Google techniques of bullying startups allowed them to remain dominant in supposedly disruptive industries
Twenty years ago, in a rare display of caring about competition The US department of justice and 20 state Attorneys General filed an antitrust suit against Microsoft that had at the time a total monopoly of desktop operating systems and decided to abuse its power and crashed Netscape browser that was in many ways superior to their “Internet Explorer” that was deeply embedded in Windows as a default browser, so that if you tried to uninstall it, you messed up all of Windows. The judge agreed with the government’s recommendation that the company be broken into the two companies. One would be an “Operating System” company, and the other being an Applications company. Microsoft barely avoided being broken up, but this had a powerful effect in favor of competition. As Gray Reback put it “Because of antitrust enforcement, that’s why we have Google” as some insiders reported Internet Explorer was programmed that whenever people type “Google” they were redirected to MSN search. The tech giants learned an important lesson from Microsoft which is not “don’t be abusive” but they learned the power of lobbying and monopoly. While Google, Facebook, and Amazon behave in ways very similar to Microsoft, they spend a lot more time preemptively lobbying and donating to political parties. They collectively spent almost $50 million on lobbying in 2018. Google was the biggest spender at around $18 million; they know that they have an overwhelming dominance in search and advertising online which puts them in the bull’s-eye of regulators. They were the second-largest corporate source of campaign donations to president Obama’s reelection effort. And the level of contacts between their executives and the White House was unprecedented as they attended White House meetings more than once a week. This surely helped them overcome many anti-competitive attacks brought against them, and allowed them to abuse their power using all means possible from search results disappearing to content extracting from websites such as, Yelp, TripAdvisor and celebritynetworth.com and place it in one of their own products such as Google Maps. They also create faster versions of websites that load faster but doesn’t allow any stranger advertising service.
Today Google that started as David is acting like Goliath. In 2006, Adam Raff and Shivaun Morean launched an interesting website called Foundem.com, the idea was simple and handy. Their technology could figure out which websites charged hidden shipping fees and which had the lowest prices. The beta testing signaled a huge win, yet when they launched, the excitement quickly faded. At first users would come rushing to the site but after the second day visitors never came back. They searched for every reason that could explain the sudden drop in traffic, internally everything was just good. The only reason is that the internet gate keeper “Google” decided to make them disappear as they checked search results ranking on google they found themselves at around 150th page, they were also prevented from purchasing any AdWords. It turned out that Google had its own “Google Product” that it wanted to promote and Foundem.com was a threat. So they simply sentenced their website to die. This is one story of many that shows the bullying of Google. The big break for Foundem did not come from the United States, but from Europe where they had few friends. As the European Competition Commission charged the search giant for competition policy violation and fined them almost $3 billion.
Google chrome browser is another powerful tool in their hands to block ads generally and keep theirs, but the design of Chrome browser isn’t the only concern about it. The way they promote it is rather interesting. Google has many free software solutions that are widely used to build websites online. Allegedly they were temporarily set not to function on browsers other than Chrome in order to ruin the browsing experience for rivals such as Firefox and Safari. This will definitely make people switch to chrome and regard it as the best browser there is.
If you’re an executive at the top of a multi-billion-dollars company, to many you’d seem the happiest man on earth. Yet your nightmare that ruins this joy would be a disrupting startup that will take sales from you and waste the giant funds and resources your company had built. This leads us to the final technique tech giants used to remain dominant in such a disruptive industry. The huge acquisitions tech giants take each year and do the impossible to make them work, after all, VC’s find it hard to reject nine and Ten-figures deals, and instead, compete against companies that control connectivity in terms of reach and material resources for instance, Google spends around $30 billion on their hardware and equipment.
What’s in it for me?
It’s hard to ignore that there is market concentration in many industries even those known to be the most disruptive such as digital industries. And that leads to less competition, less investments, less innovative startups and lower wages, and in the long run, less consumer welfare. Therefore, it’s imperative to understand how the economy functions today as it affects your investments, your life plans and your opportunities. This article is inspired by the Denise Heam’s book The Myth of Capitalism that explains the winning formula big companies and investors used to keep capitalism work in their favor for decades and amass big fortunes in the process. and Hannah Fry’s book Hello World that explains the power of algorithms and show you the choices and the tradeoffs their developers take every time they do their work.
