Perception & Reality: Naming Names

What we call things affects how we see them and how we respond to them. Indeed, language and the corresponding images and expectations it creates shape and affect what we call “reality,” which is not fixed but entirely fluid — in reality.  

The economic crisis is one example; it has profound psychological elements mixed in with the “objective” economic ones. To the extent we believe and expect the future to be worse we might make it so. This article from the NY Times argues that all the current comparisons between the “Great Depression” and today’s recession are likely to worsen the situation: 

The attention paid to the Depression story may seem a logical consequence of our economic situation. But the retelling, in fact, is a cause of the current situation — because the Great Depression serves as a model for our expectations, damping what John Maynard Keynes called our “animal spirits,” reducing consumers’ willingness to spend and businesses’ willingness to hire and expand. The Depression narrative could easily end up as a self-fulfilling prophecy.

I absolutely agree with this thesis. 

I turn now to a slightly different but similar issue, Google and the “M-word”: monopoly. The “Google is the new Microsoft” narrative has been around for a couple years but has started to take hold in a new, more specific way: at the US Justice Department (DOJ). Microsoft has been partly instrumental in promoting the idea of Google as monopolist in search and online advertising. 

Basically Google came along at the right time, built a better mousetrap, a powerful brand and then continued to consolidate its successes. We all know the story. An article in the NY Times today informally examines the growing discomfort with Google’s position and power. 

The Google-Yahoo! paid search deal was abruptly abandoned by Google a few months ago because the company discovered that the DOJ was seriously considering initiating an action against Google in which the company would be labeled a “monopoly.” Google didn’t want the litigation but it also didn’t want the label because that label would tarnish it’s brand and public perceptions of Google. 

As the Times’ article points out Google rigorously fights against any notion that it has monopoly power: 

Google maintains that its lead in the Web search market is tenuous, saying that with a simple click of a mouse, a user’s loyalty could evaporate at any moment.

But consider this: As recently as July 2005, Google was ahead of Yahoo in market share by just six percentage points, at 36.5 percent to 30.5 percent, according to comScore, the market research company. Today, however, that advantage is much wider, at 63 percent to 21 percent.

I’ve never bought the “one click away” argument. While it’s true in theory, in fact people are quite loyal to Google. Search marketer Gord Hotchkiss has spent part of the past couple years researching and trying to explain this phenomenon. 

There are many competitive threats to Google but the company is doing a good job of trying to anticipate and defend against them. Mobile is an area where Google wasn’t guaranteed success, but it has paid attention, invested aggressively and is now in a very strong position. 

The question of what happens now raises interesting political and philosophical questions. From my point of view:

• Google has not abused its position in getting to where it is (several lawsuits have disagreed)
• The market created Google and it has succeeded in an unusually competitive and fairly wide-open system
• Google’s long term dominance of search is not guaranteed by its current success

Yet, as the Times’ article suggests, there are lots of people (i.e., some insiders, regulators, marketers) who are quite uncomfortable with Google’s strength. They fear what might happen in the future — the potential for abuse or rising prices. But putting aside conscious market manipulation (a la Enron); you’ve got a de facto situation where most of search advertising is happening on Google because that’s where the traffic is. 

Consumers have expressed their preferences (to date) and marketers are responding to those perceived preferences. The government effectively can’t change consumer preferences. It could regulate prices within the search marketplace, but that would be a dramatic and in many ways unwelcome intervention (although some would welcome it). But it can disapprove M&A activity, which could mean few or fewer big deals for Google. 

Yet how would the DOJ handle a takeover bid for Twitter (hypothetically)? There are very few anti-trust implications from a technical-legal standpoint:

• Twitter isn’t a search engine, despite having search tools (Summize), so it doesn’t take a competitor out of the marketplace
• There’s no advertising on Twitter so there’s no potential impact on SEM pricing

Yet I would imagine that such a move would upset the same people who believe Google is today a monopoly. The hypothetical concern is that Google would be further locking up consumer mindshare. 

The current situation creates problems for everyone. 

Christine A. Varney who is President Obama’s nominee to run the anti-trust division of the DOJ has publicly said: “The U.S. economy will “continually see a problem — potentially with Google” [because it already] has acquired a monopoly in Internet online advertising.”

This is not a legally or factually correct statement. While one could make the argument that exists in search and/or paid search, it’s not true for “Internet online advertising” in general. Approximately 41% of online advertising (until we hear different) is search. That leaves 59% to other forms of online advertising (display, sponsorships, video, classifieds/directories, etc.). Google doesn’t dominate these other areas. 

While it’s different than talk of the Great Depression in the context of the recession, there would be intangible and actual consequences if the “M-Word” takes hold in the public mind in association with Google. The company knows this and is doing its best to prevent it from happening.

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