On Breaking up Google - this is not your Grandma's Monopoly

    Another election and another round of liberal posturing - "how do we beat down the corporates, how do we dismantle their power?" "Google, Facebook, Amazon, Apple...," exclaims Elizabeth Warren, "along with their little subsidiary acquisitions". Let's call these The Big Four.

    So let's tear this down - first, are these the monopolists you're looking for? Back in the day of the Robber Barons, we had goons showing up to beat up the competition - quite a bit of heat brought down on anyone who was in competition. This kind of activity is pretty rare these days - mostly it's just that customers are flocking to the big boys, and that's just tough on the rest.

    The IT age truly hit when Microsoft ended up with a practical monopoly on the desktop. Sure, Apple could scrape out 4 million laptop & desktop sales a quarter with a huge comparative margin, and techies could go for Linux or lately Chromebooks, but in terms of units at home and in the workplace, DOS-Windows machines predominated since 1982, and still do. Microsoft went on to do quite well in the Office software and database business - and people howled to break them up. But in the end, they went from a dominant consumer company to a dominant enterprise software company, with the whole industry resigning itself to the fact that the OS is boring, and is best off boring, and all the OS wars in the 70's and 80's mostly led to things not working with each other, whereas the Windows behemoth solved that problem. Until the Web came along and made everything interoperable in a different way, so the Windows monopoly became a "who cares?" We got a little flurry of excitement when Steve Jobs decided to put a knife in the heart of Flash and Adobe itself, pretending to go to a new standard that was far from market ready - and suddenly we saw what we'd avoided for 2 decades - having to choose when we really didn't care. Sure, Excel rolled over Lotus-1-2-3 and M$ killed some other fine mail & database software companies, but it was the 90's, baby - the Internet Age, and if things hadn't just worked, that would have harshed our mellow. 

    And that was in the age of price gouging. Antitrust was built on the old idea that monopolists like the oil and rail barons would take over everything and then raise the price. Except the new monopolists didn't do that. Hell, Google came along with a huge competitive field of shitty search engines and somehow did it much much better, incuding mail and calendar apps, but the consumer never (apparently) had to pay. Even the advertisers that flocked to the platform didn't seem to pay that much, considering how much the traditional ad agencies or classified ads had gouged people throughout the years. Remember how much it used to cost to sell your car, deciding whether to splurge for the week or just the Sunday edition?

    Amazon was a bit similar - they were just an online bookseller back when we were buying computers the same way from Gateway - packed in some cow paddies up in North Dakota or somewhere where warehouse space roamed free. Of course as Amazon shipped books, they found they could ship other odds and ends like CDs and electronics and then household appliances, and they unfairly cemented their lead by... well, actually, they just sold stuff cheap and didn't have any stores, and their product search was pretty good, as was their reviews and the delivery... in short, they just crushed, helped of course by the lack of internet taxation - a 10% added margin can easily clench a sale over traditional stores. Sure we liked hanging out at Borders, but if we were going to binge on 5-10 books, online started making a lot more sense - especially when electronic versions became available. Yeah, I bought from Barnes & Noble a few times, and some other odds-and-ends sellers, but as with most consumer comfort, we end up going back to one familiar place.

    [along the way, Amazon developed a whole bunch of cloud technology, AWS, to run all its services with - this of course could pretty easily be split off from the e-retail business - and no one would really care one way or the other]

    Apple - lessee, yeah, they were bastards with Real Media and Adobe and put the hurt to dinosaur music labels and phone companies. But they also made online music work with the iPod and iTunes when everyone'd been yacking about it for a decade. When Apple introduced the iPhone, they overcharged for it - and people still bought them over the low and high-end Nokias and Blackberries. Google cleverly introduced their Android phones - but still more *elite* people wanted iPhones, and Apple naturally raised the price, while the rest could go buy cheaper Korean or Chinese Androids (Motorola went bankrupt during this transition, as did Nokia & Blackberry and a host of others). Apple made the App Store totally brainless to use, even to buy stuff. No "what version do I need?" - it figured it out and downloaded and installed the right one.

