The Public Policy

The Googly Eyed Monster

Why its Machiavellian management wants to keep Microsoft from buying Yahoo!

By 2.13.08

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When Microsoft recently announced its proposal to acquire Internet search giant Yahoo! for $44 billion, two things were immediately certain. First, consumers would be likely to see enormous potential benefits from a merger between the two companies. Second, bureaucrats, rivals, and Microsoft-haters of all shapes and sizes -- but especially those that rhyme with frugal -- would do anything they could to slow or stop the deal.

Where there are clouds and lightning one can eventually expect to hear thunder. And behold, Google came booming through the stratosphere, or at least the blogosphere, with carefully-worded but dire warnings. The Chief Legal Officer for the leading search engine weighed in with a lawyerly series of leading questions:

Could the acquisition of Yahoo! allow Microsoft -- despite its legacy of serious legal and regulatory offenses -- to extend unfair practices from browsers and operating systems to the Internet?...Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM, and web-based services?

Could they? Might they? Will they? The forces of Google, while careful not to make any outright accusations, certainly hope you think so. They hope to plant that thought in the minds of legislators and regulators.

"Policymakers around the world need to ask these questions," the statement explains.

All these questions are being asked because Google has a sincere concern for the well-being of you, the ordinary Internet searcher, right? That's what the company claims:

We take Internet openness, choice and innovation seriously. They are the core of our culture. We believe that the interests of Internet users come first -- and should come first -- as the merits of this proposed acquisition are examined and alternatives explored.

Who could doubt the sincerity of that statement? The company's motto, after all, is "Don't Be Evil." When Google mouthpieces tell the story, their prime concerns are consumer welfare and the health of the Internet.

Right. Google's real concern has nothing to do with welfare and a whole lot to do with market share. Right now, Google leads the online search market by substantial margins. Worldwide, its share of search-related revenues hovers around 75 percent. In the U.S., roughly 65 percent of all searches are conducted through Google. In Europe, that number is nearly 90 percent.

Should Microsoft, with its number three-ranked search engine, link up with Yahoo, which sits at number two, it wouldn't represent a threat to a competitive marketplace -- but it might represent a threat to Google's current dominance of it.

In other words, Google is pushing for regulatory action to shore up its own business model. Rather than compete in on an open playing field, it hopes to batter its competitors with a bureaucratic bludgeon.

"Don't be evil"? Try, "Don't mess with my turf."

IN FACT, GOOGLE has a history of supporting restrictive regulations that bolster its business model under the guise of do-goodery. The company has been an outspoken supporter of "net neutrality," a policy likely to stifle innovation on the Internet's infrastructure, but which also helps keeps Google's costs down by forcing Internet service providers to shoulder more of the burden.

The search giant has funneled more than a million dollars into the coffers of liberal activist group MoveOn.org to promote that group's stance on the issue. The company has also fought, with some success, to force open-access restrictions that favor its own business model onto valuable wireless spectrum auctioned off by the government.

None of this is to say that Google isn't an innovative company with numerous smartly engineered products -- products that have earned it no small amount of public good will. But good products don't always make for good policy. Google isn't looking for a level playing field; it wants to tilt the terrain in its favor.

Meanwhile, Microsoft's size, success, and history of antitrust skirmishes make it an easy target. But size alone is no reason to complain, and the antitrust crusades against Microsoft have been misguided.

In Europe, for example, the company had to deal with years and millions of dollars worth of legal trouble simply for including media player with its Windows operating system. That's right: Microsoft was attacked for making software with too many features that its customers might find useful.

MICROSOFT'S LEGAL HISTORY gives Google an opening to wreak havoc with the Yahoo! acquisition, and the search giant has made clear that it intends to exploit the opportunity to the fullest. The motivation for this may go beyond simple business calculations.

Remember, last year when Google began its move to acquire online advertising firm DoubleClick, Microsoft raised a racket about potential antitrust violations and privacy concerns. The deal eventually went through, after a difficult, months-long series of regulatory delays. But "we want revenge" doesn't play quite as well as "we're just looking out for the good of others."

Readers may love Gmail, don't they shouldn't be fooled by the search giant's goody-two-shoes posturing. In the case of the Microsoft-Yahoo deal, Google's conception of "good" is Machiavellian -- just another excuse for pushing regulators to lean on the competition.

Perhaps a new company credo is in order. Don't be evil? Well, at least try not to look it.

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