Larry Page and Sergey Brin never liked hanging with reporters. “Larry can be a very sensitive and good person, but he has major trust issues and few social graces,” a former Google PR person once told me. “Sergey has social graces but doesn’t trust people who he thinks don’t approach his level of intelligence.”
Still, in the fall of 1999 their new communications person urged the Google cofounders to visit the East Coast for a modest press tour. Barely a year old, Google was still under the radar for most people, and few knew its compelling story: Page put the whole World Wide Web on Stanford University servers to divine the perfect result of a search query, and Brin did some mathematical wizardry to fulfill the concept. They tried to sell the technology to one of the big internet portals, but couldn’t get a deal they liked. So they started their own company. It still wasn’t clear where their revenues would come from. They were on record as hating ads, believing that “advertising-funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers.”
When they came to Newsweek, where I worked at the time, none of the top editors wanted to meet them; web search seemed a niche feature of Yahoo and AOL and the other dominant portals. So the business editor and I took the pair to lunch at a midtown seafood restaurant. The bigness and bustle of New York City seemed to overwhelm the awkward pair. The idea that their company might one day be worth $2 trillion seemed as likely as the Earth spinning off its axis.
Fast forward a quarter century. Google—now called Alphabet—is indeed worth multiple trillions. Internet search is deeply baked into all our lives, as common as breathing—and Google has a 90 percent global share. Google has a 90 percent global share. Larry and Sergey, while still board members and shareholders with fortunes topping $100 billion each, are no longer employees. And this week US federal district court judge Amit P. Mehta issued a 286-page ruling, based on millions of documents, thousands of exhibits, and a nine-week trial, that Google violated antitrust law. “Google,” he wrote, “is a monopolist and has acted as one to maintain its monopoly.” What’s more, the company whose founders hated ads now faces another trial to determine whether it is also a monopolist in digital advertising.
While it was hard to envision in 1999, Google’s rise from upstart to overlord now makes obvious sense. Dominance, even to the point of monopoly, has proven to be the inevitable destination for winners in the age of internet scale. Digital economics results in a winner-takes-all competition, where early innovators with humble origins can have an advantage over entrenched leaders of soon-to-be-displaced technologies. Every company at the top of our current tech heap was founded by eager youngsters with a big idea, generally a concept dismissed by industry giants at the time. Before Larry and Sergey, there were Bill Gates and Paul Allen, two students who saw a market for personal computer software; Steve Jobs and Steve Wozniak, building Apple II PCs in a garage; Jeff Bezos, who started Amazon on a budget to sell stuff on the internet. A few years after Google began, Mark Zuckerberg invented Facebook in his dorm room. Those tech companies fighting their way to the top of the heap shared a narrative: David versus Goliath.
But those slingshots were something special. The network effects of a persistent and ubiquitous internet accelerates and locks in category leaders. What’s more, these founders were brutal competitors who made the most of those advantages. Larry Page was haunted by the story of Nikola Tesla, the brilliant inventor who died in obscurity, and vowed to himself not to be Tesla’d. Microsoft’s use of bundling to stifle competitors was notorious (and led to an antitrust suit that it lost). Jeff Bezos protected his flank with Napoleonic zeal, keeping customers close with low prices. Young Mark Zuckerberg used to end meetings by shouting the word, “Domination!” Eventually, as the Davids became Goliaths, they fit into a new narrative: the myth of Icarus. Driven by the hubris of their dominance—and mistaking their network-effect-powered rise for their own singular geniuses—their heights took them dangerously close to the sun.
That’s the context of Judge Mehta’s ruling. Specifically, he zeroes in on Google’s practice of cumulatively spending tens of billions of dollars for default placement in the address fields of Apple and Mozilla browsers. Google insisted that it could make those deals only because its search engine was the best alternative: Apple would never foist an inferior product on its customers. But the judge noted that Google’s superiority was a self-perpetuated phenomenon. Because Google handles almost all searches, it is able to collect data on a scale that its competitors cannot hope to match. That allows it to improve its search engine in a way that rivals can’t dream of. It’s legal to attain a monopoly through a superior product or innovations, but actions that maintain a monopoly, like restricting competition, are illegal. Thus, sayeth the judge, Google is breaking the law.
