Google de-listed a German website because it was cheating.

Sounds right: Google is the good guy protecting its customer from receiving deceptive results. They were the bad guys trying to deceive. They got what they deserved.

Does anyone see any danger in that?

The problem isn’t what Google did. The problem is the emerging de facto monopoly that Google is developing.

Given the way the majority of people use the web, when Google de-lists a site it effectively eliminates the website from the Internet. Google has become the gate-keeper of the Internet. Of course, people don’t have to find your site through Google. Just like people don’t have to pay dues to the Microsoft monopoly to own a PC. But in practice, they do.

Way back in the Eighties, when Bill Gates was just a poor single-digit-billionaire, Microsoft became the gate-keeper to the PC industry. No PC manufacturer could be in the industry unless they did a deal with Microsoft. Of course, they didn’t really have to – they could use a Microsoft competitor’s Operating System – just like you don’t have to use Google to find a website.

Microsoft used that power to great effect. Some of the effect was good. They established rules and standards that PC manufacturers had to follow. These standards benefited you, the consumer, just like Google’s “no cheating” rules benefit you. One of the effects of Microsoft’s rules was to ensure that there was plenty of competition among PCs providers. You didn’t have to worry about whether they ran the software you wanted – they all did. You free to buy the cheapest. Competition means low prices – good for you. Competition and low prices means low margins; PC manufacturers had to fight to save every cent in costs. A few cents off what they paid Microsoft made a big difference.

So PC manufacturers had no choice but to agree to whatever “sweetheart” Microsoft offered. “We give you $5 a copy off if you …”, which, given that they had no choice but to buy from Microsoft is the same as “We charge you a $5 penalty that none of your competitors are paying unless you …”

“Unless you …what?”.

“Unless you … make PC’s that meet the qualification criteria for the latest Microsoft badge” … that’s how they enforced their standards.

“Unless you recommend Microsoft XXX” “Dell Recommends Microsoft Windows 2003 for Business”. Have every seen a PC manufacturer that didn’t display a recommendation for whatever the Microsoft marketing was pushing.

“Unless you preload Windows 3.2”. Anyone remember how Gates parleyed his DOS monopoly (so generously, stupidly and unknowingly donated by IBM) into his Windows monopoly? Or Excel, or Office, or Internet Explorer, or Media Player?

“Unless you … shut out any Microsoft competition”.

The result, as every one knows, is that the Microsoft monopoly became unassailable. It became rich enough to buy off objectors….

“Google de-lists XYZ Website after they refused to pay Google’s exorbitant Web-presence taxes”. You will never see this headline. By the time that it should happen, it will be obvious to XYZ website that they cant afford to offend the Ogre. And the value that XYZ is forced to handover to Google wont be blatantly called “Website presence taxes”, any more than the taxes we all pay to the Microsoft monopoly appear that blatant. But it will happen, just as surely.

When Gates was the new kid on the block, he was the good guy. He was the kid taking on the Ogre of his day – IBM (when he wasn’t cohabiting with the ogre, that is). In time Microsoft became the Ogre: the big bully. The introduction of Vista was a superb demonstration of Microsoft The Bully. Customers hated Vista so much they were petitioning MS to keep XP alive; and MS largely ignored them. The whole idea of businesses is that they make money by serving the needs of their customers. Any business that can ignore the needs of the customer, and simply carry on just satisfying its own needs (in this case to force its customer to keep paying over and over again for essentially the same thing) is a business that it seriously wrong.

Why do they do it? Because they can. A business’s fiduciary responsibility is to its shareholders. If there’s a path that makes more money for their shareholders then they are obliged to take it. Microsoft painstakingly built and maintained a powerful monopoly, and some point riping off the captured-customers becomes the most profitable path to follow.

When will Google do that? When their shareholders pressure them. As long as the shareholders have confidence that the high price they paid for Google shares is justified by the future value of Google, and that the founders are on track, they remain untouchable. A huge part of the company valuation has to be the vast profits that the shareholders expect to reap from the market position that Google has. That means that one day they will want to move from building the position to reaping the benefits of the position that has been built. At that point, Google the Ogre will appear.

And the longer it takes and the bigger Google greats the more bullying the ogre will be.

And there wont be anything that we can do about it. The time to fix the problem of power concentration is before the power has concentrated. Just like customers of Microsoft have little choice but to pay through the nose for very little benefit (and the customers of IBM had to do the same a decade or two ago), the customers of Google will pay through the nose for the power position we allow Google to establish.

Is it fixable? Probably not.

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Posted by Dave Pullin on November 14, 2008 4:03:00 PM EST #