Earlier this week the European Parliament voted to break up Google after an ongoing investigation by the antitrust commission into the tech giant’s monopoly on internet searches in Europe. Of course, the European Parliament lacks the power to break up the US-based company, but Google could face fines up to $5 billion if it’s determined Google uses its position to maintain dominance (hurt competitors) and hurt consumers. You may be wondering how the dominance in the search engine industry could be viewed as a typical monopoly, but search engines are by the far the most valuable form of web-based advertising available.
As shown above, Google receives 55% of the world’s digital advertising revenue, and a significant factor is its control of the European market. Surprisingly, Yahoo and Bing actually account for approximately 30% of the search market in the US, leaving Google less than 70%. However, in Europe Google controls over 90% of the industry, which gives it dominance in online advertising.
There are many ways a firm can become a monopolist, and in the case of search engines Google has been better managed and outmaneuvered its competitors, often being on the forefront of innovation. Google has chosen not to remain only in the search engine industry and to expand its base. Google’s expansion means that breaking it up is extremely difficult, and the European Parliament also lacks the authority to break up an American company. Finally, breaking up the tech giant could hurt consumers by lowering the quality of the search engine (assuming Google chooses to break up its assets from Europe).
5 Comments
Was the European Parliament able to prove that Google’s dominance has hurt consumers as well as competitors? If Google has “been better managed and outmaneuvered its competitors, often being on the forefront of innovation” how does that hurt consumers?
In this case you have to consider who the real consumers are for the search engines. Yes, I’m sure you often use google to find information, but you don’t pay to use it. Google cannot overcharge you if it is a free service. However, it can hurt the other consumers- the firms buying advertising space. As I pointed out in the post, Google dominates web-based advertising in Europe and can use this position to extract additional profit from other firms and to keep other firms out of the search engine business.
Google is free for me to use, so I’m not sure how I, as a consumer, am hurt by their dominance (considering I can freely use Yahoo or Bing). The issue is that even if Bing or Yahoo can yield better or more accurate search results, the Google brand name is hard to unseat, considering it has become a common verb in our vernacular. If anybody has a question or something they don’t know, the response is to google it, not to Yahoo it or Bing it, and I think its too late for that to change.
As I posted below, you need to consider how google can use its position to extrapolate extra funds from firms interested i advertising. Obviously using google is free, but it is not free to firms that wish to advertise, and that is what is under investigation here.
As we’ve seen in our studies, company decentralization often yields better economic benefits all around correct? Even if the European Parliament is successful in breaking up Google, it seems to me like under a smaller management umbrella, the search engine division of Google could benefit from greater fit and policy and more intimate and well-versed management. I wouldn’t be surprised to see this bite the consumers (advertisers) in the butt. However, I believe the issue here is the fact that Google tailors advertising experience using personal data stored by Google Chrome, Google as a search engine, as well as YouTube without the consent of users. Assuming advertising via search engines will exist nonetheless, won’t both users of the search engine experience benefits from tailored ads, and won’t those ads be more useful to advertisers if they’re tailored? Seems like an all around beneficial equation to me. Civil law can be tough to get around I suppose, but the effort to provide “breakup guidance” as a waste of time as not only does the EU have no control over Google, but are concurrently acting detrimentally to all Google users.
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