This moment is less a turning point than a punctuation mark. Once these companies reached their current level of dominance, and kept building on their supremacy, it was inevitable that pushback would follow. Public sentiment for these Goliaths has turned sour. Politicians inveigh against them. And a new generation of legal scholars who saw the impact of network effects have found their way into government, including the current Department of Justice and the Federal Trade Commission.
“Twenty years ago there was no antitrust in tech, supported by an ideology that you didn’t need it in that space,” says Harvard Law professor Lawrence Lessig. “Now you see people who fought an intellectual war claiming antitrust has an essential role, and you’re going to see a bunch of these victories.”
The Google decision has been a long time coming, but it’s been coming for a long time. The company was less than a decade old when it became clear that its primacy in search was going to make it an ongoing target to regulators and litigators. In May 2007, it hired a former DOJ competition expert named Dana Wagner. When Wagner met Page, he asked, “Did you ever think you’d see the day when you were hiring the antitrust lawyer?” Page acknowledged that it was weird.
Today, it is not weird at all. Lawyers schooled in antitrust are top officials in tech companies, often with the title of president. The giants of search, commerce, social media, and phone operating systems are all facing court dates. And antitrust investigators are already poring over deals involving the hot new technology, artificial intelligence. No one knows who will win the AI battle. But we already know that the winner will have way too much power. Whoever it is better have some very good lawyers.
Time Travel
This is far from the first time Google has been investigated for antitrust violations. Fourteen years ago, the US Department of Justice was about to file charges against the company for furthering what it determined was a monopoly in search ads. Specifically, the DOJ was reacting to a deal that Google made with Yahoo, which was then a target for acquisition by Microsoft. To thwart the takeover, Google arranged to serve its ads to Yahoo customers. To avoid the litigation, Google abandoned the deal. Later, Yahoo’s price demands led Microsoft to abandon its pursuit of acquiring the company. I wrote about Google’s near miss in my 2011 history of the company, In the Plex:
On the morning of November 5, 2008, the DOJ informed Google that later that day it would charge the company with a violation of Section 1 of the Sherman Act, calling the Yahoo agreement a restraint of free trade. Worse, the complaint would also accuse Google of violating Section 2 of the act, an illegal attempt to monopolize. Clearly [DOJ’s appointed antitrust attorney Sanford] Litvack didn’t accept Google’s invitation to view its business as a small percentage of the advertising world. Instead he saw the company as the 80 percent dominator of search ads, the venue every advertiser was forced to patronize. “We would have ended up also alleging that Google had a monopoly and that [the Yahoo deal] would have furthered their monopoly,” Litvack later explained to American Law Daily.
Google ruled a monopoly? The company could not let that stand. “I really did believe it was possible for us to structure an arms-length deal that met the antitrust terms,” [Google CEO Eric] Schmidt later said. “I tried hard. I talked to Sandy. It was an example where we’re running against other people’s agendas and their worldviews.” Google quickly terminated its agreement with Yahoo, informing the government only three hours before the feds filed a complaint that would have made “monopolist” a keyword when people searched for Google’s company information.
With no agreement to rule on, the government stopped its investigation. Google might have dodged a bullet but thereafter had to face the fact that the antitrust gun was loaded and pointed straight at Mountain View.
Ask Me One Thing
Dave asks, “As a writer, does it bother you that people have to subscribe to WIRED to read even one of your stories?”
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I get it that it’s a pain to be blocked at times when you want to read a story at a publication you’d never want to access on a regular basis, like a random newspaper in a midsize town halfway across the country. That’s why I like the idea of giving away a few stories free. If you keep getting blocked from a specific publication, maybe it’s a sign you should subscribe.
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End Times Chronicle
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