SINGAPORE: There has been much discussion recently about the power wielded by large tech companies such as Google and Facebook as well as calls for governments to step in by either regulating or even breaking up the companies.
One of my fellow academics Matthew Liao at the New York University has argued in the New York Times that it is immoral to have a Facebook account.
Senator Elizabeth Warren, a Presidential aspirant in the 2020 election has called for a breakup of the big tech companies including Google, Facebook and Amazon, an idea that has received support from several different quarters.
Today, I am going to admit to something that I find to be perfectly moral and good for me. I love Google and several of its products. Let me explain why.
VALUABLE FOR TEACHING AND RESEARCH
I have been a user of Google search for as long as I can remember, because I find it to be extremely valuable in my teaching and research. When I am doing either of those tasks, I value the quality of results such as interesting data on business phenomenon (including charts available through search of Google images) and relevant academic papers.
Google search gives me the most accurate and wide-ranging results. Most importantly, it costs me nothing.
I use it several times a day for work as well as for my other interests including sports trivia (especially Cricket trivia), history and increasingly for searching flights and for checking flight status (which is often faster and more accurate than the airline website itself).
As an academic, I am interested in how many people have cited my work. The higher this number, the greater the (supposed) impact of my work.
Google, again, comes to the rescue. Google Scholar is free and the most comprehensive among the different alternative citation databases, many of which (e.g., databases from various publishers) are subscription based.
A third product I use is Gmail. It gives me a large storage capacity, separates “real” mail from promotions and social mails and is extremely quick in delivering my emails to the intended recipient.
While I started out using Gmail for personal use, I am increasingly using it for my work as well, primarily because my employer-provided email is clunky, not as quick in delivering messages and its search (within the email box) function is far worse than Gmail.
WHAT’S WRONG WITH MONOPOLIES?
When I was doing my economics courses, I was taught that one way a monopolist captures consumer welfare is by reducing supply which will lead to higher prices (e.g., the OPEC cartel which tries to act like a monopolist, attempts (unsuccessfully) to hold back the oil production).
Neither reduced supply, nor elevated prices are relevant for arguing that Google is a monopoly — its products are widely available to users without any restrictions on supply and are free.
Google does charge money to advertisers, however. It is almost impossible to determine whether these prices are monopolistic. My guess would be that they are not.
According to recent data provided by Statista, search advertising is a much smaller market than display advertising online. There are clearly many more players in display online advertising - e.g., almost any content provider such as news sites (including the Financial Times), sports sites (espn.com), financial information sites (fool.com) - than Google.
Thus any advertiser has many options besides Google and if one extends the boundaries of the market to offline advertisements (e.g., TV, print etc.), Google’s position becomes even less dominant.
Google sceptics want to shift the goalposts and define monopoly based on criteria other than the usual metrics of supply and prices. I will argue below that the case against Google as a monopoly doesn’t hold, whatever definition of monopoly one adopts.
A firm with great market power (e.g. a monopolist) can “hurt” (extract value from) the other stakeholders. Some years ago, detractors of Walmart which then enjoyed significant market power argued that while Walmart provided low prices to customers, it paid its employees poorly.
This clearly isn’t true in Google’s case. Google is among the best paymasters. I will be delighted if my son, who is pursuing a degree in Computer Science, gets an offer from Google when he graduates.
Google doesn’t harm the environment either, other than in a very indirect way by helping us use computers and Internet more. But, if one wishes to pursue this line of reasoning that greater use of computers is bad for the environment, then we, as users, are more at fault than Google.
Another argument proposed by Google sceptics is that with its market power, Google may be able to restrict competition and stifle new entrants. I find this argument to be hollow. From a business perspective, Google search is essentially an advertising platform.
Since Google became dominant, many new players have emerged that use advertising to generate revenues. Facebook, an alternative advertising platform, has in fact twice the number of sites linking into it versus Google, which on paper makes it more powerful.
According to data compiled by Amazon, there are several sites such as Yahoo.com, Wikipedia.org (no advertising), Twitter.com, Live.com (operated by Microsoft, a Google rival), besides the e-commerce giant Amazon.com, which are among the top 15 sites.
In fact, collectively, the number of users visiting these sites is far greater than Google, making it difficult to argue that Google is dominant. China based sites such as Baidu.com Qq.com and Taobao.com were not even included in the above list and their inclusion would further dilute Google’s alleged market power.
IT HAS FAILED MANY TIMES TOO
If Google was omnipotent and really able to exclude potential competition, then it would be successful in almost everything it tried. But, Google has failed many times.
Its social network Google+ was a failure and was disbanded recently. Other failed initiatives include Google Glass, Google Answers (have you heard of it?) and Google Health.
Apparently, the wealth of information that Google collects through its dominant search engine puts it in a better position to launch new products. If this were true (that is, the information was a huge advantage), Google’s above-mentioned failures would be very difficult to explain.
It is a fact that a company needs information to come up with innovative products, but to translate that information into innovation, a company needs a lot of other things including a clever strategy and good execution.
In my view, the reports of Google’s alleged market power are greatly exaggerated. Though Google does dominate search-based advertising, there is a lot more to Internet, online advertising and e-commerce than search-based advertising. I think Google is simply very good at many things and users love its products which are mostly free for them.
It would indeed be a travesty if this company (or any other company that offered excellent products at low or zero prices) was regulated based on wrong analysis and reasoning, and hampered from providing consumers the products they appreciate.
Nitin Pangarkar is an Associate Professor in the Department of Strategy and Policy at the National University of Singapore (NUS) Business School. He owns a small number of Google shares which account for approximately 0.25 per cent of his total assets. The opinions expressed are those of the writer and do not represent the views and opinions of NUS.