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Sunday, July 12, 2009 8:14 AM/EST

Should Antitrust Laws Be Amended to Consider Google's Use of Free?

The Google and free issue is really heating up. Friday I posted what I thought was a pretty innocuous analysis for eWEEK.com about what Google is doing to its brand with its free Web services and what the coming of Chrome OS will mean.

"What Would You Do If Google Web Services Stopped Being Free?" drew some passionate responses. The people have spoken: No one will be willing to pay for Google Web services, such as Gmail, Docs and Talk. Why would we?

Many of us grew up on the Internet with free Web services from Yahoo, Microsoft and Google, among others, so it seems unnatural to consider a world where Web services aren't free.

The issue merits more discussion after Google's Senior Competition Counsel Dana Wagner combed through a July 8 piece in CNN written by Wired Editor in Chief Chris Anderson, who noted that Obama's new "antitrust cop" Christine Varney would have to weigh Google's use of free to dominate the Internet advertising market.

For those of you who haven't heard, Google offers free search and Web services markets, such as e-mail, word processing and mapping applications, and makes 97 percent of its $20 billion a year in advertising served on the Web pages where those Web services are served.

Anderson is something of an expert on free. He's written "Free: The Future of a Radical Price" and is now being invited to Google talks and other forums to talk about free with the some soberness we'd associate with talking about perpetual software licenses versus utility-based subscription models.

Anderson's piece begged for a response from Wagner, whose raison d'ĂȘtre is making sure Google's data-hoarding, ad-dollar chomping machine doesn't hoard too much data or chomp too many ad dollars to warrant scrutiny as a Microsoft-like monopolist.

Anderson wonders whether it is fair for Google to make a lot of money from search advertising to support its Google Apps enterprise and other services that aren't exactly raking in the big bucks. "Is that fair, when so many of its competitors don't have a similar golden goose at the core of their operations?" Anderson wonders.

Wagner notes that cross-subsidization is common in many companies, with certain products subsidizing others. "No matter how successful or profitable the subsidizing product is, the fact remains that cross-subsidization itself has never been viewed as an antitrust problem."

Fair enough, but Google is so powerful and holds so much sway on the Internet (not by force, but by user choice, mind you) as to warrant consideration as a precedent-making giant. That's my belief. Free has changed market dynamics, leading others in Google's long tail to offer free Web services.

Anderson also asks: "Could Free be OK for little companies, but not really big ones? How much market share would you have to have in one market to disallow you from using Free in another?"

Harvey delivers Google's stock we-haven't-broken-any-antitrust-laws answer, taking a shot at Microsoft in the process:

It is true that if a company has a dominant product, it may run afoul of antitrust laws if it "ties" that product to another--for instance, by requiring customers who buy that product to buy another product as well. When a company provides products for free on a stand-alone basis, however, it's not requiring anyone to buy anything. It may take business away from other companies trying to charge users for similar products, but that's hardly an antitrust issue.

Harvey is, of course, alluding to Microsoft's tethering of its Windows Media Player to its Windows desktop operating system, an issue hashed out by the U.S. almost a decade ago and still under consideration by the European Union.

I take no issue with Harvey's defense and do not accuse Google of breaking antitrust laws. But in this world of perception being nine-tenths of reality, many people see Google as a monopolist because of its massive share of the worldwide Web search market.

Make no mistake; Google doesn't force us to use its search engine. We just do and get comfortable with it (and other services like Gmail), but we can go to Microsoft Bing and other services if we want.

But people, myself included, aren't considering the legal definition when we put "Google" and "monopolist" in the same sentence. Even though customers choose Google over Microsoft, Yahoo, et al., we are looking at Google as a monopolist because so many people use it.

Why has Google become a fortress of indomitable fortitude in search? Because it's so darn good at helping us find what we need online. Sorry, Google, but that's the rub.

Google is the classic victim of its own success, and it doesn't help the perception that it is a monopolist in its quest to hoard the world's data by marching laterally across the entire landscape of Internet services.

