Remember when Microsoft appeared to be on track to dominate our waking hours at work (Windows, Office) and at play (Xbox, Internet Explorer, MSN)? Seems like a quaint memory now — though, in the long-standing tradition of refighting the last war, as recently as December the European competition authority was browbeating Microsoft about the market share of its fast-fading Internet Explorer web browser.
Now it appears to be Google’s turn in regulators’ klieg lights. Google, you probably don’t remember, epitomized the New Age company, adopting “Do No Evil” as its mantra and plunging into visionary enterprises including the preservation of every book ever published in digital form. But Google’s current dominance of some information technology niches (and the undisguised ambition to its reach) has made the company a prime target for antitrust authorities around the world.
Google managed to convince U.S. trustbusters to bless its purchases of DoubleClick (digital marketing technology) and AdMob (mobile advertising) – though it was apparently a close call. And the company still faces complaints about its dominance of web-based advertising in Europe, whose competition authority way too casually equates market share to monopoly.
Antitrust scrutiny is often called for, particularly when large firms acquire others in related fields. But scrutiny for the right reasons. Regulators need to recognize that in markets driven by rapidly changing technology and huge economies of scale, it’s natural for one firm or another to be king of the hill – albeit temporarily. So market share alone is no indicator of anticompetitive behavior or of the difficulty a newcomer with a better idea would have in competing for the business.
This tendency toward winner-take-all market outcomes explains why Google is following the explosive growth of Facebook with interest — and, we suspect apprehension. The number of Facebook users exceeds half a billion, and Google has already fallen flat with an attempt to use its highly successful web-based e-mail technology to counter the juggernaut.
So will Facebook, with its massive lead in social networking, bury Google? Probably not. After all, successful competition in a variety of market niches left Microsoft standing (and profitable). But, if Google fails to slow Facebook’s relentless growth in social networking, the search behemoth might find itself struggling in a lot of arenas it now dominates – notably online advertising.
Neither Google nor Facebook will last forever (or even necessarily a long time). Very little related to the Internet manages to survive the Next Big Thing – even companies whose names become verbs. Whether the winners du jour make it or not, though, what ought to matter from the competition regulators’ perspective is whether their behavior is aimed at preserving market power and stifling innovation. The short but eventful history of digital technology suggests that consumers will be better off if these behemoths are given the benefit of a doubt.