“Google makes most of its money by selling ads that appear on the top of your screen as ‘sponsored links’ when you search with certain words. Advertisers set prices for these ads by bidding in an automated auction,” The Seattle Times writes. “It may seem odd that a company could exercise monopoly power without setting its own prices. Eric Clemons, professor at the Wharton School, responds with an analogy. Suppose an airplane is going to crash, and there is only one parachute. The owner of that parachute, he says, can easily get a monopoly price by auctioning it. This is like what Google does.”
“To make such a case against Google, the Justice Department will have to establish several points. One, says Clemons… will be establishing what ‘relevant market’ Google is in. The company will argue it is a mere minnow in the market for all advertising,” The Seattle Times writes. “The government will have to argue that in the market for Internet search advertising — the relevant market — Google is a whale.”
The Seattle Times writes, “Its case against Microsoft did not work out well. The Justice Department won in District Court and lost on appeal. But that was a decade ago. Times have changed. Google could be different.”
Full article here.
MacDailyNews Take: In the U.S. achieving a monopoly is legal; in fact, it’s the ultimate goal. It’s monopoly abuse that’s illegal. Therefore, the question is: If Google has a monopoly, what did they do, if anything, to abuse their monopoly position?
Curious to see a piece in the local paper about something other than how cool MS is, or how great its plans are
Uh, if the owner only has one parachute, and the plane is going to crash. Wouldn’t he keep it for himself? What good would the money do if he is going to die before he could ever use it?
This NY Times article yesterday explained it a little further: http://www.nytimes.com/2010/05/23/technology/23goog.html
Maybe he knows something we don’t. Maybe he felt the need to buy his way into Heaven perhaps?
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Joe,
There you go ruining a perfectly good analogy by actually doing some thinking!
Sheeesh.
Not only that, but what would stop the other passengers from bum rushing him and taking it?
Who says that the owner of the parachute is on the plane? (The hypothetical parachute ould be in a code-key locked container, like a pay toilet.)
When the Seattle Times runs a hit piece on a technology company you have to wonder what that company did to piss off Microsoft this time.
Seattle Times motto translated from the original Latin,
“From Ballmer’s fat head to the pages of the Seattle Times.”
The parachute analogy is wrong. This isnt life and death. This is just ad space.
When Google auctions ad space it is the purest form of market driven pricing. It also tells Google and the rest of the world exactly what something as nebulous as an Internet ad is really worth. Consider Google’s method vs. Apple’s, “Initially an ad will be one million dollars” method. There is no way to know if an ad is worth that much. If I were buying space I’d much rather be in the auction pit bidding on Google’s space. I have an idea what I want to spend. I can try for different spaces until I win an auction with my budgeted sum. I also develop a sense of what ad space is worth to others.
I don’t see why this is a problem and it stinks of more bottom feeders seeking their moment in the limelight by screwing with Google simply because they are successful.
Wow, how people’s memory is wrong… You’d think a reporter would actually get it right — especially in Seattle!
“The Seattle Times writes, ‘Its case against Microsoft did not work out well. The Justice Department won in District Court and lost on appeal. But that was a decade ago. Times have changed. Google could be different.’
The DoJ won. Period. What was overturned in the appeal were the penalties. The original judge wanted Microsoft broken up. The appeals court sent it back down for a different penalty. A new judge agreed to a “penalty” of just “We, Microsoft, won’t do it again and you can monitor us more closely.”
Microsoft is still a company convicted of abusing its monopoly power. That has never changed.
Thank you, Shadowself! People forget too easily.
I don’t see how you can say Google has abused its monopoly position. It created the best search engine at the time, and gained a majority market share based on the ease of searches by using its engine.
The gathering of data is another matter, and violates different privacy and other laws. Has nothing to do with Google being a supposed monopoly.
typepad.com/atlas_shrugs/2010/04/this-is-britian.html
Check this out to see the future. Google or not.
Yahoo and Bing are parachutes. They may not be seen as adequate, but hey are there.
@ Ron,
That’s some scary stuff. It just reinforces my belief that the 2nd Amendment should have been the 1st Amendment.