    Facebook - uh, yeah, overall sux compares to what MySpace used to be. But for the non-musically/side-development inclined, I suppose, it was better with likes and little tweaks, but MySpace's CEO notes Facebook got people using their real names and they no longer minded (which meant bonanza time for marketers). They improved community and it too off. But with Zuckerberg's behavior in front of Congress and especially UK MPs, it's hard to feel any sympathy for their smug amoral attitude.

    But let's say we break up Facebook. Within 2, max 3 years there'd be another trendy monopoly player that everyone flocks to because everyone's on it. (Younger kids have abandoned Facebook a great deal, thus the need to buy Instagram et al). If we break up Amazon, another player will implement 1-stop shopping that satisfies us, and we'll have a new different monopoly. Break up Apple - uh, like what? their tablet sales fell drastically after an initial goldrush, they discontinued their iPods cause they're just crippled iPhones now, they no longer really have desktops and their laptops sell the same 4 million per quarter as always.

    Perhaps with Google we could split off the Android business from search, but Android on its own makes like 0 money, so Android development would grind to a relative halt (similar to Larry Ellison of Oracle buying Java just to keep someone else from having it, and so all interesting development has stopped).

    Would any of this serve the customers, the consumers out there? The rapid rise of mobile use is based on being able to find anyone and anything quickly, to have over-the-air upgrades that don't need a techie to handle, being able to share data like photos and videos as a 5-year-old to 95-year-old. Remember when grandmothers used to have to ask for help with their PC's to use Hotmail or connect to the internet? Less and less does that happen. I haven't looked at "Senior Phones" in a decade, about when I was looking at some Senior video conferencing on tablet, but Skype and WhatsApp and Zoom pretty much covered that market for consumer and businesses. (okay, Microsoft bought Skype and merged it with its old clunky corporate package, so it's slightly worse, slightly better as tied to the Microsoft cloud - but still largely free or dirt cheap compared to what we recall of Telco charges).

    We had the chance to break up some of our too-big-to-fail banks in 2009, and did a crappy job of it - but those were old school oligopolies and used market position to sell poison assets, robosign people's mortgage foreclosures, overcharge kids for credit cards, and other obscene practices. What'd we do? we gave traders bonuses, hand held investors with 100 cents on the dollar, bailed them out and let them merge into even bigger entities. Well, that went so well, let's try breaking up tech companies that politicians understand so poorly.

    Even with advertising - Google & Facebook monopolize 60% of advertising, with Amazon working on breaking in. But one reason that advertising is so high is that advertisers want a single efficient spend, a single platform (or 2 at most). To build a mobile app you used to have to build 10 different versions at least ot effectively cover available phones. Now you build 2 - Android & Apple iOS, and just put it in their stores. Same pretty much for advertising - sure you can put up billboards or even pass out flyers, but it's totally simple to do Google & Facebook ads and check their analytics, and you know pretty much all the world is there if you design your pitch, your ad words right. So while people who want to enter the market complain, the ones using are mostly happy. What that means for consumers is evolving, since the system was built on "free lunch" and we're discovering (if we didn't know already) that "if you're not paying for the product, the product is you".

    Does Elizabeth Warren and DC in general understand any of this? Do they see that people will freely gravitate towards a NetFlix without excessive pressure? We can see the damage that misuse of data creates, other types of abuses of worker pay, et al - but these aren't quite the focus of what a traditional split up would look like for a traditional monopoly. But as the bean counters from DC didn't help Detroit out much by taking over management (instead their only real successes were continuing say producton in China that was going well, while electric cars are still a bridge mostly too far), let's not expect Washington to understand well the retail or technology fields and what "platform-based" development means to the consumer and suppliers.

    WalMart at one point was responsible for 13% of America's imports, but for the last decade or more has been trying to fight off Amazon's steady encroachment - including trying to compete with advertising, as well as go online, while Amazon has successfully taken the lead in apparel and opened bricks-and-mortars shops. Nokia had 50% of the global market share in 2007, and within 5 years was dead - despite a Microsoft buyout.

