Restraint and Regulation

https://i0.wp.com/investor.google.com/images/logo.gifOne of the most fascinating companies online is Craiglist. Among the many reasons it’s fascinating is that the company choses not to make more money than it does. Craigslist, for example, has repeatedly decided not to make an alternative yellow pages directory or charge for more listings categories or allow graphical advertising.

As I characterize what they’ve done in my conversations with people, I say they’ve exercised “restraint.” Of course it makes the Wall Street Analyst types absolutely crazy to think that a company in Craiglist’s position could be making so much more money but chooses not to. Here’s where the logic of Wall Street breaks down.

One of the reasons Craigslist is so popular and successful is a set of core values that the company has faithfully adhered to — not in a calculated way but in a real way — which has won the trust of the community. (Cynics like to say Craigslist is really popular because of its “Casual Encounters” listings.) As I also like to say, if Craigslist had taken VC money it wouldn’t be in business today — because there would have been early pressure to more fully “monetize” the site.

With that as context, I want to discuss Google. (I’ll come back to why it’s relevant.) Everyone saw the BusinessWeek cover story on Google potentially now being too powerful. The recent, controversial Ask ad campaign in the UK plays up that theme. And Danny Sullivan this morning has a related post about Google potentially having access to too much user data.

Microsoft got into trouble with the US and EU authorities because of aggressive tactics that appeared to be monopolistic and anti-competitive. Part of this was a cultural and management issue — people who were making conscious decisions — and part of it was a function of market position and success. In other words, Microsoft did some of the things it did because it could; it was powerful enough.

But, as they say, Hubris is followed inevitably by Nemesis.

Google is arguably now in a similar, precarious position. Its remarkable success has made it enormously powerful but that power is causing fear and skepticism in certain quarters. And its movements into and experiments with traditional media (though early and uneven) contribute to a perception that Google has become a juggernaut that may be unstoppable. (To some degree, eBay’s failure with its TV auction platform reinforces such a perception, if only indirectly.)

More success — and outcries based on any perceived abuse of power — may bring about unwelcome scrutiny at a Congressional level. I’m jumping the gun here intentionally. But Google’s success and ambition is taking it down a path whose outcome may be regulatory scrutiny, similar to Microsoft but for different reasons.

That begs the question: what should Google do? Should it hold back, compete less forcefully, invest less in R&D and so on? The logic of Wall Street and Google’s own culture argues against that. It would be perceived as stagnation. So, effectively, Google cannot (and wouldn’t) exercise the kind of “restraint” I was talking about with Craigslist above.

The only move for Google then is transparency — more and more transparency. The company needs to be more forthcoming, more open and more consistently approachable and customer-service oriented than its competitors because of its position.

This is not only the right thing to do, it’s the only thing that may keep Nemesis at bay.

One Response to “Restraint and Regulation”

  1. American Idiots « Necessary Therapy Says:

    […] Restraint and Regulation from Screenwerk: Greg Sterling’s Musings on Offline and Online Media.  I found this while doing a tag search under “culture” (something I know little about) and it wound up dealing with business as well (something I know nothing about).  As an English major, I refused to take business courses on ethical grounds.  This post has me rethinking my decision. […]

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