The Department of Justice (DOJ) has officially taken Google to court. This trial, initiated under the Trump administration and now being brought to fruition via Biden’s bidding, is poised to be one of the biggest antitrust cases in history – and all business owners should be concerned.
According to prosecutors, Google has entrenched itself as the dominant search engine, which many of us would say isn’t an accusation but rather a cold hard fact, and a good one at that. Any entrepreneur, business educator, or admirer of Warren Buffett knows that economic moats matter and Google’s gully is quite a feat.
The concept of an economic moat gained prominence when Buffett noted in a 1999 interview that companies worth investing in are those with a safeguarded competitive advantage. Essentially, firms should be proactive in protecting their profits, sustaining market share, and keeping any potential rivals at a distance. And for Google search, the fortress has been secured.
Google.com is the most-visited website in the world and has upwards of 90 percent of search engine market share. History, however, has proven that even the mightiest of kingdoms aren’t devoid of vulnerabilities and, given the dynamism of market mechanisms, economic moats are hard to hold on to. Just ask AOL, TimeWarner, Compaq, AltaVista, Napster, or Netscape. For Google, developments in AI and AI assistants may make the need for search engine sites soon obsolete.
Google is well aware that it is at the mercy of consumers given the many flops and failures it has had over the years. Google Wave, Google Hangouts, Google Buzz, and Google + are just a few examples of Google initiatives that were rejected by the marketplace for simply not being good enough.
Nevertheless, the FTC, for some unknown reason, feels the time is now to go to battle with Google. And the fight, via court filings, will be a cost borne by all through tax payer dollars.
Forget the fact that the Google brand serves as a verb in our daily lives, and that the ability to just “Google it” has enabled advancement in a variety of ways. The benefits of accessibility and the impressive capabilities of Google search are being sidelined for criticizing the status it has achieved since launching in September of 1998. If only the founders knew that in just 25 years their success would be met with government scorn.
Google conveys its mission as being “to organize the world’s information and make it universally accessible and useful” – and it has. Google search has proved itself as both efficient and effective thanks to the superiority of its algorithms and its marketing savvy. Small business owners are better off for Google’s accuracy when people need to find a plumber or florist “near me.” Parents desperate to know the hours and location for the closest urgent care facility when their child needs medical attention can feel confident in fast and precise results derived from a Google search. And it should be pointed out that Google’s algorithms are reliant on our queries, and search success is dependent on the relevance of the results. Essentially, we all fed the beast.
If the performance of Google search were to become subpar, consumers could and would switch to Yahoo, Bing, DuckDuckGo, or Startpage. And soon, search engines powered by AI, such as You.com, or privacy protected search sites, like Brave, may result in users switching sooner rather than later. The DOJ could simply take a step back and wait to see what the future holds, particularly given that the government is not known for either efficiency or effectiveness in anything it does.
All of this is not to say that Google is not without fault when it comes to consumer issues or data concerns, but that is not what seems to be the main premise of the DOJ’s case. In fact, one of the DOJ’s main criticisms is how Google established itself early on as the default search engine for Apple and Android products, yet doing so was simply shrewd business strategy. Anyone with the opportunity to do so would have done the same.
To put this in perspective, here’s a sample illustration:
Let’s say different hotel chains were approached by the Lindt Chocolate company and received compensation for featuring Lindt’s Lindor truffles in each hotel room. Patrons of the hotel receive a free product which they can enjoy or discard as they see fit; the hotel receives revenue for improving the in-room customer experience; and Lindt, despite already being known as the best brand choice for chocolate across the globe, sees its brand equity and economic moat further secured.
In this fictitious scenario, the situation is unfortunate for other chocolatiers who are unable to outbid Lindt’s hotel contracts, but perhaps there are other opportunities outside of the hotel sector that they could capitalize on instead. Hershey’s chocolate, for example, will dominate when it comes to campsites rather than hotel rooms given that nothing beats a Hershey bar on a s’more. And Hershey’s partnering with marshmallow makers and graham cracker companies helps secure its status as king of campfire treats.
This situation is what Google is being berated for. Google is the best search engine in the world, and it paid to have its site featured as the default option for consumers. This not only benefited Google, but also Apple and Android customers. We live in a market that demands frictionless products, and when we turn on a new smart device, we want it to be preloaded with all the best options and features – and if Google is the best, then that should be the default. In fact, it would be odd for products to feature subpar defaults or no default at all.
Returning to the chocolate example, if hotel patrons were ever to complain about the chocolates, or if the desire for healthier snacks were to become trendy options for hotel chains, Lindt might find its position compromised or even rejected. And the same is true for Google. Search may not always need to be done via a search engine site, and new smart technology may no longer feature defaults for Google, or any of the other existing search engines for that matter – making the DOJ’s case a complete waste of time, effort, and expense.
Given that I have previously written on why supposed monopolies, like Google, can actually be of benefit to society, why government interference in business matters can create opportunity costs for consumers and for companies, and why antitrust is anti-progress when it comes to bullying Big Tech, I leave you with this question to consider. When industry leaders become whipping boys for political pundits, and government dictates determine the standards and practices to adhere to, what will become of the ability for small producers to have a say in their operations management and the seizing of competitive advantages? Companies in a market economy amass wealth via value creation through voluntary exchange, but politicians amass power via subjugation through enabling and emboldening a command economy. Consider carefully which beast is worth feeding.