Online Privacy

Google's self-interested proposal with Verizon on net neutrality legislation publicly spotlighted to many for the first time, Google's Machiavellian manipulation of Washington for competitive advantage, i.e. proactively seeking regulation of Google's competitors while ensuring Google remains unfettered by any regulation.

• Net neutrality activists are now shocked, shocked, that after five years of brilliantly portraying the starring role of the too-good-to-believe "don't be evil" corporate organizer and benefactor of net neutrality, that Google ultimately would just take care of itself, and prove that net neutrality was simply a shrewd means to an end -- best positioning Google to dominate Internet information distribution.
• The movement's most lovable lambkin, has been unmasked as a capitalist wolf in sheep clothing.

This piece will analyze: why Google surprised everyone; what's in this for Google; and why many like Skype, eBay, Facebook, and the TV business, should be very concerned with Google's Machiavellian positioning here.

Let's deconstruct the Google-Verizon net neutrality proposal from Google's perspective.

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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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.   

37 States are now involved in a "powerful multi-state investigation" of "Google's Streetview snooping" per a press release from investigation leader, Connecticut Attorney General Richard Blumenthal, who released a new follow-up letter to Google asking for more information and clarification of its representations to date. 

The letter shows the investigation is very serious. Its prosecutorial exactness strongly suggests that investigators believe Google has not been forthright in its answers to date and that it could be covering up material information to the investigation. 

• Several questions in the letter also indicate that the investigators are seriously concerned about the integrity and completeness of Google's systems of internal controls and supervision to ensure the safety and privacy of consumers. 

What appears to be the most problematic line of inquiry is whether or not Google tested this software before it was used in public to collect private information on consumers. 

In an exceptionally uncharacteristic low-key PR manner for Google, Google announced on its blog in one sentence that China renewed its license to operate in China.

• "Update July 9:
  We are very pleased that the government has renewed our ICP license and we look forward to continuing to provide web search and local products to our users in China."
  

What's the rest of the story here?

Google and China have been at loggerheads with one another in one of the highest-of-profile international standoffs between a private company and a superpower in modern history, since Google publicly accused China in January blogpost of being complicit in a hack of Google that resulted in the theft of Google's intellectual property, (which John Markoff of the New York Times reported was the extremely sensitive computer code for Google's password control system.) 

What is the quid pro quo here?

Google has much to lose in its ill-advised PR and public policy war with Apple, its previous closest Silicon Valley ally.

Antitrust or Fiduciary liablility? Google's recent market behavior puts Google and its CEO Eric Schmidt in a lose-lose situation.

Google unwisely brought closer scrutiny to Google's public representation of its business model by pushing WSJ columnist, Holman Jenkins, to run this footnote/correction: 

• "Google objected to a line in a column two weeks ago that summarized its business in part as "collecting data it can sell to advertisers." We didn't say "user data," but Google nonetheless wants you to know it doesn't sell any data directly to advertisers, and doesn't employ user data to sharpen the efficiency of its search advertising, but only its display ads."

With all of the controversy surrounding Google's business model (WiFi privacy-invasion investigations on four continents... a massive private data spill from Chinese hackers stealing Google's password security system... and increasing calls for the DOJ/EU to bring an antitrust case against Google), it seems particularly ill-advised for Google to be nitpicking about how Google wants to represent/misrepresent its business model to the public.

Let's parse Google's misleading nitpicking.

First, Google is being too cute by half in insisting its business is not as Mr. Jenkins succinctly encapsulated it to be: "collecting data it can sell to advertisers."

American consumers clearly want online privacy, per a national poll conducted over the weekend by Zogby International, that was commissioned by Precursor LLC. 

• In a nutshell, over 80% of Americans are concerned about the security and privacy of their personal information on the Internet; about 90% of Americans consider some common industry behaviors to be unfair business practices; and about 80% of Americans support a variety of stronger consumer protections of their privacy online.

More specifically, this Zogby poll asked eight timely questions that are highly pertinent to:

Google's CEO Eric Schmidt, dismissed the notion that Google was "arrogant" in an FT interview.

• Mr. Schmidt: "The arrogance comes across because we trying to do things for end-users against organised opposition from stakeholders that are unhappy -- and they paint us as arrogant. But I am sure that all successful organisations have some arrogance in them."  

It seems to me that "the arrogance comes across" with Google because Google operates, and expects to operate, under a double standard -- where rules, laws and expectations apply to others, but do not, and should not, apply to Google -- because Google is somehow special.

The latest example  of Google's expectation to be treated differently and better than Google treats everyone else -- is Google's "permissions" policy.  (See the Goobris Series below for other examples.)