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Economist's "Inside the Googleplex" is highly relevant to FTC's review of Google-DoubleClick

I always enjoy reading the Britain-based Economist's take on things American because they bring a detached, across-the-pond, critical perspective that often is very illuminating.

Relevant to Google-DoubleClick merger:  

  • "In a recent analysis by Alan Rimm-Kaufman, a marketing consultant, it [Google] took a whopping 73% of the budgets of companies that advertise on search engines (versus 21% and 6%, respectively, for Yahoo! and Microsoft)."
    • This is strong evidence of market power given that Google's share of searches is between 55-65%.
  • "Its costs are mostly fixed, so any incremental revenue is profit. It makes good sense for Google to push into television and other markets, says Mr Varian. Even if Google gets only one cent for each viewer (compared with an average of 50 cents for each click on the web), that cent carries no variable cost and is thus pure profit."
    • This surprisingly candid marginal cost/revenue assessment by Google's Chief Economist is yet more evidence of Google's market power and predatory cross-subsidization potential -- because the economics and the competition of the entered market are clearly completely irrelevant to Google -- their market power and infrastructure drives their overall economics.
      • "This infrastructure means that Google can launch any new service at negligible cost or risk." 
      • The FTC will have to determine if Google's exercise of their market power is anti-competitive or not.

On Google's huge internal control risk:

  • "Worse, Google might inadvertently pick up a rogue employee, as the late Barings Bank notoriously did with Nick Leeson. Indeed, Google is fast becoming something like a bank, but one that keeps information rather than money."
    • Google's near total lack of accountability to anyone on the security of their "private information bank" that keeps the most sensitive private information on hundreds of millions of people is staggering. 
    • A data breach at Google, could put more individual private data into bad guys hands faster than maybe any other data breach imaginable. 

On privacy, they also get right to the point:

  • "Google could soon, if it wanted, compile dossiers on specific individuals. This presents “perhaps the most difficult privacy issues in all of human history,” says Edward Felten, a privacy expert at Princeton University."
  • "Speaking for many, John Battelle, the author of a book on Google and an early admirer, recently wrote on his blog that “I've found myself more and more wary” of Google “out of some primal, lizard-brain fear of giving too much control of my data to one source.”"

On Google's arrogance:

  • "Google is “arrogant” because it feels “invincible”, says a Xoogler who left to run a start-up firm. The internal attitude towards customers, rivals and partners is “you can't stop us” and “we will crush you”, he says. That “kinder, gentler” image is “mythology...”"

 The editorial is also very interesting:

  • "The list of constituencies that hate or fear Google grows by the week."
  • "...many others are put off by Google's cocksure assertion of its own holiness, as if it merited unquestioning trust. This after all is the firm that chose “Don't be evil” as its corporate motto and that explicitly intones that its goal is “not to make money”, as its boss, Eric Schmidt, puts it, but “to change the world”."

My favorite comment in the whole editorial was the Economist's concluding advice to Google:

  • "One obvious strategy is to allay concerns over Google's trustworthiness by becoming more transparent and opening up more of its processes and plans to scrutiny."

Dead on advice. Wouldn't it be helpful if the company that crusades for an "open" Internet and legislatively forcing its competitors to be "open" to Google, agreed to be more "open" themselves?

  • Among the biggest questions for the FTC to answer in its review of Google-DoubleClick and its review of the Privacy groups filed complaint about Google's deceptive and unfair trade practices is; "What is Google hiding? and Why?"