Google has a MARKET monopoly. That means that the market has decided to use Google because it is THE superior product. You and I and everyone who advertises could switch from Google to one of the many other competitors in a heartbeat. Why don’t we/they? Because Google is the best.
What people are doing here is what they do when they attack the iPhone as a monopoly. They don’t really want freedom of choice. They HAVE freedom of choice. What they want is control.
Look, I’ve begun to have reservations on Google of late, but this is pure bullshit! Google made an advertising plan that has yet to be matched. Even Apple with its iAd has nothing on Google when it comes to this. If you’re gonna beat Google, come up with a better plan and stop crying to the government because you cannot make a better design.
As for privacy, well that’s a whole different kettle of fish. This is what the government should be looking at. How is all of the information being used to individualize marketing and whatever else Google decides to do with our data and surfing practices.
@Ron.
No disrespect, but what does that have to do with the topic at hand?
IF Google has a monopoly in advertising over the internet, and that’s decided to be a separate market, than having Google DECLARED a monopoly for legal purposes can be important.
It wouldn’t be said that having that NATURAL monopoly would be illegal, but it would enable certain restrictions that being declared a monopoly would automatically put into place.
It’s like MS’s monopoly in PC OS’s. It’s not illegal, but they can only do certain things now. I’ve long thought that Office should also be declared a monopoly as it has an even bigger share of the office software market than Windows has of the OS market.
Mel, interesting thoughts, but if we continue down this path of nailing everyone and restricting them because of being a Monopoly, this is going to stifle all businesses and put a cap on just how far any company can innovate.
I believe that Microsoft’s problem wasn’t the fact that they were a Monopoly, but how they got there and what they did with their monopoly. I knew several OEM’s who were ridden by MSFT to produce only Windows machines and offer only Office to their customers or face the wrath of MSFT. Additionally, if they built a Linux box, Microsoft still got a cut for the underlying ROM. Why? I have no idea. That is where the illegality comes in and why they had to be stopped.
A natural monopoly with no additional negatives should not be an issue, particularly in the example of Google who have basically created a business model that is becoming hard to beat. Companies need to go back to the drawing board and figure out how to beat Google in the ad space. Apple is trying by using the leverage of their own OS and the popularity of its own devices to do this. They are not running to the DOJ to make this happen.
It’s no surprise it’s happening in Europe, but I digress…..
Just my 2 cents on a sunday afternoon.
If Google were a convicted monopolist like Microsoft, what they are doing would be illegal – using dominance in one market (advertising sponsored search) to create predatory pricing advantages (free services) in other markets.
Google pretty much invented or defined online search and advertising, and are market leaders. In other areas, Google is playing catch up using “free” services under a “free and open” banner to take the air out of the room in a way that few companies can compete with.
Apple will be fine, as they sell both hardware and software and have a platform … although I never thought I’d feel sorry for Microsoft, the company who is really screwed by where things are headed.
Google’s OEM’s (the ones who have no platform of their own) will probably end up screwed as they are almost forced to use Google software to sell their products. ie: Sony, Motorola etc.
Microsoft wrote the book on this one – “Embrace, Extend and Extinguish”, by whatever means possible, including leveraging a monopoly to provide free services.
Ironic.
Is Google our buddy now that we see Google as M$FT’s enemy? Or is Google still our enemy despite being the enemy of our enemy? Or … ?
It’s hard keeping these things straight when we have different levels of “enemies”. Right now, M$FT is Apple’s most significant Enemy in that a) it produces nasty products and b) is the biggest player in the pond. Google is trying to compete with Apple in some product lines (phones, ads, information) but not (yet) in others – and is not THE player in a market Apple is heavily invested in. So … ?
What could be the problem with a company knowing everything I search for on the Internet, knows all my phone calls, knows all my apps, knows my images, knows my email, knows my social circle, has a picture of my house and wants to know what I watch on tv and host my business apps. You guys are just being paranoid.
@HolyMackerel…well said…it is rather unsettling when you put the pieces of their future pie together…
Why isn’t Google advancing its web serching technics? On any simple search we still get millions of total useless hits. Instead, Google is copying Microsofts old way of copying competotors, this time Apple’s engeneerings?