Google: A Victim of Success
May 6, 2009
If you are a person who sees Google as a victim, you may enjoy James B. Stewart’s essay “Few Match Google. Does that Make It a Monopoly?” here. This link may go dead at any time, but the hard copy version of this story appeared in the May 5, 2009, Wall Street Journal. The author argued that Google has been successful. As a result, Google should not be singled out for regulatory or any other action that would impede the company. For me, the most interesting comment in the write up was:
Google is indisputably a victim of its own success. Its market share of Internet search has continued to rise steadily, encompassing roughly two-thirds of total searches. At 76%, its share of search advertising is even higher, thanks to Google’s technological prowess at matching ads to people’s search queries. Given the accompanying high profit margins on this lucrative business, Google displays the telltale characteristics of a monopolist: high, even dominant market share, with high profits and pricing power that are evidence of high barriers to entry for competitors.
This is the MBA argument, and we know how well MBAs handled the financial industry.
The problem, in my opinion, is not regulatory. The problem is that Google is a new type of industrial enterprise. I argue that it is not a single firm. Google is something like the invention of the printing press. The company is transformational. Regulators have trouble with known entities such as utilities and pharmaceutical firms. The SEC was clueless when it came to Bernie Madoff’s alleged Ponzi scheme. Regulators are likely to be at sea without a life raft when it comes to understanding the “digital Gutenberg”. Should we trust MBAs? Should we trust Google? Ideas?
Stephen Arnold, May 6, 2009
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