03.20.10 6:53 PM ET
Google's Monopoly Play
Why can't we all just get along?
Just a couple of years ago, Google CEO Eric Schmidt was helping to launch the iPhone—standing onstage with Steve Jobs much in the fashion that Bill Gates video-conferenced himself on to the MacWorld Convention stage back in 1997 to celebrate Microsoft's support of OS X.
Google understood that the iPhone would be more than the first successful smart phone; it would also be the first successful handheld advertising platform. So Schmidt’s company worked hard to integrate its search capabilities into the phone, hoping that someday its ubiquitous presence in the iPhone universe would mean the ubiquitous presence of Google's ads. What Google did for the Web, it could also do for the universe of Apps.
Google’s executives are delivering sworn testimony to federal agents as I type this sentence.
But a funny thing happened on the way to the sponsored search link: It became clear Apple's iPhone would be an entirely proprietary universe, accessible only through Apple's own iTunes store. Google realized that Apple's total control over what happened on its phones could do more than simply shut out illegal or incompetently coded applications—it could shut out Google's ads.
That's when Google went and bought a small phone operating system startup called Android, and then released the operating system to a consortium of 47 other companies to work on as they pleased, under an open-source license. Google's idea was that by creating an open cellphone platform, it could keep cellphones open to its advertising.
Meanwhile, Apple decided to get into the advertising space for itself, and got close to purchasing the leading cellphone advertising company, AdMob, for $600 million. The deal didn't go through, and just a few days later Google announced it was acquiring AdMob for $750 million. Accusations of foul play and worse flew back and forth, at which point all civility vanished. Google released an upgrade to its own version of the Android phone that included all those yummy iPhone features we've grown to know and love. Apple sued Google's phone manufacturer for patent infringement, and everyone called each other mean things.
Finally, thanks in no small part to competitors like Apple ringing the alarm bells, the Federal Trade Commission is now investigating Google's proposed purchase of AdMob, citing antitrust issues. Google's executives are delivering sworn testimony to federal agents as I type this sentence, and most industry experts seem to think Google will eventually back down from the deal, the way they dropped their search advertising partnership with Yahoo in 2008 when too many agencies complained.
Serving more than 7.1 billion ads to handsets per month, AdMob is probably the world's biggest mobile advertising platform—especially on the iPhone—so an acquisition by Google, even if negotiated fairly, may indeed be giving Google, which already enjoys near monopoly over Web advertising, just too much power. But even if the deal doesn't go through, it has given Google a way to announce its intentions for the mobile space. And when Google claims a territory, particularly for its advertising, there's a certain inevitability about it coming to pass. AdMob's technology isn't so unique—or its client base so committed—that Google can't just re-create them like it is currently re-creating the iPhone.
The bigger question, however, is whether all of this focus on jockeying for position, targeting acquisitions, and undermining one another's business plans is good for anyone. Google did a great job hacking the Web to create search—and then monetizing search with advertising. And Apple did a great job humanizing hardware and software so that formerly daunting computers and applications could become consumer-friendly devices—even a lifestyle brand.
Were these not two of the largest capitalized publicly traded companies, they might be able to spend more time and attention to developing things than guaranteeing growth. It's as if simply doing what they do, and doing it a little better each day would actually put them out of business.
Yes, growth is nice for shareholders, but these technology companies are no longer allowed to achieve mere sustainability; their debt structures and market caps demand they achieve everlasting and accelerating growth. And as a result, we get the hypercompetitive marketplace of technology, where CEOs appear more concerned with undermining one another's business plans than figuring out how to fix the world's problems.
It couldn't be fun—not even for a guy as aggressive as Steve Jobs. If Steve, Sergey, and Larry were really the geniuses they're supposed to be, they'd figure out how to hack and reconfigure the senseless demands of Wall Street, instead of hacking at one another.
Douglas Rushkoff, a professor of media studies at The New School University and producer and correspondent for the PBS Frontline Digital Nation project, is the author of numerous books, including Cyberia, ScreenAgers, Media Virus, and, most recently, Life Inc.