The Federal Trade Commission (FTC) is investigating whether Google is using its dominance in Web search to give its own services an unfair advantage. The FTC is also looking into whether Twitter is abusing its position to lock out competitors. But government intervention here is misguided. These investigations, and whatever results from them, won’t level the playing field. They will only stifle innovation and yank lawyers out of unemployment lines.
The technology sector moves so quickly that when a company becomes obsessed with defending and abusing its dominant market position, countervailing forces cause it to get left behind. Consider: The FTC spent
years investigating IBM and Microsoft’s anti-competitive practices, yet it wasn’t government that saved the day; their monopolies became irrelevant because both companies could not keep pace with rapid changes in technology — changes the rest of the industry embraced. The personal-computer revolution did IBM in; Microsoft’s Waterloo was the Internet. This — not punishment from Uncle Sam — is the real threat to Google and Twitter if they behave as IBM and Microsoft did in their heydays.
Vivek Wadhwa is Vice President of Innovation and Research at Singularity University and Arthur & Toni Rembe Rock Center for Corporate Governance at Stanford University. His other academic appointments include Harvard, Duke and Emory Universities as well as the University of California Berkeley.
Google is already under fire on several fronts. It missed the social-media revolution, allowing Facebook to race ahead. And when it comes to search, Facebook is a fortress — Google doesn’t have access to the massive amounts of content being created on the social-media giant’s platform. Meanwhile, as of December, Facebook surpassed Google as the most popular site on the Internet, and it drives more traffic to popular Web sites than Google does. Google+ is a valiant attempt to catch up, but the odds are poor that it will succeed. (Washington Post Co. Chairman and chief executive Donald E. Graham is a member of Facebook’s board of directors.)
Similarly, Twitter has become one of the largest social networks in the world. It achieved this success, in part, because thousands of third-party developers built applications on its platform. But then Twitter started buying
some of these companies and placing restrictions on others, such as Ubermedia, because they compete with its acquisitions. What Twitter is doing may or may not be legal, but its tactics will likely cause it to suffer the same backlash that Microsoft did when it mistreated its developers. They will simply move on to a new platform like Google+.
The FTC is focusing on the way Google places its own services, such as YouTube and Google Places, at the top of search results, which allows Google products to be ranked ahead of other, more relevant returns. But this is not the critical issue in Web search. A greater concern is Google’s practice of encouraging “content farms” to pollute the Web. Google makes billions of dollars through its AdWords service, which attaches ads to common search terms. Google then shares this revenue with third-party content farms, such as Demand Media, that provide traffic by employing legions of freelancers to create content that is optimized to appear at the top of Google’s search results.