Why Google Is Facing Serious Accusations of Monopoly Practices

Yves here. For regulatory moves against Google to bite, officials in more than one big economy need to get serious about taking them on. That finally seems to be happening.

By Prabir Purkayastha, the founding editor of Newsclick.in, a digital media platform. He is an activist for science and the free software movement. Produced in partnership by Newsclick and Globetrotter.

The U.S. Department of Justice filed a lawsuit against Google-Alphabet (Alphabet is Google’s parent company) on October 20 for a range of anti-competitive practices using its monopoly power in the search market. It is the only major action in the U.S. against tech monopolies in recent years, the last one being the 1998 action against Microsoft. Eleven state attorneys general have joined the Department of Justice suit, with more expected to follow.

Google’s current market share in online searches globally stands at about 92 percent and rises to more than 98 percent in countries like India. The only market in which it has virtually no market share is in China, where it shut shop for its search engine in 2010.

The four major tech companies—Google-Alphabet, Facebook, Amazon, and Apple—are globally on the radar for their monopoly power and their ability to drive out competition. The recent hearings in the U.S. Congress relating to the Big Four were followed by a staff report of the subcommittee on antitrust, commercial and administrative law that recommended appropriate legislative action to Congress to either break up or limit these companies.

Facebook has additionally come under the scanner for being an instrument of hate speech, helping the formation of violent militias, and promoting conspiracy theories, including COVID-19 conspiracies. A Delhi assembly committee—Committee on Peace and Harmony—is investigating Facebook’s role in Delhi’s communal riots that took place earlier in 2020 (full disclosure: I also deposed before this committee).

Meanwhile, Google faces the following charges in the lawsuit filed by the U.S. Department of Justice:

  • Creating a web of exclusionary and interlocking business agreements to shut out competitors
  • Paying mobile phone manufacturers and web browsers to make Google as their preset, default search engine
  • Controlling the online ad market with its selling and buying tools to ensure that web publishers are locked in
  • Using its control over the Android operating system to position its Chrome web browser and search engine as the default for mobile platforms

Much of these sound like legalese and beyond our ability to understand what Google is doing. The simple issue is that Google uses its monopoly over the search engine and its other Google properties to grab more than 30 percent—$103.73 billion in 2019—of the global digital ad revenue pie. Facebook has a little more than 20 percent, but today’s story is Google and not Facebook.

Google and Facebook have one similarity. Neither of them generates any content; they show users content generated by others. Their entire business model is capturing our eyeballs so that we, or our attention, can be sold to advertisers. Those who create content may get a small fraction of the ad revenue that Google generates, but the bulk of the digital revenue is appropriated by Google as the major gatekeeper of the digital world.

How does Google get so much of the ad revenue? Does its search engine not show other sites that a person searching on Google would also visit? And would these sites also not get a share of the online advertisements?

Visiting other sites via Google searches is decreasing year by year, as pointed out by Rand Fishkin, a leading expert on search engine optimization. During the House hearing on July 16, 2019, the chairman of the House Judiciary subcommittee on antitrust, commercial and administrative law, David Cicilline, said, “In 2004, Google’s cofounder Larry Page said the purpose of Google is to have people come to Google, quickly find out what you want and to get you out of Google and get you to the right place as fast as possible.” Fishkin shows with figuresthat this is not the case anymore; if it ever was. Today, the majority of searches on Google lead to no further clicks on the links in the displayed search pages (zero clicks).

In the browser search market, more than 50 percent of searches generate zero clicks on the search result page links. If clicks do occur, a significant share of such outgoing clicks is only for other Google sites such as YouTube, Google Maps, etc. Clicks on search pages leading outside the Google universe are dwindling every year.

The situation is worse with mobile searches than for the desktop market, where Google has a more dominant position. It might seem that Apple mobile phones should be independent of Google and, therefore, non-Google websites might fare better in Apple’s ecosystem of iPhones, iPad, etc. That, however, is not the case. Google pays an estimated $8 billion to $12 billion, nearly 20 percent of Apple’s annual profits, for Apple to carry Google search and maps as the default setting for Apple phones and Siri.

These figures relate to the search engine outputs and the resulting clicks. What about the proportion of web traffic referrals that sites receive, meaning when sites are visited from other sites, where do they come from? Seventy percent of such web referrals on any site still come from Google properties. If a website gets on Google’s bad side, the site could fall into a deep black hole, which only the faithful will visit.

So, if a website owner wants to generate traffic for a site, the owner will have to configure the site in a way that Google can catalog all the content on the website easily. If Google makes changes, the website owner will have to adapt; otherwise, the site will not show up on Google searches, Google Amp pages, and Google News. All sites have to spend money to make Google’s task of crawling the web for content easier. If people want their videos to be viewed, the only realistic option is YouTube. And there is no way to fight with Google even if that means a dwindling share of ad revenue for a website owner. Google holds all the cards!

