We think (as does virtually everybody else) that Google is a fantastic company, a force for innovation that has generated enormous benefits for Internet users even as it earned a ton of money for shareholders. But we don’t think Google is some sort of saint of capitalism–a firm that can always be trusted to serve the interests of society in the rough and tumble of the competition for eyeballs. In particular, we are concerned by Google’s efforts to strong-arm regulators and rivals under the guise of promoting “openness.” Just two examples–one old and one quite new–illustrate the point.
Way back in 2007–an eon in the telecom industry–Google lobbied quite effectively for federal communications regulators to auction off a swath of the airwaves (“spectrum” to us nerds) with an “open access” mandate. This requirement allowed third parties with wireless apps for smartphones and other wireless gadgets to piggyback on the spectrum owner’s wireless network at no charge. Google, by the way, was potentially a prime beneficiary–think, among other apps, Google Maps. But openness comes at a cost to the public, reducing the incentives of spectrum purchasers to use it in ways that maximize societal value because they would be obliged to share the benefits.
This, incidentally, wasn’t our idea. The point was made a half century ago by the Nobel Laureate Ronald Coase in a seminal article on why spectrum should be auctioned to the highest bidder without restrictions on the property rights. So one must weigh the value of openness against the risk that open spectrum will not be dedicated to its best use: no easy task.
Which brings us to Google’s latest foray into the openness arena. Speaking at a Google-sponsored conference on Sept. 15, Eric Schmidt (Google’s CEO) outlined the company’s plan to expand its reach into social networking–a piece of the telecom market now dominated by Facebook. And how, you might ask, does he plan to get from here to there in a hurry? By demanding that Facebook allow users to transfer information amassed on their Facebook pages–friends’ lists, bios, photos, etc.–directly to Google. (Of course, Facebook users can now post any information they wish on Google sites, but the process is manual and thus less likely to happen.)
We’re a little uneasy about Facebook’s tight grip on social networking. But it’s common to have winner-take-all outcomes in the information technology space, market dominance that almost inevitably gives way to another company with another good idea. And we can’t think of a good reason why Facebook should hand over the keys to the kingdom at no cost. If Google wants data, it can always pay. Presumably there is some price that would make the deal worthwhile to Facebook shareholders.
Here’s our advice to Facebook: Offer to trade all that data Google covets for something equally valuable–maybe the formula for Google’s search engine or the technology for its ad platform. Perhaps Google and Facebook would both end up winners. Whether they did or not, we know that consumers would benefit from more competition on the home turfs of these Internet behemoths.
So let the openness show begin–but with a healthy respect for the sanctity of intellectual property rights that make both Google and Facebook so successful.
(This post was also published on Forbes.com.)
This is an innovative solution that is consistent with Coase’s prescription. I am wondering whether it matters where the property rights to the content on the pages lies. To my mind, many users think that the contents on a Facebook page belong to the individual and not to Facebook, which provides “merely” the infrastructure to allow it to happen. if this be true, Facebook may only trade that information with Google if it was the undisputed owner of the content and I am not sure that all subscribers agree that they surrender their content by using that facility.