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Goliath's slingshot

February 03, 2008

When Google adopted "don't be evil" as the cornerstone of its corporate code of conduct, what it really meant was "don't be Microsoft." The company's loathing for its neighbor to the north was on display again today in a remarkably contemptuous broadside launched against Microsoft's proposed acquisition of Yahoo by Google's top lawyer, David Drummond.

Drummond does not mince words. Microsoft's "hostile bid," he writes, is an attack on "the underlying principles of the Internet: openness and innovation." He raises the specter of Microsoft "exert[ing] the same sort of inappropriate and illegal influence over the Internet that it did with the PC" and "extend[ing] unfair practices from browsers and operating systems to the Internet." He makes it clear that Google will seek to block any deal on antitrust grounds, arguing that:

Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on 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? Policymakers around the world need to ask these questions - and consumers deserve satisfying answers.

Drummond's right that these are good questions and deserve serious consideration. But the irony here is that Google itself will provide Microsoft with the best counter to charges that it will wield monopolistic control over the Net after a merger with Yahoo. It is Google, after all, that holds "an overwhelming share" of web searches and search-based ads (as well as the largest share of online advertising in general), which most experts would argue are at least as important to the ultimate structure of Internet business as personal messaging and portals. Google's paranoia about Microsoft, a paranoia that shadows all its business decisions, appears to have blinded the company to the extent of its own power. It has itself become a Goliath, even if it insists on wearing David's clothes.

UPDATE: Microsoft's top lawyer responds, claiming the acquisition "will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising. The alternative scenarios only lead to less competition." Meanwhile, the Wall Street Journal reports that Google CEO Eric Schmidt has called Yahoo CEO Jerry Yang "to offer his company's help in any effort to thwart" the Microsoft bid. It's Goliath vs. Goliath, and Yahoo's in the middle.

UPDATE: Dan Farber offers a useful table, from Hitwise, summarizing the market shares held by Microsoft, Yahoo, and Google for a number of Internet services (though not for advertising). Drummond is certainly right about Yahoo and Microsoft's dominance in portal home pages and web-based email. In combination, the two companies hold, according to the chart, 87% and 80% of those markets. Of course, those numbers also underscore Google's lack of success in cracking those markets

Comments

This intemperate, unnecessary and silly intervention by Google is so uncharacteristic, that it's hard to believe it was not carefully planned. And such a comment must only help M$'s chances of World Domination, sorry, takeover of Yahoo!

So we must conclude that Google is in favour. This doesn't surprise me; instead of two fronts to fight on, they'll have just the one.

And do the math:
Google > M$ + Yahoo!

Perhaps even Google = 2 x (M$ + Yahoo!)

Not in size, or even cash - but in ability to innovate on the web.

Posted by: heenan73 [TypeKey Profile Page] at February 3, 2008 05:41 PM

Strangely enough it’s the David’s, the consumers, who are going to lose in the long run. The "Don't be evil" bit was the mantra when idealism ruled, in the early days.

I don’t believe, with the power, clout and size of Google that there is much reality to the mantra anymore. David put the armour of Goliath in his own tent after slaying him, we the consumer will have the apps and such-like for our use but not much else that can be counted on, not to even to talk about issues of privacy!

Alan

Posted by: alan [TypeKey Profile Page] at February 3, 2008 06:20 PM

I agree with heenan73 that its a carefully planned move by Google ...however, I believe the underlying reason is to try and make this merger process as long and arduos as possible for both MS and Yahoo ... the more the uncertainty about the merger amongst the advertisers and the longer both MS and Yahoo spent time on sorting things out amongst themselves and with regulators ... the easier it is for Google to forge further ahead

Posted by: Amit [TypeKey Profile Page] at February 3, 2008 06:34 PM

It is amusing to hear anyone from Google complaining about the potential for its competitors to become monopolistic. I once believed in Google. I had hoped that they (in conjunction with other technology companies) could break Microsoft's grip on the computer world. I loved their euphemistic "don't be evil" slogan. Now, I've lost my faith. Why must they own everything? Their many acquisitions have drastically decreased competition in a number of technology sectors. How can they complain about Microsoft's practices? I hope Yahoo sticks it out. In fact, I'd like to see them tackle search again. We really need some new innovation in that field.

Posted by: 'son [TypeKey Profile Page] at February 4, 2008 12:22 AM

I think that the Google vs. Microsoft angle is overblown to an extent. It is my opinion that Microsoft is aiming for a different market - leader in ubiquitous computing while Google is the leader when it comes to desktop-initiated search and advertising.

They can both win.

Different ponds for different fish. I have a detailed analysis on my blog for the interested reader.

Posted by: Anshu Sharma [TypeKey Profile Page] at February 4, 2008 02:52 AM

Funny how no one seems to care about what the slogan really means. . . Just read any story about he early Google: the slogan came during a brainstorming with the early team of a few dozens, if I remember properly, were the attempts to make any specific slogan failed: being open, user-oriented, efficient, all that wasn't perfect, all that wasn't good. Even something as corny as “The only thing evil needs to win is that good people do nothing” couldn't go through, so they decided the most general moral statement that you can possibly make. The slogan is about how clueless even the best are when trying to decide on a normative code of conduct prior to changing the world. However assertive, is is a sign of weakness.

Another weakness I would like to point at is that you seem to miss the “would” and “should”: it is a question -- will the team that did anything (short of murder) to have Microsoft hegemony on the desktop work on the Web? Will we see more Orwelian Passport, absurd W3C non-compliance from IE7, heavy-handed lobbying around OXML? Should Yahoo! innovations be kept out of it? If anything, Scoble proved there were tons of good stuff in MS R&D that could not see the light because of corporate decisions.

Instead of having browser innovation and less on-line badware thanks to diversity, will we have 80% of users forced to use IE because that's the only browser compatible with there webmail? It is a question — and many would love to have Yahoo! answer it, rather then Microsoft lobbyists.

Posted by: Bertil [TypeKey Profile Page] at February 4, 2008 09:47 AM

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