Google’s Search Monopoly: Should Monopolies Be Limited
Google is undoubtedly one of the biggest companies of our time. The company’s search engine has become so popular that we don’t look up things on the Internet anymore, we ‘google’ them.
The company’s conquest of the digital business world has led some to argue it’s not just an ordinary company anymore, but rather a monopoly. Some regulators are closely scrutinizing the company to ensure it isn’t violating competition.
But what are monopolies and is Google a digital monopoly? If so, should regulators try to find a way to limit them? This guide will look at all of these questions. Hopefully you’ll get a better understanding whether we should be worried about Google’s dominance in the digital world and why it might not be one of the world’s most invincible companies.
WHAT IS A MONOPOLY?
Before we look into the evidence of Google as a monopoly, it is important to understand what a monopoly is. The word is often used in the media, but not always in its proper meaning and many companies accused of being monopolies don’t necessary fall under the strict definition.
In its essence a monopoly is a situation in which only a single company or a group has the ownership of nearly all or all of the market for the given product or service. Therefore, a monopoly is a situation where competition is absent.
In a strict academic sense, this extreme case of capitalism is characterised as a market containing a single operator. Such situation often results in increased prices and even inferior products, as the group has no competition in the market.
Because of this, monopolies are tightly controlled in the modern world and therefore the strict definition of monopoly is not often present in the modern world. In many countries, there might be specific industries where there is a state-owned monopoly, but overall, most government’s are against the rise of a monopoly. If a single company would control the market, the group is likely forced to divest its assets through antimonopoly regulation.
What is a digital monopoly?
Google is often referred to as a digital monopoly instead of just a monopoly. But what is a digital monopoly?
At its core, the definition is the same as above, but it only refers to market position in the digital market, especially on the Internet. Digital monopoly is the concept of digital forms of media replacing all the other forms of media. Since digital media has different transparency issues and more advanced modalities, a company in digital media has a higher likelihood of controlling and dominating information and entertainment.
Few examples of monopolies
Monopoly as a concept is relatively new in the field of history of business. The study of monopoly kick-started around a hundred years ago, when academics began to wonder if monopolies are good or bad for business and for the consumer.
As mentioned above, it isn’t easy to find a true monopoly in the modern world, as many governments are strictly against them. This doesn’t mean that monopolies, to some extent, wouldn’t exist. Furthermore, there have been plenty of famous examples of monopolies in the past.
One of the most cited examples is the US company, Standard Oil. The company, founded by John D. Rockefeller, controlled around 88% of the refined oil flows in the US and nearly 91% of oil production.
Other examples include:
- S. Steel
- American Telephone and Telegraph
Check out the YouTube video for an interesting look at some surprising monopolies:
IS GOOGLE A ‘GOOD’ OR A ‘BAD’ MONOPOLY? AND SHOULD THEY BE LIMITED?
So what about Google? Is the famous search engine a monopoly or not? In the case of Google, opponents and proponents of the company often don’t simply argue whether the company is a monopoly, but rather whether it is a ‘good’ or a ‘bad monopoly.
First, it is important to understand why Google is considered a monopoly in the first place. Whether or not people agree with Google’s position as a good or a bad monopoly, its position as a market leader is undoubtedly true.
When it comes to Google’s position in the digital world, the following stats support the argument that Google is, for good or for bad, a digital monopoly:
- It currently owns around 67% of the global search market
- Its share of the US mobile organic search market sits at 89%
- Around 187 million unique visitors visit Google sites each month
The case for a good monopoly
Although Google itself has never claimed to be a monopoly, some experts don’t think being a monopoly is necessarily a dirty word. In fact, some people argue Google is in fact a monopoly and this is a good thing, not just for Google but also for its consumer.
The argument is that Google’s position as a market leader doesn’t necessarily mean it wouldn’t be improving or developing. Indeed the argument goes that Google’s position is what allows it to focus more freely in building a stronger business and better product and service for customers.