How does Google ensure that most search queries on Google lead to zero clicks? Zero clicks happen because Google increasingly curates the results of the queries, displaying the required information on the search result page itself so that most searchers do not go further. Even Wikipedia is worried, as its clicks from Google are dwindling.

Even when queries lead to other sites in the list of results, they also still lead to Google properties as they promote either the sites or the content of such sites—for example, YouTube videos on the search page are curated in such a way that people do not visit the world outside Google.

The rules of ranking that Google imposes on others do not apply to Google properties and sites, which have consistently higher rankings on Google searches than searches on other search engines like DuckDuckGo, Bing, etc. As Fishkin puts it, the answer to the question of how to be ranked number one on a Google search is an easy one: be owned by Google!

The European Union regulators have penalized Google on occasions, but Google has been happy to pay the fines, as the monopoly it has achieved through its anti-competitive action cannot be reversed. It is like license fees that telecom companies pay to secure the monopoly of the airwaves. In India too, Google has been fined, but the amount of the fine was a paltry $21 million. It does not even count as a rap on the knuckles for Google.

These tech monopolies are also facing action in the European Union and Australia and even in the UK. In the UK, the Monopolies and Mergers Commission (now renamed as the Competition and Markets Authority) was replaced with a weakened Competition Commission in 1999, a step which India quickly copied in 2002. Even with a weaker regulatory framework than the earlier anti-monopoly regulations, the UK’s Competition and Markets Authority stated in its recent report that these companies “are now protected by such strong incumbency advantages—including network effects, economies of scale and unmatchable access to user data—that potential rivals can no longer compete on equal terms… We need a new, regulatory approach.”

India has been charting a very different course. Not only have the government and its regulatory agencies sheltered Reliance Jio in controlling the national telecom monopoly, but they have also ‘blessed’ huge investments from Google and Facebook of $4.5 billion and $5.7 billion respectively, helping cement all three of their monopolies. While all other technology partners bring in their technology tools and platforms, Jio’s key to success is its old-fashioned monopoly over India’s telecom network. India is slated to be the world’s biggest market after China in the coming decades.

The global anti-monopoly actions show that what we are witnessing is a tectonic shift in the way big tech companies and their owners are being viewed. Not as Ayn Rand’s imaginary captains of industry, who through superman-like powers are creating a new world, but simply as venal and predatory monopolies. Even in the fractured politics of the U.S., there seems to be a bipartisan consensus that monopolies are inherently dangerous to consumers and competitors alike. Otherwise, why would a Justice Department under Trump file a case against Google-Alphabet, in which, according to its spokespersons, nothing—presumably even breaking up the monopolies as advocated by Senator Elizabeth Warrenis off the table.

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14 comments

  1. km

    I suspect that Google will expect payback for having put is finger on the scales in support of Biden, especially since the race was close.

    Reply
  2. Jeremy Grimm

    Google’s businesses are built on services that should be treated as public utilities. Google is a conglomerate of many kinds of what should be treated as public utilities. Breaking up Google along the lines of each kind of public utility in the parent conglomerate would have the same impacts as breaking up AT&T — which is to say little impact — although fortunately Google does not enjoy monopoly power based on geographic location as AT&T did, at least I am not aware of any Google locale based monopoly power. Ideally, in a perfect world, I believe Google should be replaced or at least supplanted by a Government utility offering search service tailored to serve the public interest. Of course a perfect world does not include the CIA, FBI, or other dark acronyms [part of Google’s alphabet?], nor ‘Heimatland Security’.

    Reply
    1. digi_owl

      An old flaw of the internet was that ISPs didn’t want to be treated as telcos (even if telcos became some of the biggest ISPs) thus they never implemented anything akin to a “premium number” scheme for news sites and like.

      End result is that there are two ways users pay for access, ads and credit cards.

      And for many services, credit cards are not worth it as the cost pr access would be singular cents or less.

      Reply
  3. howseth

    Why is Facebook and Amazon getting a pass? Are they next? Or will Google be let off the hook when all this proceeds.

    Reply
  4. ex-PFC Chuck

    To get a full grasp of the all-encompassing invasive nature of Google Shoshana Zuboff’s The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power is a must-read. When in the early naughts it dawned on one of their techies how each bit of “behavioral exhaust” they were collecting could be converted into targeted advertising gold by triangulating it with other bits, they began their relentless drive to collect “behavioral exhaust surplus” everywhere. All of their acquisitions and new business ventures since – Maps, Street View, Youtube, Android, Glass, etc. – have been undertaken mainly to increase their access to behavioral surplus with massive invasions of your and my privacy. I’m only about 150 pages into the 500 page tome (not counting the end notes, index, etc.), but it’s so vividly written it’s hard to put down.

