Deconstructing Google: After The Google Antitrust Breakup
Previous chapters have covered how the growth of Google and fears of how it
was reshaping the communication landscape led to the application of existing
anti-trust laws along with new ones to force a Google breakup in 2010. This
chapter looks at the immediate aftermath: the “Baby Googles” or “Googlets” that
were formed in the name of greater competition and consumer choice.
Google (Search Products)
The Google brand name remained with the company’s first product, search.
Virtually all search-related products were kept part of Google, including
enterprise search. Google continued to operate the Google search engine, which
itself remains by far the most popular search engine in the United States and in
most countries around the world.
What didn’t stay with Google? As covered more in chapter 3, the Search Engine
Reform Act of 2009 (SERA) had a fundamental principle that companies with
business models around being guides to the web — regardless of the technology
or human effort involved to create those guides — were forbidden from also
owning content that might be listed in those guides.
“If I buy a restaurant guide, I don’t expect the publisher of the guide to
also own or make money off of some of the restaurants in the guide,” said one US
senator during debate over the act.
Critics pointed out that it wasn’t illegal under US law for these conflicts
to occur in other areas. Movie studios were free to own magazines that might
cover their movies, for example. Nor could anyone show solid evidence that
Google had allowed the inherent conflicts to become real ones. But the argument
of search deserving special regulatory protection won out.
Away went products like
Google Knol, as well
as Google’s ability to offer an ad brokerage service like AdSense to publishers.
Google could still sell ads — indeed, the AdWords program remains the chief
source of revenue for Google. However, those ads are restricted to Google’s own
search results pages or the search results pages of affiliate partners.
Google was allowed some exceptions to the “no content” rule. Community maps
were deemed “search-like,” so Google’s
mapping effort could continue. Google News, where pages of “content” are
built in an automated fashion, were still deemed to be search-like because of
nature and thus were allowed. Local reviews of merchants were also allowed. Hosting of
video content through YouTube? That was not deemed a search activity, so YouTube
was spun off.
Understanding that gray areas would come up, the reform act also established
the Search Commerce Commission. Among its many duties is serving as an arbiter
of whether a search engine has slipped too much into the content-hosting space.
As coming chapters will explain, the changes were not limited to Google.
Microsoft and Yahoo both found the act required them to divest and divide up
various business units. Ironically, one of the chief backers of the reform act
– the newspaper publishing industry — got a rude awakening when they found it
applied to them. Plans for a pan-newspaper portal to rival Google News came to a
halt when it was deemed in a lawsuit that the portal would violate SERA because,
as a search engine, it was listing newspapers that it also would have an
interest in favoring.
AdSense (Ad Products)
With Google forbidden to broker ads, virtually all non-search ad activity was
spun off into a new company that took its name from Google’s former
publisher-facing ad program, AdSense. As before, AdSense allowed publishers to
carry textual ads on their pages, as well as banner ads, video ads, and more. The
company also continued its play into the offline world through radio, television,
and print ads.
Ironically, once free of Google, AdSense’s mission to gain both advertisers
and publishers was easier. Previously, AdSense was often seen as only offering
“those contextual ads,” which in turn suffered from poor performance compared to
search ads. As its own company, AdSense was better able to explain that it
offered a range of advertising opportunities. Publishers better understood that
they could pick and choose or, if trusting in AdSense, simply let the company
undertake a one-stop-shopping integrated campaign for them.
Search was the exception, of course. AdSense was unable to offer search ads
via Google or anyone, since doing so would inevitably mean that the search
engine it was partnered with might be listing a publisher that was also carrying
AdSense suffered a major shock, of course, due to the Internet Advertising
Reform Act of 2009 that was passed alongside SERA. In particular, it was the
“anti-black box” provision, IARA, that initially made AdSense feel it would be
stillborn. The provision required anyone serving as an ad broker to reveal the
exact amount it kept off of transactions and what those transactions were
selling at. As a result, those placing ads understood the cut AdSense was
taking, plus they no longer had to leave it to the AdSense black box to apply
“discounts” as it saw fit. Similarly, publishers finally learned exactly how
much Google was keeping back for itself.
Google — before the break-up — argued loudly that such transparency would
cause it to cut the percentage it was keeping, because advertisers and
publishers would focus to much on the size of that percentage rather than the
efficiency they gained by using Google rather than their own salesforce. As it
turned out, the overall percentage that Google kept did drop on average.