In a highly competitive field, companies don’t have much chance to focus on anything other than making money. But when you are in a position such as Google where money isn’t on your mind, you are freer to focus on the long-term future of the business.
Furthermore, the argument is that a monopoly in today’s world means the product or service on offer is simply superior to others. Google’s monopoly became to be simply because its product and service is so much better than others in the field. Its market position was born naturally not through a government subsidy or forced market control, for example.
Should Google’s monopoly position be discouraged? The people who argue Google’s position is positive think the current situation is not just good but a desired position for a company. Because the above highlights the positive aspects of a monopoly and because digital monopolies can be beaten by a superior competition, there’s nothing wrong for Google being a digital monopoly.
The case for a bad monopoly
But of course there are always two sides to a story. Google’s unrivalled market position is seen by many asa negative and it’s accused of taking advantage of the situation for business gain. While the company might not have achieved its market status through illegal means, some people claim it’s using its position in a monopolistic manner.
The bad monopoly argument is often based on the fact that since Google’s search engine is so widely used and since it has the power to decide what companies come up in search engines at the top, it can promote its own products and services freely. Therefore, it doesn’t support free competition, as it can control who gets the views.
Google’s market monopoly is almost considered as a self-perpetuating. Since it has such a big market monopoly and people use its services for many different aspects (e-mail, search engine, calendar, documents), small businesses have no choice but to advertise on its platforms.
Therefore, critics argue that Google’s position should be limited and it shouldn’t be able to promote its own services or affiliates as freely as it does.
THE EUROPEAN PARLIAMENT GOES AFTER GOOGLE
Perhaps the most critical approach to Google’s position has been the European Parliament’s quest to limit its market control. The company, which controls over 90% of searches in many European countries, has faced a number of legal challenges from the European Parliament in recent years.
The European Union is known for its criticism of antitrust probes – it challenged Microsoft’s position as a market leader a few years ago. It has since turned its attention towards Google and criticized the search giant for abusing its market position.
EU has accused the company for its anticompetitive practices, claiming the company promotes its own services over those of its rivals. The European Parliament has called the company to unbundle its activities and voted in 2014 for a motion that would ask the company to break into smaller operators. The EU’s European Commission is currently investigating the company over alleged violations of anti-trust laws.
Furthermore, the European Parliament has attacked the company for its data protection practices. The EU is hoping to create a unified data protection act across Europe and one that would also see foreign companies abiding by the laws as well. Google was forced to implement the EU’s right to be forgotten’ ruling. Under this rule, people can ask Google to remove certain ‘out-dated’ or ‘irrelevant’ information of themselves from the search engine.
European Union’s final verdict on Google is still waiting for the investigation to finish. So far, the search engine giant has battled against the EU’s claims, but it remains to be seen whether the company is forced to restructure its business or change its approach in the coming months.
While there are many who have welcomed the EU’s decision to go after Google’s monopoly position, the US government has sometimes accused the EU for looking after its own interests. Nonetheless, the US Federal Trade Commission did look at antitrust complaints against Google earlier, but decided not to pursue stronger action.
THE DANGERS OF A DIGITAL MONOPOLY
But should digital monopolies be limited? Are there any dangers associated to companies such as Google having such a big market share? The following are some of the dangers of a digital monopoly and the reasons why regulators are right to keep an eye on market position.
Problems over the ownership of data
Many experts, who argue against digital monopolies, aren’t necessarily concerned about the market positions per se or their influence on the competition, but the ownership issues over data. Companies such as Google are able to collect a vast amount of data from their users through the different operations and use this data in order to stay ahead of other businesses.
Furthermore, many argue the company hasn’t always acquired this data through appropriate measures. For example, Google has been accused of using exclusive deals in order to attract new customers and that some of its services collect data without its customers’ proper knowledge.
Data collection and ownership makes the situation tricky, as it hasn’t been considered a competitive advantage in the monopoly regulations.
