I would assess Google (& FB's) "crown jewel" as, ultimately, their market share, which is related to your points... and causation runs both ways.
The user data helps/ed Google create the superior UX, as you say. The reach is what makes Google & FB valuable to advertisers. A search engine with 0.1% of Google's user volume cannot charge advertisers 0.1% of Google's as revenue. Returns to scale/reach/market-share are very substantial in online advertising.
I'm glad we're talking though. Those tech giants are too powerful.
Ultimately, the old antitrust toolkit is near useless today, for dealing with tech monopolies. It's not obvious what "break up Google" even means. There are strong network effects and other returns-to-scale. It's a zero-marginal cost business, which was rare enough in the past that economists a ignored it.
We need fresh thinking, a new vocabulary, new tools, but we do need to deal with it.
* an Office suite / enterprise company (Google Cloud + Docs + Gmail + Business)
* a phone company (Android)
* a search company (Google Search + Advertisement)
* and a media company (Google Play Movies, Music, Books and YouTube)
The names would probably become different in time, but you get the gist.
Amazon and Microsoft could be broken up much the same way, in neat categorical 'silos'. Facebook should be trisected into Facebook, WhatsApp and Instagram again.
I have no idea how you would break Apple up without utterly destroying their core principle, vertical integration. There is no way to do what Apple does with MacBooks or iPhones if they don't control the entire stack.
I'm not saying they shouldn't be, I just see no way.
(2) is one of the most important points. We have to stop Google from cross-financing new products from other revenue streams so they can no longer undercut or buy all competitors. Google Maps is a good example. They ran it for super cheap a long time to drive out competitors and now rack up the prices.
In contrast to most people here, I think breaking up Amazon is far more important to Facebook, Microsoft, Apple and many other tech companies. Only Google is as bad.
But you have to acknowledge that without the cross-financing those "markets" wouldn't even exist.
Before Google Maps we had a few online map services and they were terrible. Google Maps redefined what it means to have free access to web based interactive global maps, it changed how people find things and it was all payed by the ad business. Later on some monetizing efforts were made for it and competitors started to appear, mostly trying to catch up and copy what Google Maps did, but without the huge cash infusion of the ad business none of this would have happened.
A decade later, people take these things for granted and just want to split services up. I guess it makes sense from their point of view but to me it's not that clear what should happen while still allowing for the type of creativity and speed of development that allowed things like Google Maps to appear because I'm afraid "the next big" thing that could redefine our lives (and improve them) would be slowed down or simply made non-feasible.
> "Before Google Maps we had a few online map services and they were terrible. Google Maps redefined what it means to have free access to web based interactive global maps"
This is not true. MapQuest revolutionized things almost 10 years earlier than Google Maps. Google search is what allowed Google Maps to overtake MapQuest. Also, Android providing real-time traffic data of all their users gave them the winning formula.
You are right that traffic was revolutionary and that's why google maps became the defacto standard. However, in context with the original post, this is exactly why it's unfair. Google has an android that gives them user location data which they then use as a competitive advantage in another space to eliminate all competition. If Android were 1 business and GoogleMaps another, then people like MapQuest could also negotiate deals with Android to get user data and then it's a matter of who has the best platform that wins. That's what is best for the consumer as well. In the current structure, there is no way that a small business like MapQuest could build a smartphone to ascertain user data and nor should they have to. They should only have to build the best map application to succeed in the online mapping space. Having to also succeed in location data aggregation eliminates competition. It's designed so the giants can eat the small guys at will without them being able to fight back.
Worth mentioning a couple factors related to this. You couldn't turn location data on for any service external to Google without also having it turned on for Google & even when you had location services turned off for Google sometimes they still had it turned on anyhow.
If you stopped cross financing YouTube then it would stop existing. YT has never made a profit and hosting user generated content in the YT syle is impossible to do profitably.
Google takes 45% revshare on YouTube. Some videos that were demonetized still show ads, so on those Google is taking 100%.
I've seen mid-roll ads on songs on YouTube.
Hosting costs & delivery costs (per byte) drop every year. Every year their compression gets better. Every year their ad revenues goes up. YouTube ad revenues have been growing at something like 30% a year for many years.
I think one reason Google doesn't break out YouTube profitability is because as soon as they show they are profitable they end up getting some of their biggest partners (like music labels) using those profits to readjust revshares.
Also if Google claims YouTube is not profitable they can be painted as the victim for extremist content or hate content they host, whereas if they show they were making a couple billion year a year in profits these narratives would be significantly less effective.
Core search ad prices haven't really been falling yet Google blended click prices keep falling about 20% a year while ad click volume is growing about 60% a year. This is driven primarily by increasing watch time on YouTube and increasing ad load on YouTube. Google blends video ad views in with their "clicks" count.
Yes, my thought was that by breaking everything off from everything else, these silo'd services would suddenly have to compete with the rest of their market at fair terms, instead of being propped up massively by other division(s), and thus would lose marketshare to a multitude of fresh and established competitors.
You are right though, it doesn't deal with the dominance of the search directly. My hope is a complimentary effect to the above also happens: Google no longer gets gobs of personal data from its other services, allowing other search engines to approach its efficacy.
As is clear I'm not really a fan of direct intervention in a single market, I see it as more of a problem when these giants muscle their way and control more and more markets, creating a vicious feedback loop.
