RUTHFULLY YOURS

Google turns 25-years-old today. Back then, it was a given that technology would change the world for the better. And by studying the practices of the founders, we could improve ourselves, too. So, how well does this assessment of Google hold up today?

In its early years, Google embodied technical excellence and good taste. Its original (and for a while, only) service was a web search engine based on a simple borrowed idea. The search results were rated according to the density of in-bound links, just as academic papers are ranked by the number of times they are cited. This method gave us results far superior to those of its rival search engines.

Google also benefited from having a certain mystique. Its front page – google.com – was immaculately clean and uncluttered. The service was very fast and helpful, too, correcting your misspellings. Initially, Google seemed to have no interest in serving us any other products or services, or apparently, even making money. Occasionally, the front page featured a whimsical cartoon. Google seemed to embody the kind of a shiny, hopeful liberal idealism expressed in Gene Roddenberry’s original Star Trek. Larry Page and Sergey Brin, Google’s boyish founders, would be our companions to the future, just as Kirk and Spock had been.

At one point in his book, Jarvis allows himself a dark thought: What would happen if Google fell from its saintly standards and tried to screw us? We needn’t worry, he assures us: ‘Google could lose our trust the moment it misuses the data it has about us or decides to use our growing dependence on it as a chokehold to charge us (as cable companies, phone companies and airlines do).’

Such optimism seems very naïve today. It is still true that Google does not charge us, as consumers, directly. But multiple authorities across several continents have judged that it does operate a chokehold on competition, and this costs us all a lot.

For example, in 2022, the EU levied a record fine against Alphabet, Google’s umbrella company. Having once vowed never to detain people on their journey to another destination longer than necessary, Google now seeks to keep people on its own properties for as long as possible. According to the European Commission, Google abused its market dominance to give an illegal advantage to its shopping service. Google also dominates dozens of markets that once had thriving competition, from smartphone platforms to web browsers, all of which serve as funnels to deliver us to its advertising business. Google also participated in a secret wage-fixing cartel against US technology workers that suppressed wages by some $3 billion, according to one complainant in a class-action lawsuit.

There are other ways that Google ‘charges’ us indirectly. The real cost to us all from Google comes from the excessive prices it levies on businesses for advertising, which are well above what they would pay for the same advertising in a competitive market. These costs are then passed on to consumers through higher prices. Economists at the UK’s Competition and Markets Authority (CMA) tried to estimate what this might be. It found that in 2019, each UK household ‘spent’ £500 with the advertising duopoly of Meta (Facebook) and Alphabet (Google) – a far higher figure than would be expected in a competitive market. Indeed, the CMA estimated that the total annual cost to UK plc of Google and Meta’s excess monopoly profits would have been as much as £2.3 billion. This cost is likely to be far higher today, as Google’s revenues have doubled since then.

So how did we get here? Firstly, the digital advertising market is enormous today – worth more than the entire technology sector was before the explosion of the internet. Just two weeks before Google was founded, Microsoft surpassed General Electric as the world’s most valuable public company. Yet its annual revenue in 1998 was smaller than Google’s quarterly profit today (Google reported $18.4 billion in net income in the most recent quarter period, up to July).

Google’s crowning achievement is the electronic exchanges it uses to trade ads. These are the largest exchanges in the world by value, and are the world’s only unregulated exchanges of this type. In these black boxes, Google acts as the buyer’s broker and the seller’s broker, giving it a unique insight into every trade. This also allows it, as various competition lawsuits allege, to inflate prices.

Such behaviour is not permitted in any regulated exchange, and both sides of the market suffer as a result. When publishers devised a digital auction innovation in 2014 that levelled the playing field, called ‘Header Bidding’, Google was alarmed. It became even more worried when Facebook endorsed it. Google’s own research showed that using this method, customers were happier, got better results and paid less than using Google’s black box. It ate into Google’s own margins. Google responded in 2018 by signing a secret deal with Facebook, which various US states regard as a form of collusion. The US Department of Justice, fired up under the current administration, wants Google to be broken up, with the ad exchange spun out. Google has offered a voluntary restructuring instead.

‘Call me a utopian’, Jeff Jarvis conceded in his panegyric to Google. But today, it isn’t Poundland futurists like Jarvis who are the utopians – it’s the self-described ‘free marketeers’ who advance a similarly Panglossian defence of Big Tech. It is those who oppose any and all regulation of Google, Meta and others. They have abandoned their devotion to efficient and competitive markets, as they insist that rigged, monopoly-run markets offer us the best of all possible worlds.

Twenty-five years on from Google’s founding, it’s time for us to finally get serious about taking on Big Tech.