However, publishers did not abandon AdSense. It was indeed, for many, an
efficient way to earn despite the various cuts AdSense would take.
Cloud (Apps & Content)
Google’s many applications, from Google Docs through to Gmail, were not
required to be spun-off into a separate unit. Gmail, in particular, had been
ruled acceptable for the search unit to keep. Google Docs could have been part
of AdSense, since the law had no provision preventing an ad brokerage from also
owning its own content. However, Google itself decided that the “Apps” part of
the “Search, Ads, & Apps”
company really needed to be on its own.
The new company name came from the idea of people no longer having a physical
desktop or computer, with data linked to one physical point, but rather with
their applications and information residing in a “cloud”
of computers, accessible from anywhere the internet could reach.
At its core was Cloud Office, the Microsoft Office-rival that Google had long
denied building but nonetheless
developed along the way. Word processing, spreadsheets, presentation
software, a database, 3-D modeling, photo management and hosting, and video
hosting were just some of the things rolled into it.
There was some rebranding. Picasa become Cloud Media Manager and gained video
upload tools. YouTube, part of Cloud Content, was allowed to keep its own strong
brand name — but Cloud Media Manager fed into it. Gmail saw a brand change –
Cloud Mail, though old @gmail.com addresses continued to work. Blogger kept its
name, while Orkut became Cloud Connect. Similarly, Google Talk changed to Cloud
There was some debate over Google Reader and Google Notebook. Were these
“search” products or applications? In the end, they rolled into the Cloud
family, deemed more app-like and less likely to cause “content hosting” issues
Most Cloud products continue to be funded by ads. Again, there was huge
debate during the break-up hearings on whether Google was abusing existing laws
– or should be subject to new ones — to prevent it from altering the
marketplace by offering free products that were funded off the back of its
search and ad units. Behind the scenes, Microsoft, worried that it might lose
billions in software license fees, pushed for a change. But implementing such
a law was seen as unwieldy. Any number of businesses might find they had to make
fundamental changes in what they gave away for “free” due to earnings elsewhere.
Google itself helped prevent such a law from being passed though its own
actions. As noted, it split AdSense and Cloud apart, so that there would be a
more customer relationship between both units. AdSense was awarded an initial
three year contract to monetize Cloud apps and content, with a large revenue
guarantee that ensured Cloud’s immediate future. But Cloud was allowed to develop
its own internal ad and monetization systems. And after the first three years,
any company could bid to win Cloud’s business. Indeed, many saw irony that
adCenter — the Microsoft ad brokerage spun off as part of SERA — might one day
be funding Cloud’s apps. The children of Google and Microsoft, working together.
It wasn’t all ad earnings, of course. Cloud continued to grow a healthy
enterprise audience, with universities in particular pleased to pay relatively low
fees to offload content development infrastructure onto cloud. But many
businesses looking for savings also became adopters.
Gmetrics (Analytics & Shopping Services)
Google Analytics (which had eventually absorbed FeedBurner) and Google
Checkout were odd-products-out in the break-up. Part of both SERA and IARA were
provisions preventing search companies or internet ad brokers from trying to
“close the loop” by harvesting analytics information. Nor did these products
seem a fit for the more consumer or enterprise-facing Cloud company. Metrics
were deemed to be the uniting factor, so Gmetrics — the G for the former Google
– was born.
Replacing the C in communication with a G for the former Google created the
fifth and most obscure of the Baby Googles, Gommunication. Google’s long-range
vision had assembled an impressive list of communication assets, from its own
national and international fiber optic network –
undersea cables — to the
700MHz bandwidth it
won in the US, along with similar former analog TV bandwidth it won
in the UK and
elsewhere in the world. Gommunication formed to lease communication services to
its siblings, but also to any other company that wanted them.
Breaking Up Is Hard To Do
Dividing up products into different companies seemed largely
straightforward. Indeed, Google’s old
already made some of these divisions. Much harder was dividing up the underlying
infrastructure and virtual army of engineers that build the cloud layer
supporting all Google products, not just a particular division. How the various
data centers scattered across the US and the world were divided — as well as
the engineering teams — is covered in the next chapters.
