Google's Looming Antitrust Battle
Alban Gér?me
Founder, SaaS Pimp and Automation Expert, Intercontinental Speaker. Not a Data Analyst, not a Web Analyst, not a Web Developer, not a Front-end Developer, not a Back-end Developer.
Over the past few years, weak signals about a potential breakup of Google over the Sherman Antitrust Act started popping onto my radar. The Sherman Antitrust Act of 1890 aimed to make monopolies illegal and foster competition. When governments tolerate monopolies, prices skyrocket. Competition ensures companies cannot apply exorbitant profit margins on top of their products and services, benefiting the population. Here are some famous breakup cases:
In some cases, the breakup was geographic. Standard Oil broke into companies operating in specific states. Standard Oil of California became Chevron, and Standard Oil of Ohio became Sohio. AT&T experienced a geographic breakup: BellSouth, Pacific Telesis, and Ameritech (Midwest). However, the American Tobacco breakup resulted in companies competing with each other.
Microsoft vs the United States
A Google breakup has a comparable precedent: Microsoft. In 2000, Microsoft defeated the United States at the appeal stage. About five years earlier, Microsoft released its first browser, Internet Explorer, as part of its Windows operating system. Internet Explorer is the predecessor of the Edge browser. Windows and Internet Explorer shared lots of code, making them tied tightly together.
Microsoft showed a Windows version without any Internet Explorer code, including the shared code. That modified version of Windows barely worked. During that pivotal moment of the lawsuit, it demonstrated that Internet Explorer was an integral part of Windows. However much the general public and Microsoft Windows users stood to lose by keeping the status quo, a breakup would result in an even more significant loss for the users. We can't let the remedy have worse effects than the illness it purports to heal.
Baby Microsofts could have specialised in niche markets split along business vs. consumers, hardware vs. software, game consoles, etc. Microsoft could have kept the shared code in their modified Windows operating system version; Windows would have worked properly. Microsoft offered precisely that as part of its remedial steps: Windows without Internet Explorer. Computer manufacturers like Dell and Hewlett-Packard could ship computers with software that competes with Microsoft's pre-installed software. Microsoft also had to publicise its internal Windows documentation to help the competition develop alternative products.
Google vs the United States
Google is now the latest company facing accusations of running monopolies and could face a breakup, too. It is running not one, but two, and with several near-monopolies. Search is the apparent main concern. Google has dominated search for about two decades. Online advertising is also another monopoly that Google runs. With Google Search comes paid search, Google Ads (formerly called AdWords), and Google Marketing Platform (formerly DoubleClick). Other areas of concern are Android and the Google App Store. The synergies of Google's products and services also give them an unfair advantage with AI. Here is a timeline of the Google antitrust trials:
Microsoft has written the playbook to create an antitrust-proof monopoly: leverage synergies between your products and services to maximise the network effects. When you reach a point of interdependence, selling one part weakens the rest, perhaps even making it dysfunctional and the cure worse than the illness. Ultimately, the Department of Justice wants to improve the end user's experience, and a breakup may achieve the opposite.
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In 1964, Eric Berne published a bookseller that popularised concepts of Transactional Analysis. In "Games People Play", Berne explored archetypal cases and how they unfold. "Why Don't You—Yes But" explores how three classes of people will interact. Stephen Karpman, a student of Berne, explored that game further and gave us in 1968 the Drama Triangle, involving victims, rescuers and perpetrators.
The victims are the general public and users of Google's products and services. The Department of Justice views itself as the rescuer and designates Google as the perpetrator. However, in Karpman's Drama Triangle, the roles are transient. The rescuer overreaches and becomes the new perpetrator. Google takes the position of rescuer of the public by demonstrating how that overreach victimises the public even more and undermines the US's technological leadership.
Google's potential remedies
Before Google appeals a decision, their next play is offering remedial changes. Rather than creating two Baby Googles, one for search and one for online advertising, what could Google do?
First, their monopoly faces a severe challenge with the rise of ChatGPT and other large language models (LLMs). People prefer a single answer over a list of links. Before the antitrust lawsuits, Google had the incentive to provide an AI-generated answer as its first answer, followed by the search results links we are used to seeing. Choosing not to provide such an AI answer might be enough to dodge the search monopoly claims if it helps LLMs become our preferred search engines. Microsoft's search engine, Bing, stands to reap the rewards here.
Second, we might see in Google Chrome, either at the install stage or first use, a banner prompting us to choose which search engine we prefer rather than relying on a default. Chrome will undoubtedly give you the option to change your preferences later.
Third, Google benefits only this much from paid search because its position in the search engine market has remained unchallenged for so long. With the rise of LLMs, paid search will drastically change, and we will see a LLM variant of paid search. We will see product placements in LLM search results that are reminiscent of what we see on TV shows and films. By letting new market players capture market share with LLM paid search, Google might avoid having to sell its online advertising business.
Fourth, compelling mobile phone manufacturers to unbundle their devices from the operating system (OS) it comes with and offering a choice of OS to the buyer, similar to choosing your mobile operator, will probably lead to dearer phones and tablets. Mobile phone manufacturers can recoup a significant part of their research and development costs. We could see Google negotiate with operators for exclusivity deals to ensure that the operators offer only Android rather than mobile manufacturers. We could see Google negotiate with operators for exclusivity deals to ensure that the operators provide only Android rather than mobile manufacturers.
Fifth, Google may have to open Android, like Microsoft had to open Windows, to allow competitors to provide safe and cheap apps in new online stores other than the App Store. The quality and safety of the apps may decrease, and customers are likely to stick to Google's App Store. However, on paper, Google would have complied.
Many are betting on Google prevailing and averting a breakup following Microsoft's precedent. By refusing to aggressively pursue embedding an AI answer on their search engine's result pages, letting LLMs take market share of search, negotiating with mobile operators rather than the manufacturers, and opening up their App Store, Google may be able to avoid the worst outcome. We should know soon what their proposed remedial steps will be. YouTube was also strangely not mentioned despite its near-monopoly on online video. The impact on Google Analytics (GA), Google Tag Manager (GTM), Big Query, Looker Studio and the Google Cloud Platform seems limited, and I have not seen them mentioned in the news, even though one could argue that Google has a quasi-monopoly on Digital Analytics with GA and GTM. I cannot make investment recommendations, but it may be a good time to invest in popcorn futures.
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