Are we using the monopolist claim loosely? Sure, in the same way we generalize in the subjective when we say so and so is the greatest actor in the world, or that such and such food is the best ever. Are they really? Come on now.

Anderson is right to wonder whether Varney will put the screws to Google. Harvey is right in his defense. I believe the next question should be: Should antitrust law be modified to consider Google's revolutionary model of free search and Web services in the Digital Age?

That's the question I put to you.

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Comments (13)

Dror Harari :

Why are you insisting on saying Google gives us all of its services for free? They surely do not give us anything for free.

If I am required to do community work in order to get some benefits, can I say I got those benefits for free? I can't - I gave something in return.

Google gives me various services in return for my attention (to ads), in return for valuable information about myself, my habits, my social network, my private matters and more. Google is entrusted with this precious information under the (mostly implicit) assumption that Google will use this information in an aggregate, in non-personal manner and in order to be able to better serve me. That's the "Don't be evil" thing that Google is promising its users - an ingenious promise.

So you might want to rephrase your question and start by considering the price Google users pay. Since it's not a monetary transaction, the accounting rules are different, so different that they are actually being rewritten. Are we Google users getting enough? Who can tell?

/d

Mark :

Answer?
NO.
Google developed it's model based on a free search service, and uses advertising dollars to monetize. As a result of their success, Google has expanded it's offerings, and until recently, all of those offerings have been FREE.
We can and should think of Google as we thought of "free" TV (when it was free).
Television, since it's inception has always been a free service which was monetized through advertising dollars. We found this perfectly acceptable, and there were no questions of "anti-trust", or "monopoly" raised regarding the TV business model.
Why then would anyone attack Google?
The notion is ridiculous.
In theoretical analogy, Google is simply a free channel on a paid TV signal. Google users have every freedom to use other services at their own discretion.
At this point, Google is the best thing to ever happen to the web, or to computing.
Could that change?
Sure.
But for now, leave Google alone. It deserves every penny of it's 20 billion.

George :

There is a difference between "natural monopolies" (like Google and Standard Oil), who got big because they provided their customers good product and the best available price they could; and gov't created monopolies like the old AT&T or the utilities companies. Natural - good. Created from back room political deal - bad.

Graham :

Trying to hem in Google's free release of search queries would run into insurmountable 1st Amendment issues. And rightly so.

Mason :

google was the beginning of the search engine industry i would say. at least it became the giant the quickest. however i also see a video ad giant rising up at http://adwido.com. They have all the best video ads that google could never touch!

Kirk M :

I would say no, the anti-trust laws should not be changed. It all boils down to this; Google's business model of free apps that are (nearly fully) paid for by advertising (mostly via search and search related avenues) is entirely based on user choice only. As the article stated, nothing is tied into a product that has to be bought as, for example, IE and Windows Media Player is tied to the Windows OS.

Compared to other similar products, Google does not "push" it's products and certainly no one is forced to click on Google's low key advertising links. For the most part Google's search, online and offline (free) applications are not thrown in the user's face via marketing ploys and advertisements nor are they forcibly tied to any particular PC vendor forcing the users to "take what they get" when they buy a new PC. The only thing that makes Google's offerings, especially search, as popular as they are is that the majority of users prefer to use them over other offerings. nobody forces them to do this and Google cannot be blamed or penalised for that.

Chris :

My understanding of the definition (legal or otherwise) of a monopoly is that there are no alternatives. No Choice. Currently there are plenty of choices for search engines.In my opinion, Google is not monopoly....there's Yahoo, Just Ask, Bing and a heck of a lot of other search sites, including the automatic search function in Microsoft Internet Explorer. The fact that they aren't popular doesn't mean they aren't available. In fact, one could argue that there are more available search sites available than operating systems. Or game stations, for that matter. Another issue is that Google doesn't have true "Control" of the market. That is that they don't have the power to keep others from coming up with better search engines, better algorithms, etc. Nor are they hindering anyone from adopting their business model. So, to consider them a monopoly is just plain wrong.

