BlogNewsThe End of Google?

The End of Google?

Google, Facebook, Apple, Amazon…

Combined, the “Big 4” tech giants are worth over $5 trillion dollars.

Humans have a problem grasping giant numbers, so to put that figure in perspective, it’s equal to the 2019 GDP of Japan — and almost a quarter that of the United States.

Despite being the world’s second-most valuable company, Google’s had a tough month.

The fact that a brief service outage in the US made front-page news worldwide goes to show how dependent people have become on Google and its products…

But far more distressing to the C-Suite must be the news that US Attorney General William Barr is hellbent on bringing an antitrust lawsuit against Google before the election in November — and maybe as early as the beginning of October.

Barr’s Justice Department has set its sights square on Google’s dominance in search.

At the risk of biting the hand that feeds us, I’m going to take a look at what brought Google to this point — and some possible outcomes of the threats to Google’s monopoly on both search and digital advertising.

Antitrust and Technology

In the US, antitrust laws date back to the Sherman Act, passed in the 1890s.

Antitrust regulations are designed to protect consumers from the adverse impact of one or less than a handful of companies having a monopoly on an essential product or service.

Monopolies represent a barrier to competition — and competition is essential in a free-market economy.

(Source: The Balance)

Some of the commonly cited adverse effects of a monopoly include price-fixing, inferior products and services, and the stifling of innovation.

The first antitrust lawsuits were brought against International Harvester and American Tobacco…

Apparently, both farm machinery and cigarettes were both viewed as essential at the turn of the twentieth century.

Antitrust laws are often used to prevent mergers between large companies that might harm consumers.

When oil giants Exxon and Mobil merged in the late 1990s, they were forced to sell 2,431 gas stations before the $80.3 billion deal was allowed to proceed.

Despite this divestiture, Exxon-Mobil was the world’s most valuable company until Apple surpassed it in 2012.

Digital technology companies have had their fair share of skirmishes over monopoly and antitrust issues with the government, both in the US and around the world.

IBM faced over 20 government and private antitrust actions in the 20th century.

On the cusp of the 2000s, Microsoft was sued by the Department of Justice (DoJ) and others to “determine whether the company’s bundling of additional programs into its operating system constituted monopolistic actions.”

These actions were partly a result of the “Browser Wars” between Microsoft’s Internet Explorer and their now long-defunct competitor, Netscape. 

Microsoft was accused of intentionally making it difficult for consumers to install software from competitors on Windows machines — and delete Microsoft’s bundled programs.

Microsoft lost the case, and the judge called for the company to split into two separate entities called Baby Bills, a reference to the “Baby Bells” created when the government broke up AT&T in the 1980s. 

The Windows OS side of Microsoft’s business was to become a separate corporate entity from the software side.

Ultimately, Microsoft settled with the US government, and escaped being split up but it was forced to make significant concessions that limited its anticompetitive tactics.

Many observers speculate that the antitrust lawsuits against Microsoft led to Bill Gates stepping down as CEO.

The lawsuits and settlement also fostered a more competitive environment that allowed fledgling startups like Google, Facebook, and Amazon to survive and thrive. 

8Google CEO Sundar Pichai Testifies Remotely to Congress, July 2020 (Source: Cnet)

Threats to Google’s Monopoly on Search and Digital Advertising

Antitrust in the US

Federal government concerns about Google’s dominance in both search and online advertising really began to pick up steam in summer 2019 when the Justice Department and Federal Trade Commission (FTC) opened antitrust investigations into all of the “Big Four” tech giants.

Additionally, Google finds itself targeted for investigation by 50 state attorneys general for its anticompetitive practices, particularly its dominant share of the digital advertising market. 

Only California and Arizona declined to join the probe.

(Source: Geekwire)

In 2019, Google accounted for a 31.6% market share of overall digital ad spending and a 73.1% share of search advertising.

Google’s dominance in search is even more staggering…

Global Market Share of Search Engines (Source: Statista)

As of July 2020, Google held an 87% market share in desktop search — its nearest competitor, Bing, accounted for just over 6%.