    But would I rather be stuck with WalMart clothes and a Nokia flip phone?

    It's a complicated developing world out there, and thanks to 2016 we're much more aware of the Big Brother side of corporations owning our data and other practices - but we're still a long way off from understanding the technical, legal and societal remedies. The Democrats always held Silicon Valley at arm's length, appreciating their support and often liberal values, but uncomfortable with their vast money-making technical enterprises and the venture capitalists that rose up around this.

    So yeah, I'm uncomfortable with cries to just break up the Big Four and more - we've been down these roads before, and many of them look like the past. Develop a real goal, one that combines the challenges of Universal Basic Income and enough tax income for new initiatives like health care and better retirement and day care, one that identifies overstep in corporate behavior but tries to preserve consumer/B2B convenience and savings, one that's focused towards ensuring next-gen innovation rather than trying to recover some happier time that's already left last gen's Pandora Box. You can't have your Golden Goose and eat it too. It takes a platform to lay those eggs. We just need to make sure they're not Godzilla's instead.

    Comments

    Your answer may be different. Just struck me as somewhat applicable:


    File under "with the best intentions", why I worry that people will take this new tech/marketing/social media stuff on w/o understanding the details, players and structural problems.


    You make a strong case. The landscape is so fluid and the competition so fierce that consumers are doing just fine, thank you very much. When Toys-R-Us was going under, my wife and I had to rush to spend our leftover baby gift cards before the deadline. Among other things, we bought a Minny Mouse bicycle helmet at a steep going-out-of-business discount. And yet, it was still more expensive than the same product at Amazon. Anyway, it's hard to shed tears for the demise of a big box retail chain that put so many mom-and-pop toy stores out of business back in the day.

    I do think we need to be wary of these giants becoming more abusive in the future, however. It won't take the form of "goons" beating up competitors--and frankly it never did even in the old days. The chief danger is that powerful companies will use their influence to manipulate government, just like the Robber Barons used to do, pushing policies and legislation that benefit them and hurt their competitors, not to mention consumers and workers. But as you say, we're not there yet, at least in the tech sector, and the fall of Microsoft shows how quickly things of change.

    Anyway, great piece, very persuasive.


    Facebook is doing their best to convince me they're truly evil.

    Google's biggest evil may be Youtube, though it also may be hidden algorithmic control of what appears on page 1 of search results (and condemn the rest to hell) may be spawn if the devil. Alt-right actors have been able to game that system in the past, putting say 6 spam/spin/hijack listings out of first 10 results to normalize an extreme position and promote a completely illegitimate tiny web site over say CNN and CNBC.

    In a way I'm still hoping for Amazon (Buffett and Dimon - gack!) to make good on promises of improving healthcare and driving down costs - something rigged competition has failed to do. Part of this is digitalization of health data, part is bringing in a godzilla to crack heads of slower, more crooked gorillas.  Give them 10 years to smack things around and *then* break them up? Too dangerous?

    Education btw - why does all the power of reputation go to a few "elite" schools? Why is a Yale tag on a Biology degree more than Wake Forest or Pepperdine or UNH? Where's the real evaluation of what people learn, and how does that tie into sky high tuition cost and actual taught knowledge (rather than perceived hobnobbing/access to future power bone), the yearly SAT scramble, the fake qualifications/activities that somehow show how marvelous kids are when they shut down from any actual innovation and creativity to jump thru these hoops...)? Imagine if a player comes in and redefines post-education access to big kahunas, so that college really is only about things taught, not about myths around if your roommate might be Bill Gates or Sergei Brin - what happens to this hyper-charged NCAA March madness of study choice? Can an Amazon-like ratings roll over the ever-dodgy US News and what-not big wide painted brush approach? Why are 48-52 classes taken from 18-22 so goddamned important anyway? And if that's really the case, why do most high schools suck so bad?


    Now this new development makes me think about things from their P.O.V. Where are they going to go if they see both major parties as not smart enough to even know if they are an enemy or not?


    Offered as a FWIW, because just ran across:


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