how did we get to this state of affairs? How was Google able to assume this role so quietly and profit so handsomely from it? What sorts of trouble is Google causing for states and firms? And how—if at all—should we consider regulating the regulator?
THE SCOPE OF GOOGLE
Google is sui generis. At its core, it’s a Web search-engine service. The primary reason anyone uses Google is to manage the torrent of information available on the World Wide Web. But as the most successful supplier of Web-based advertising, Google is now an advertising company first and foremost.9 Its search function is why we visit Google. Advertising is what keeps it going. However, there were search-engine companies before Google, and several competitors still do just as good a job linking people to information as Google does. And there were Web advertising companies before Google, just as there are now other firms, such as Facebook, that try to link a user’s expressed interest in subjects to potential vendors of goods and services that reflect those tastes. But there has never been a company with explicit ambitions to connect individual minds with information on a global—in fact universal—scale. The scope of Google’s mission sets it apart from any company that has ever existed in any medium. This fact alone means we must take it seriously.
Google has expanded in recent years into a general media company because it delivers video and text to users, even if much of that content is hosted on other institutions’ sites. Its 2006 acquisition of YouTube, the clear leader in hosting short videos contributed by users, made Google a powerful disseminator of video content.10 This role has put Google and YouTube at the center of major world events, such as the antigovernment protests in Iran in the summer of 2009 and the election of Barack Obama as president of the United States in 2008.
Since about 2002 Google has steadily added to the roles it plays in people’s lives, thus complicating the Web’s taxonomy. It now hosts e-mail for millions of users. Google purchased the innovative and free blog-hosting service Blogger in 2003. It runs a social networking site called Orkut that is popular in Brazil and India, but nowhere else. Google Voice offers a voice-over-Internet-provider (VoIP) that competes with Skype’s long-distance Internet phone service. It facilitates payment for Web-based commerce through Google Checkout.
Google is also a software company. It now offers online software such as a word processor, spreadsheets, presentation software, and a calendar service—all operating “in the cloud” and thus freeing users from managing multiple versions of their files and applications on different computers, and easing collaboration with others. In 2008 Google released its own Web browser called Chrome, despite many years of collaborating with the Mozilla foundation in supporting the open-source Firefox browser. And in 2009 it previewed its Chrome operating system for cloud computing, a direct assault on Microsoft’s core product, Windows. It hosts health records online. On top of all that, since its beginning in 2004, its Google Books project has scanned millions and millions of volumes and has made many of them available online at no cost, simultaneously appropriating the functions of libraries on the one hand and the rights of publishers on the other. In 2007 Google announced plans for a mobile-phone operating system and attempted, but failed, to change the ways that the United States government allocates radio bandwidth to mobile companies in an attempt to open up competition and improve service.11 And since 2005 the company has been Googlizing the real world through Google Maps, Street View, and Google Earth, a service that allows users to manipulate satellite images to explore the Earth from above. Only one company does all that, so it does not even need a label beyond its increasingly pervasive brand name.
This diversity of enterprises has confused and confounded other firms that compete with Google. Because no other company, not even Microsoft, competes in more than a handful of these areas, it’s also hard for regulators to get a sense of Google’s market power. In most of these arenas, such as e-mail, applications, blogging, photo-image hosting, health records, and mobile-phone platforms, Google is far from the dominant player. But in online video, out-of-print book searches, online advertising, and of course Web search, Google has such an overwhelming lead that other competitors can’t hope to develop the infrastructure needed to compete with Google in the long run.
Google thus has been the victor in the winner-take-all race to serve as the chief utility for the World Wide Web. In 2010, in the midst of a massive two-year economic downturn that hampered every sector of the global economy and devastated some, Google was worth more than US$120 billion and made more than US$4 billion in total net income. More than twenty thousand people worked for Google in 2010, although the company shed a few thousand through layoffs in 2008.12
FRICTION
Because of its presence in a broad array of markets and its brazen unpredictability, many established industry players have taken aim at Google and have demanded either regulatory intervention to pressure Google or regulatory relief for themselves. When Google in 2007 made a strong case to the U.S. Federal Communications Commission that newly released radio spectra should be licensed only to firms that promised openness in mobile-phone design and business practice, the major American telecommunication companies banded together to stifle and limit the proposal. When Google proposed collaborating with Yahoo in online advertising placement, U.S. regulators quickly squelched the plan because advertisers feared total market domination by the two companies, which would hold 90 percent of the search market in the United States. When Google moved to purchase the leading placement service for website banner advertisements, DoubleClick, national advertising companies demanded intervention—unsuccessfully. When Google refused to prevent YouTube users from potentially infringing copyrights and instead relied on the provisions of copyright law that protect service providers such as Google from liability, Viacom sued in a naked attempt to change the law. And when telecommunication companies that act as Internet service providers tried to alter how the Internet works by charging fees to services that might wish to have their content delivered faster—and thus downgrade service for those that didn’t pay—Google lobbied to preserve “network neutrality.” Google thus has made many powerful enemies in a very short period. Many of Google’s positions correspond roughly with the public interest (such as giving empty support to a network neutrality policy and “safe-harbor” exemptions from copyright liability). Others, such as fighting against stronger privacy laws in the United States, do not.13
When confronted with questions about its dominance in certain markets, Google officials always protest that, on the Internet, barriers to entry are low, and thus any young firm with innovative services could displace Google the way Google displaced Yahoo and AltaVista in the early days of the twenty-first century. With Google unable or unwilling to leverage its advantages though some sort of lockdown, such as holding users’ content and data hostage with technology or exclusive contracts so that they must continue to use Google services, they point out that users could easily migrate to the next Google-like company. As Google’s lawyer Dana Wagner says, “Competition is a click away.”14
Of course, that argument relies on the myth that Internet companies are weightless and virtual. It might be valid if Google were merely a collection of smart people and elegant computer code. Instead, Google is also a monumental collection of physical sites such as research labs, server farms, data networks, and sales offices. Replicating the vastness of Google’s processing power and server space is unimaginable for any technology company except Microsoft. Wagner’s argument about user behavior could be valid if boycotting or migrating from Google did not incur significant downgrades in service by losing the advantages of integration with other Google services.
Google’s argument also ignores the “network effect” in communication markets: a service increases in value as more people use it.15 A telephone that is connected to only one other person has very limited value compared with one connected to 250 million people. YouTube is more valuable as a video platform because it attracts more contributors and viewers than any other comparable service. The more users it attracts, the more value each user derives from using it, and thus the more users it continues to attract. Network