    Reply
  5. kwark

    I suspect that Google will fear payback for having put its finger on the scales in support of Trump, especially since the race was close. /S

    Reply
  6. Follow the Money

    To actually do something against the tech-monopolies requires a non-neoliberal poltical conviction as well as not being dependent on them for your political life as donors.
    EUs so called record fines for Google were just a slap on the wrist. The sum was well covered by “cost of doing business”
    At most this is a politician scam to tell tech to pay more as donations.

    Reply
  7. Sound of the Suburbs

    Going round in circles with the Americans.
    The US was dominated by huge trusts in the early 20th century.

    I have been looking at the history of neoliberalism and this reveals the Mont Pelerin Society went round in a circle and got back to where they started.
    Western liberalism failed miserably in the 1930s and new ideas took hold, but those in favour of Western liberalism looked to bring it back in a different form.
    They were initially well aware of past failings and sought to address these problems, but as time went on, they moved further and further to the right and got back to pretty much the old form of Western liberalism, with its old problems.

    In the early days of the Mont Pelerin Society, they were acutely aware of the problems of Western liberalism and none more so than the Germans.
    They looked for a form of liberalism that would also provide a stable society, and came up with Ordoliberalism, which they implemented in Germany. It was a huge success.

    The rest of the Mont Pelerin Society gradually forgot the problems of the old Western liberalism, and unintentionally got back to pretty much where they started.

    The Mont Pelerin Society remembered the problem with consolidation and monopoly until 1950, then they forgot.
    Actually, their wealthy sponsors ensured they forgot.
    https://www.youtube.com/watch?v=ecfxHevLKsM&t=1622s
    When private backers fund academics, they can control the direction the academics take.

    The Americans have remembered that monopolies are a problem again.

    Reply
    1. Sound of the Suburbs

      This neoliberalism isn’t very new is it?
      It was supposed to be, and they did try to learn from past mistakes, but the Mont Pelerin Society went round in a circle and got back to pretty much where they started.
      Most of today’s problems can be seen in the 1920s.

      Mariner Eccles, FED chair 1934 – 48, observed what the capital accumulation of neoclassical economics did to the US economy in the 1920s.
      “a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion of currently produced wealth. This served then as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied themselves the kind of effective demand for their products which would justify reinvestment of the capital accumulation in new plants. In consequence as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When the credit ran out, the game stopped”

      This is what it’s supposed to be like.
      A few people have all the money and everyone else gets by on debt.

      On a BBC documentary, comparing 1929 to 2008, it said the last time US bankers made as much money as they did before 2008 was in the 1920s.
      Bankers make the most money when they are driving your economy into a financial crisis.
      https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
      At 18 mins.
      The bankers loaded the US economy up with their debt products until they got financial crises in 1929 and 2008.
      As you head towards the financial crisis, the economy booms due to the money creation of bank loans.
      https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
      The financial crisis appears to come out of a clear blue sky when you use an economics that doesn’t consider debt, like neoclassical economics.

      “The Great Crash 1929” John Kenneth Galbraith
      “By early 1929, loans from these non-banking sources were approximately equal to those from the banks. Later they became much greater. The Federal Reserve Authorities took it for granted that they had no influence over these funds”
      They can’t control the lending of shadow banks in the 1920s either.
      They thought leverage was great before 1929; they saw what happened when it worked in reverse after 1929.
      Leverage acts like a multiplier.
      It multiplies profits on the way up.
      It multiplies losses on the way down.
      It’s still the same.

      As a CEO, I can use the company’s money to do share buybacks, to boost the share price; get my bonus and top dollar for my shares.
      What is there not to like?
      Share buybacks were found to be a cause of the 1929 crash and made illegal in the 1930s.
      It’s a 1920s problem.

      …… etc …….

      Reply
  8. Michael

    Google and the Google sites went down about 20 minutes earlier today. It was immediately obvious: no search, no gmail, no Google Calendar. Wonder if Google is a monopoly? Don’t use it for awhile – try searching elsewhere. If you use gmail, don’t. Stay away from all Google services. The answer is pretty obvious pretty quickly.

    Reply
    1. Sue inSoCal

      I’ve found there’s simply no way to get away from it. Regardless of how you try, Google Analytics is everywhere. (I use no social media or have Gmail and use Startmail.)

      A bit off topic, I know, but I’m fed up with the entire s-show. Trying to exercise California so-called “privacy rights” feels like the role of Sisyphus.

      Reply

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