> Yes, my thought was that by breaking everything off from everything else, these silo'd services would suddenly have to compete with the rest of their market at fair terms
I think it's instructive to look at the rest of the market. How is Mozilla funded? Basically a single gigantic contract with Google. Even Apple accepts payment from google to become the default, and it's not cheap: https://fortune.com/2018/09/29/google-apple-safari-search-en... The same logic applies to pretty much anything Alphabet spins off -- there's little difference between ownership and those contract.
About the only competition this setup produces is the ability for Mozilla to walk away to a competitor bid, which they did for like a year before bailing out at the first opportunity. There's a huge incumbency bias in these contracts. The first parallel that comes to mind is employer provided health insurance. Everyone gets to bid, but the incumbent knows the claims history far better than the competition and we'd only expect them to lose bids to companies overly optimistic about that history. Google knows how valuable various traffic sources are, but their competitors have to guess, and only when their guess is higher than Google's does it pay off. Does anyone think Yahoo winning Firefox was a good deal? I haven't seen any analysis to support that.
> My hope is a complimentary effect to the above also happens: Google no longer gets gobs of personal data from its other services, allowing other search engines to approach its efficacy.
Wouldn't the most profitable thing for these broken up companies be to sell their slice of the personal data pie as many parties as possible? This seems like a net loss for privacy. How much extra would it be worth to set up an exclusive arrangement?
>You are right though, it doesn't deal with the dominance of the search directly. My hope is a complimentary effect to the above also happens: Google no longer gets gobs of personal data from its other services, allowing other search engines to approach its efficacy.
I'm still not sure how this would work on Apple though, since their main differentiator is their design sensibilities and integration rather than their platform monopolies.
I guess iMessage and the App Store do rely on monopoly rents, but I can't think of any way to sever those links without making the iOS platform less secure.
I'm not sure how much an impact breaking Google up would have, and I say this as someone who has built a product that competes with Google's G-Suite. I want there to be a more level playing field, sure. But each of these siloed businesses would still be a monopoly in its own right.
Most of those products don't make money by themselves, they exist to keep people in the ecosystem, providing more data for the real moneymaker.
The biggest blow to Google wouldn't be to break it up into lots of small companies, you just need to separate the advertising business from everything else and you've effectively neutered the monopoly. Google's genius isn't in hiring the best engineers to providing a ton of services, it's in convincing people that they're not an advertising company, and that is where Facebook has been falling out of favor recently (I'm guessing that's why they bought Instagram, and why Google bought YouTube).
This is a supposition - while perhaps it seems to makes sense, seems true, “must be true”, it doesn’t mean it is true!
Unless you worked on search quality at google you really aren’t in a position to know if, say, google cloud, or android provides useful signals to search (outside of the signals they’d collect anyways if they were different companies).
One thing people are obscuring is just how crazily effective AdWords are. They work for the advertisers, and they earn google like 70+% of the revenue. Confirmed via sec filings which does break that out. Go play with creating an AdWords campaign and try to infer just how much data google really needs to deliver those ads - it’s less than you’d think.
In short: this overall move is more wishful thinking than solidly reasoned. Surveying the field of streaming video, given the amount of studio driven consolidation, is there really a tons of competitors being held down and will spring up? I am skeptical.
That's an interesting thought. I agree with you that most of those products are loss leaders for data mining and thus advertisement.
But my thinking was that if you simply cut off advertising all the products still have massive marketshares and could lean on each other, as long as some succeed. Not to mention investors probably willing to prop up such a massive aggregate marketshare (one only has to look at Uber).
If you 'silo' them, success of one division of previously-Google won't lead to all of them dominating.
I rather cleave them all vertically anyways, rather than be left with a bunch of mini horizontal monopolies.
Granted most of your examples wouldn't be, except for search, but it still seems more interesting to me to just have a bunch of mini googles made from cleaving teams. Certainly that would make for some crazier competition.
Breaking up companies like Google, Amazon, and Microsoft are just not gonna happen in 2019 where huge, global mega-corps are the only way to compete outside of small local markets.
Even though a lot of these corporations build offices, hire non-Americans, and pay tons of foreign taxes in countries in which they do business, the main executives and talent still live in the US, the IP is developed here, and the majority of profits end up back in the home country.
It's better for everyone who actually matters - shareholders, intel agencies, government officials, associated businesses, etc - that these companies remain large and globally dominant, even if it screws over US citizens by having to pay the monopoly taxes and suffer the privacy invasions. We're an insignificant sacrifice in the decision-makers' minds.
Apple's already on it's descent, and at most you'd break off their cloud services, which would immediately die without the support line from the hardware.
The user data helps/ed Google create the superior UX, as you say. The reach is what makes Google & FB valuable to advertisers. A search engine with 0.1% of Google's user volume cannot charge advertisers 0.1% of Google's as revenue. Returns to scale/reach/market-share are very substantial in online advertising.
I'm glad we're talking though. Those tech giants are too powerful.
Ultimately, the old antitrust toolkit is near useless today, for dealing with tech monopolies. It's not obvious what "break up Google" even means. There are strong network effects and other returns-to-scale. It's a zero-marginal cost business, which was rare enough in the past that economists a ignored it.
We need fresh thinking, a new vocabulary, new tools, but we do need to deal with it.