This disparity has led critics of both major political parties, as well as President Donald Trump, to argue that Google needs to be more strictly regulated — or even split up into smaller entities.

There is precedent for breaking up monopolies in the United States. 

In 1904, John D. Rockefeller’s Standard Oil controlled 91% of oil production and 85% of oil sales in the US.

The Supreme Court ruled in 1911 that Standard Oil was in violation of federal antitrust laws and split the company up into 34 separate entities, including companies that became ExxonMobil and Chevron.

In more recent history, antitrust lawsuits filed in the early 1970s against AT&T — which operated a legal monopoly on local and long-distance telecommunications for almost a century — broke the company up into seven smaller entities known as “Baby Bells.”

In addition to the DoJ and State’s attorney investigations into Google, all of the Big 4’s CEOs were recently summoned to appear remotely before Congress’s House Judiciary subcommittee on Antitrust. 

Mark Zuckerburg, Jeff Bezos, Tim Cook, Sundar Pichai testify before Congress, July 2020 (Source: Exchange4Media)

The subcommittee held the hearing after investigating the Big 4 for over a year.

In the current American political environment, where it often seems like Republicans and Democrats agree on practically nothing, the hearing was surprisingly bipartisan.

By many pundit’s accounts, Google’s Sundar Pichai faced the most intense scrutiny by lawmakers during the almost 6-hour session.

Here are the elements of Google’s vast empire that are thought to be most vulnerable to punitive antitrust actions.

Google Ad revenue
(Source: Statista)

Advertising 

Not only does Google command a lopsided market share in both search advertising and digital advertising as a whole, but it also faces investigation because Google effectively owns and controls every aspect of the online marketplace for selling and purchasing advertising.

Google has achieved its advertising hegemony primarily through acquiring competitors, such as it’s 2008 buyout of ad-tech firm DoubleClick.

Over 70% of Google’s revenue comes from advertising — over $160 billion in 2019.

Any threat to this income stream could have devastating effects on the value of the company.

Investigators and competitors charge that allowing Google to have such complete control over digital advertising is harmful to competition and gives Google an unfair advantage.

Content

Content creators and publishers big and small were likely thrilled when Rep. David Cicilline, chairman of the antitrust subcommittee straight up asked Pichai, “Why does Google steal content?”

Unsurprisingly, Pichai disagreed with the characterization, but Cicilline rejected his response. 

Congress, he said, has “heard throughout this investigation that Google has stolen content to build your own business. These are consistent reports, and so your testimony that it doesn’t happen is really inconsistent with what we’ve learned during the course of the investigation.”

As Google continually finds new ways to answer search queries using third party content on its own platform, often without attribution or a link to the source, it seems likely that this strategy will come under growing scrutiny.

Google Search Antitrust

Search

Google’s near-total dominance of search has led to numerous allegations of anticompetition practices — including favoring its own products above competitors in search results.

Founder’s tales of businesses being decimated by Google’s search manipulation and favoritism towards its own offerings abound online — such as this one from the founder of comparison shopping site Kelkoo or this Harvard and Columbia study funded by Yelp.

According to The New York Times, the DoJ has narrowed its focus to search and may leave action on Google’s advertising practices to the state attorneys, led by Texas Attorney General, Ken Paxton.

Paxton says he has not ruled out any possible punishment, including breaking up the company.

By narrowing the focus to search, the DOJ hopes to have a stronger lawsuit that it can file in a more timely fashion.

The federal case is expected to largely drill down on Google’s agreements with Apple and other companies to have Google set as the default search engine on iPhones and other devices. 

The DoJ will likely argue this an anti-competitive practice that puts other search engines at a significant disadvantage.

(Source: Pexels)

Android

One other possible vulnerability regulators might exploit is the ubiquity of Google’s Android mobile operating system.

Android is by far the most popular mobile OS globally, with a 74.6% market share.

Reports say that the state attorneys are also investigating Android for antitrust violations. 

The EU has already fined Google €4.34 billion for using Android “as a vehicle to cement the dominance of its search engine.”

Taxation and Privacy Regulation in Europe

AG Barr’s antitrust campaign is far from the only threat Google faces against its monopoly on search and online advertising. 