As already noted, it’s not to be forgotten the impact the changes had on
other businesses. Newspaper groups in the US (as well as in the EU, when it
adopted similar laws) found they couldn’t be both search engine/portal and
publisher. Yahoo and Microsoft similarly found that plans to be ad players,
software makers, and search providers were not compatible with the same company.
For them, breaking up was also hard — but federally mandated — to do.
I trust most readers will have recognized this is a work of fiction. I’m not
an expert in anti-trust law, so it may be that Google will continue growing and adding business units for many years without hindrance. But 2007 has been a
remarkable year. My
Google: Master Of Closing The Loop? article from April 2007 looks at how
much information Google is gathering in various ways. The usual
freak-out on the
information gathering is in terms of personal privacy, but my article looks at
things from a business perspective. As I wrote in that:
Is it far-fetched to think Google itself could be setting itself up for an
anti-trust action? If the web is now the operating system, and Google is seen
by many controlling the web, perhaps it will be forced to divest itself of
certain operations because of them effectively giving it a trust or monopoly.
Since then, the review of the Google-DoubleClick merger has continued to
raise these types of questions, though as my
Open Letter To Senators
Hatch & Kohl About Google-DoubleClick article explained, perhaps those
asking the questions haven’t been looking broadly enough:
Instead of blowing the wad of investigating Google-DoubleClick, why not
investigate whether Google is trampling laws by both being a leading traffic
source for some web sites while also being their leading revenue generator? Or
whether Google simply has too much insight into the web that gives it an
unfair advantage; i.e., if it offers free tracking tools, ads, free wireless,
free web acceleration tools, and more, does that mean it effectively knows
everything happening on the web operating system, so that it can improve the
quality of its search and other products in a way that no one else can match.
What inspired today’s piece in particular were the words of FTC commissioner
Pamela Jones, who dissented against the merger,
I am convinced that the combination of Google and DoubleClick has the
potential to profoundly alter the 21 century Internet-based economy – in ways
we can imagine, and in ways we cannot.
I do not doubt that this merger has the potential to create some
efficiencies, especially from the perspective of advertisers and publishers.
But it has greater potential to harm competition, and it also threatens
privacy. By closing its investigation without imposing any conditions or other
safeguards, the Commission is asking consumers to bear too much of the risk of
both types of harm. The unique confluence of competition and consumer
protection issues should have been a call to action for this agency – “the
only federal agency with both consumer protection and competition jurisdiction
in broad sectors of the economy.” Section 5 of the FTC Act is the 30
cornerstone of the Commission’s authority to review a wide range of business
practices. The agency embraces its dual, but complementary, missions. While
the FTC’s competition and consumer protection missions focus on different
types of conduct, they share the same overall goal: that consumers obtain
truthful information about products and services that they can then use to
make purchase decisions in a competitive marketplace in which their personal
information is safeguarded. This purpose has assumed even greater importance
in this dynamic, digital, and global marketplace.
I’ve written many times in aforementioned pieces that the merger really
didn’t seem from my view to harm competition. But Jones — along with senators
Hatch & Kohl and others — are simply disturbed in my view by the size and
growth of Google. It, in particular, has been the catalyst for some many changes
so quickly. My suspicion is that if it is not violating any existing laws,
powerful interests will ultimately decide new ones will be needed. Perhaps they
are. If so, I think it’s important that they be applied across the board, rather
than being some knee-jerk Google-specific actions.
Postscript: This story went popular
on Digg, and there are some great comments to be read over there, pretty
much showing that the Digg audience would strongly object to any government
breakup. A sampling:
- Government touches google = we revolt… this is sacred ground people!
- What if GOOGLE broke up the GOVERNMENT, would be a more interesting story
- Google is the last company that needs breaking up. If we’re talking
companies to break up, let’s discuss Disney, National Amusements, Time Warner,
Viacom, News Corp, Bertelsmann AG, Sony, General Electric, Vivendi SA and
- Don’t you dare touch Google? It’s personal.
- I don’t think that GOOGLE should be worried about the GOVERNMENT … now
- If they break up Google after they declined to break up MS I’ll be pretty
shocked. In fact, at that point, I’ll just assume that all government is pure
- They can take my Google when they pry the keyboard from my cold, dead
(Some images used under license from Shutterstock.com.)
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