As far as your question....I don't see a problem with Google offering their products for free. They are still making money. Just because other companies have a different business model, doesn't mean that the other companies are guaranteed that their business model would rake in profits.

Daniel Skinner :

This must be the stupidest thing ive read, ever. First thing im doing after posting this is filtering out all eweek articles from my google reader ..

Ned Nowotny :

Google is providing ad supported Internet services similar to the way broadcast networks have been providing ad supported programming for several decades now. Frankly, Google is less of a monopolist than are the networks if only because the networks own far more content covered by copyright (i.e. legally sanctioned monopoly of limited duration--unless Congress continues to extend copyright terms to "protect" all of those lovable Disney characters...).

Google came along well after other search engines were available. They then won market share away from those competitors by providing a better service. That could happen to them, but it will require better competitors than those who have tried to date. That is all the control we need over Google's "monopoly."

As for the charges of data hoarding, well... That is another topic altogether and would first require an explanation of what you mean by it.

Zach :

You are missing the true part of Google that is a potential monoploy and where the harm can come from. From what I understand the government and others are not looking into a search monopoly but an Advertising monopoly. Google gives away its services for free so there is not much consumer harm there. But when it is one of the largest providers of ad space on the internet there start to arise concerns about how that ad space is sold and how competitive it really is.

Does Google artificially set price floors for ad space? Could an advertiser really afford not to pay Google for its ad space? This is why the antitrust regulators were concerned about the DoubleClick aquisition. Their concerns are less about the % of search queries that people direct their way and more about the ad real estate they have. Also, the Antitrust stuff is much less about Google's consumer customers and just people about thier Advertising customers.

So if the AntiTrust people get Google on anything it will be around their ad sales practices and how much of that they control. If they are able to alter ad prices in any way they they are create customer harm. It is just that they customer they are harming is not who we commonly think of as their customers. Their customers are Advertisers for the most part. They are the ones that keep the lights on in Google land. So if Google can get 2 cents more for each ad they make a ton of money.

Also, from an antitrust stand point Google Search is not sticky and you can easily switch. So forcing pull through of other products and stuff is hard if not impossible to do. Google can advertise it but people can alos choose to do something else. Now they still may get Google on this and Google really needs to be careful about how much they empower the Europeans. The EU is hot after Microsoft on the Browser front to display a menu of options. Google may well have to display a selection of mapping services or a selection of e-mail services when you go to sign up for GMail account or use Google Maps from the search engine.....

Jason :

I completely agree with Mr. Skinner above. This has to be one of the most stupid arrangement of words and thoughts I have ever wasted time reading. The poor author is probably very proud of his "epiphany" also...

Mike :

It is a grave mistake to think that Google web services are "free". Your "payment" is that Google gets to record your every click and keystroke, interpret that data as they see fit, maintain that data in perpetuity, and you have no right to access, review or control. They routinely do waay more than we'd ever allow NSA/FBI/CIA agencies to do to us, but for some reason the public assumes that Google is less prone to nefarious purposes. (*giggle*) They monetize your data in many different ways; the public knows about clickstream advertising, but there's a lot more than just that. The only limit to what Google does with "your" data is their imagination, there are no checks/balances. Maybe Google will always use your data to serve your "best" interests, maybe they won't, but in any case you have no rights, "your" data isn't *your* data it is Google's, and the services are not "free". CAVEAT EMPTOR

David :

Man, people are really having trouble writing good articles now a days.

I don't know how long people have been using the web, remember Lycos (Go get it boy), excite, Hotbot, Webcrawler, yahoo, etc. they are still there. Google came along and did it better and they know to keep doing things to get our attention to come to their site that's all.

If all the networks but one start cranking out bad shows are we going to penalize the network that is still giving us good shows? That's how goofy this article is.

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