The European Union has fined Google $9.4bn for antitrust violations to date.

Another “big number” — the fines are roughly equivalent to the gross revenue of Campbell’s Soup, Avis, or Hilton Hotels in 2019.

To Google, it was merely a slap on the wrist.

Driven mainly by the impression that these massive fines against Google have had little effect and have failed to increase competition, the EU recently announced the Digital Services Act (DSA).

The stated aim of the DSA is to “foster innovation and competitiveness of the European online environment,” and it’s widely thought to target Google, Facebook, Amazon, and Apple.

The DSA is still in the consultation phase, but it will almost undoubtedly give the EU sharper teeth to use against Google and the other “gatekeeper platforms” like Facebook and Amazon that it sees as stifling competition and innovation.

Google argues that “decisions prohibiting, or requiring the unwinding of, product changes or improvements that involve large-scale investments could have significant financial ramifications and hurt users.” 

Individual nations have also taken action to curb the monopoly power of Google, Facebook, and Amazon — or at least to ensure that they pay additional taxes.

In the UK, the Digital Service Tax (DST) recently took effect, aimed squarely at:

  • Social media services 
  • Internet search engines
  • Online marketplaces

The 2% DST only applies to companies with worldwide revenues of £500 million that earn a minimum of £25 million from UK customers.

Google promptly turned around and passed the cost of the DST onto its users…

“Digital service taxes increase the cost of digital advertising. Typically, these kinds of cost increases are borne by customers, and like other companies affected by this tax, we will be adding a fee to our invoices from November 2020.” Google

(Source: Tax Foundation)

Other European countries that have already imposed a digital service tax include France, Italy, Austria, and Turkey, ranging from 2 to 7.5 percent.

This patchwork of national laws creates a regulatory tangle that will undoubtedly keep Google’s accountants and lawyers busy for years to come.

The EU had long pushed for a global digital tax on the tech giants, and were “centimeters away from a deal on the taxation of digital giants,” according to a French official, before the US abruptly pulled out of negotiations in June 2020.

While a 2% tax seems unlikely to make much of an impact on Google, Facebook, or Amazon’s bottom line — especially when they simply pass the cost onto consumers — the tech giants have fought the imposition of DSTs tooth and nail.

This combative approach is undoubtedly driven by concern that measures like these are the thin end of the wedge and a harbinger of further taxation and regulation in the future.

(Source: The Conversation)

General Data Protection Regulation (GDPR)

Perhaps of even greater concern to the Big 4 are actions European governments have begun to take related to the General Data Protection Regulation (GDPR).

The GDPR roiled the digital marketing and online business community a few years ago, but its potential impact on the tech giants is only just beginning to be felt.

In September 2020, the Irish Data Protection Commission ordered Facebook to suspend the transfer of EU citizens data to the US — potentially upending how Facebook collects and processes user data in the EU.

If Facebook fails to yield to the order, it faces a potential fine of up to 4% of its annual revenue or $2.8 billion.

Zuckerberg and co. didn’t take the order lightly, threatening to shut down both Facebook and Instagram in Europe altogether if the order was enforced. 

“It is not clear to [Facebook] how, in those circumstances, it could continue to provide the Facebook and Instagram services in the EU.” Yvonne Cunnane, Facebook Ireland’s head of data protection

According to the Wall Street Journal, the order creates “an operational and legal challenge for the company that could set a precedent for other tech giants.”

Will Facebook really pick up its toys and go home?

It’s unlikely. 

Facebook has already appealed the ruling and almost undoubtedly has the ability and resources to keep the order tied up in the courts for years.

Another reason Facebook’s threat to close up shop in Europe is an empty one?

“Facebook makes more money from European users’ data – an average of $13.21 (£10.19) per user in 2019 – than from any other territory except the US (where it earns $41.41 per user).” John Naughton, The Guardian

Nonetheless, it appears likely that further regulations aimed at Google, Facebook, Amazon, and Apple are imminent in Europe.

(Source: SearchEngineLand)

The Competition

Apple

The US government’s antitrust lawsuits against Microsoft were a significant blow to the company.

