the FCC to legally justify preemptively mandating common-carrier like regulations on un-regulated broadband information service providers in the FCC's pending open Internet proceeding.

FreePress, which philosophically opposes competition policy, effectively is mocking antitrust law and authorities by cynically feigning to care about antitrust and competition in calling for an antitrust investigation of "TV Everywhere" efforts to enable authenticated paying video customers the additional convenience of accessing their paid-for content on any device at no extra cost. 

• FreePress is misrepresenting its latest report -- "TV Competition Nowhere" -- as antitrust analysis when it is standard FreePress villain-ization of broadband and media businesses.   

In their own words, FreePress is anti-competition, anti-property, and anti-business. 

The latest whistleblower of Google anti-competitive behavior, Adam Raff of Foundem, wrote an excellent op-ed in the New York Times last week that should not be missed, and that explained why Google is a much greater threat to an open Internet than anyone else. (To learn more about Google's monopoly bullying of Foundem, see "Foundem's Google Story" at www.searchneutrality.org.) 

What's also troublesome here is the reflexive bullying and impugning of the credibility of the victim by Google apologists, that apparently assume that if Google did something to Foundem, Foundem must have deserved it... because the Google apologists assume Google's search algorithm and business can do no wrong (even though they, nor any independent third party, has ever reviewed or audited Google's search algorithm or quality score for neutrality or anti-competitiveness.)

Google posted its treatise on "The meaning of open" designed to redefine the word "open" in Google's image. It is an important read because it is a bay window view into the altruistic way that Google yearns for the world to perceive it.

• Like most all of Google's PR, however, Google's Treatise on "The meaning of open" may be "the truth" as Google sees it, but it is certainly not "the whole truth and nothing but the truth."

I.   Google's  Open Double Standard

Simply, Google is for "open" wherever it does not have a monopoly or dominant market position, however where it does, as in AdWords, AdSense and search advertising syndication, it is closed, to ensure that its dominance remains impregnable to competitors.

In the height of irony, Google has cleverly flipped a concept that was originally designed to be a sword of competition to a closed monopoly, and applied it as a political/PR shield to protect Google's closed monopoly from competition.