Control over the data customers see
The other issue with digital monopolies such as Google is the power they have on controlling the data available for customers. When you are searching for flights through Google’s search engine, the answers you receive are not simply random. Google with its affiliates decides the flights and routes you are offered.
While Google argues the information is for the benefit of the customer, i.e. it’s the cheapest routes, it still doesn’t necessarily provide enough information for the customers on how this happens. Customers do for the most part enjoy the benefits of Google’s powerful algorithms, but how the company uses them is not always clear.
Furthermore, companies who want to be recognized by Google’s search engine need to convince Google first and not the consumer. Some have argued this puts companies into competition over Google’s attention, not necessarily over the customers.
Both of the above points could lead to the final danger of digital monopolies: distorting competition. Free competition is considered the best way to guarantee consumers enjoy a good product and service. But if companies are looking for Google instead of the customer, is the competition free?
The digital revolution has also introduced the issue of vertically integrated ecosystems, where different tech companies work together against other players. This could limit consumer choice quite drastically and make it hard for different companies to compete with their direct competition.
Different smartphone apps are a great example of this distorted competition. Developers of apps often have to choose which vertically integrated ecosystem they join (Apple’s iOS, Google’s Android or Microsoft) and depending on the customer choice, the customer’s option of apps could be strictly limited. Furthermore, different mobile carriers now offer certain phone deals exclusively, again creating very limited ecosystems for consumers.
THE REASONS GOOGLE ISN’T NECESSARILY INVINCIBLE
Digital monopolies can be harmful for the consumer as well as for healthy competition amongst businesses. Because of the dangers mentioned above, it is a good idea for governments to keep an eye on digital monopolies and companies that control much of the digital market.
But is Google’s market position as powerful as some of its opponents argue? Is there evidence to suggest Google might not be as invincible as some would think?
While Google could be seen to benefit and somewhat distort the competition through its search engine and other service, the company surely also has provided many benefits for its customers. Advertisers do need to pay for Google, but on the other hand, consumers are able to use Google’s products free of charge. People are also free to switch between search engines, yet most continue to find Google’s products and services the most accurate and time-saving.
Furthermore, the era of digital business hasn’t limited competition, but, as many argue, made it riper. The barriers of entry aren’t as hard for many businesses and some of Google’s own products are often preferred by small businesses as important part of getting started.
Overall, the entry barriers in the digital world are much lower than the ones for offline companies. You can set up an online service quite easily from the comfort of your own home, whereas creating a new clothing company won’t be quite as simple.
This increased competition also makes it harder for digital monopolies to last. While it is hard to see Google withering away from the digital world, it isn’t to say it couldn’t happen. Consider the example of Google’s dominant social network Orkut, for example. The platform was hugely popular, but was swallowed by Facebook. Now Facebook is under threat by a wave of different social messaging apps such as WhatsApp.
The evidence shows how big technology companies have struggled to maintain a strong market position for longer periods. IMB and Microsoft both lost their market dominance in personal computing and Google itself is struggling with the rise of the smartphones, as developers are creating successful substitutes for Android.
In order to survive in the digital world companies need to stay on top of the market and reinvent themselves. Microsoft, for example, got behind because it didn’t continue to innovate but relied on its market dominance. If Google wants to be on top in the next few decades, it will need to continue to create new services. This will only be beneficial for the customers as well as competition.
Google’s market position is unrivalled and it enjoys a clear market advantage over its competitors. At the same time, there are real dangers attached to digital monopolies and it is crucial regulators keep a close eye on digital companies such as Google. Monopolies of the digital world will need to be treated slightly differently and regulators must start focusing on areas such as data ownership instead of simply focusing on competition.
Nevertheless, Google’s prominence hasn’t always been simply bad, especially for the consumer. The era of digital business has also increased and improved competition, making it harder for companies such as Google to overlook competitors and take advantage of consumers. While it is important monopolies continue to be controlled and limited, Google isn’t necessarily as abusive of its power as some might argue.