Still, with hindsight, many observers point to competition from the likes of Apple and Mozilla as eventually eroding Microsoft’s market dominance.

When it comes to search, Google may soon be facing one of those same adversaries — a fellow member of the Big 4.

Since 2017, it’s been reported that Google pays Apple billions of dollars a year for the privilege of being the default search engine in Safari — and more crucially, iOs and the iPhone.

“Given the impact of preinstallations and defaults on mobile devices and Apple’s significant market share, it is our view that Apple’s existing arrangements with Google create a significant barrier to entry and expansion for rivals affecting competition between search engines on mobiles.” UK Competition and Markets Authority

Perhaps in anticipation of legal threats to this cozy and profitable arrangement with Google, there are persistent and growing rumors that Apple is hard at work developing its own search engine.

As well as allegedly forming the crux of the DoJ’s antitrust lawsuit against Google, UK regulators recently released a damning report on this practice. 

Jon Henshaw, in a terrific piece for CoyWolf, did some detective work and outlined why he believes an Apple search engine is imminent:

  • Hiring: Apple has dramatically increased its hiring of engineers and coders specializing in search. There are over 600 open search-related positions on Apple’s recruitment board as of the time of writing.
  • Spotlight on Spotlight Search: iOS 14 and iPadOS 14 betas — the latest version of Apple’s mobile operating systems — bypass Google search altogether and deliver search results directly from Spotlight.
  • Increased Crawl Activity from Applebot: Many webmasters and developers have noticed significantly increased crawl activity, which could indicate that Apple is testing search engine functionality.

Here’s Henshaw’s summary of “suspicious” recent changes to Applebot’s info page.

(Source: Coywolf)

Even if (and that’s a big if) Apple did abandon Google in favor of its own search engine its unlikely to deal a deathblow to Google’s search dominance. 

But Apple’s a worthy competitor with deep pockets. And the potential loss of iPhone and iPad owners could lead to significant erosion of their almost total monopoly on search.

A competitive Apple search engine will also have a negative impact on Google’s data-mining operations and advertising revenue.

FINAL THOUGHTS

Google, Facebook, Apple, and Amazon have amassed wealth and power never before seen in human history.

Given their almost limitless resources, the Big 4 can likely avoid, or at least delay, significant changes to the way they do business for years to come…

But there’s little doubt that the impetus for governments worldwide to take meaningful action to curb the big tech monopolies is growing.

Both political will and public opinion increasingly demand it.

“Our founders would not bow before a king,” declared David Cicilline, chairman of the House antitrust subcommittee, “Nor should we bow before the emperors of the online economy.” 

The Big Four’s dominance is “killing the small businesses, manufacturing and overall dynamism that are the engines of the American economy.” – Wall Street Journal

[cta]

[author_bio image=”https://seobutler.com/wp-content/uploads/2019/06/Sean-Shuter-Circular-Portrait-1-150×150.jpg” name=”SEAN SHUTER”]SEOButler’s Editor-in-Chief, Sean has been writing about business and culture for a variety of publications, including Entrepreneur and Vogue, for over 20 years. A serial entrepreneur, he has founded and operated businesses on four continents.[/author_bio]


3 thoughts on “The End of Google?

  1. Great piece!

    It will be interesting to see how things look in the long run. As much as we depend on Google going back to a multi-search engine world would certainly make SEO’s happier in the sense that you would not have a dependency on just one engine to deliver traffic. Time machine back to the 90’s! lol

  2. I knew these guys were eventually going to get it! They’re literally selling their services at overpriced levels making users feel like they’re paying service’s worth (I mean there’s even such a thing as ‘overpriced stocks’)

    And yes, nerfing Google will prove helpful to SEO’s

  3. I love how their goal is to avoid monopolies, and yet they’re just breaking apart one monopoly (Google) to help another (Apple). Why not make it easier for companies like Mozilla and DuckDuckGo? To have some REAL, separate competition? It’s insane the kind of power these big tech companies have and how deep so many people’s hands are in their pockets.

Leave a Reply

  • Services
  • Resources

Free Guest Post Database

1,500+ Sites

Sign up to receive our free guest post database list where you can start your link building campaign for free !

0