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This week, Uncle Sam hired veteran antitrust attorney Sanford Litvack, leading to rumors that the Feds are preparing to file antitrust charges against the Big G over an ad deal with Yahoo! (Nasdaq: YHOO ) . Steve Ballmer must be dancing like a crazed monkey.
But this is a stupid idea, even if it doesn't seem so at first.
Meanwhile, at the intersection of Park Place and Boardwalk ...
The argument in favor of intervention is simple. Google dominates search and thereby search advertising. Maybe not to the same extent as Mr. Softy dominated PC operating systems in the '90s -- Google accounted for roughly 71% of searches in August, according to Hitwise -- but dominance is dominance. Once you control at least two-thirds of a market it's time to consider the m-word. (You know, the one that rhymes with "schmanopoly" and is also a board game from Parker Brothers.)
The argument against intervention is more complex but also more important. It comes down to control. Microsoft had an iron grip on the PC market in the '90s. No amount of delays or bugs with Windows 95 and 98 would change the equation for Apple (Nasdaq: AAPL ) . Not even Microsoft's ill-fated "Bob" user interface could create an opening for Mr. Mac. Switching from Windows to the Mac OS was too cost-prohibitive. You'd be sacrificing software needed to do your job or run your business -- software not available for a Mac.
I'll take "stupid ideas for a software company" for $800, Alex
Contrast that with Google. Are switching costs high in search? How about search advertising? I'd say they're almost nonexistent, which means that Google has share but not control.
Consider Yahoo!, which worked with plenty of other ad distributors before Google. So why the switch? Money. Yahoo! estimated it would make as much as $800 million more in its first year working with the Big G than against it.
And what of search? Do you really believe that Google's search engine is the best we'll ever see? I have a Dilbert cartoon from the mid-'90s on my office wall that mocks a would-be entrepreneur who proposes a "word processing program for Windows" in a meeting with venture capitalist Dogbert. The ensuing exchange:
Dogbert: "That's an interesting concept. I wonder if twenty dollars would be enough."
Entrepreneur: "To start a software company?"
Dogbert: "No, to pay our waitress to beat you with a loaf of French bread."
Dilbert creator Scott Adams is a wickedly funny guy, but that's not the only reason we find humor in the strip. We laugh because it's true, perfectly illustrative of the futility of competing with Microsoft on its home turf during its heyday. Now, can you think of anyone -- any well-funded start-ups aiming to beat Google at search? How about Powerset? Cuil? Radar Networks?
Can I take your lampshade, Uncle Sam?
Look, I get it. I know that Google is upending the newspaper industry. I know that it dominates search. It's a winner in the ad business, too. Unless, of course, you're talking about Web display ads, in which case Fox Interactive and Yahoo! lead and Google ranks fifth. Or in-game ads, where Mr. Softy is Massive.
Uncle Sam can't make this argument. He'd be like Mr. Lampshade at last year's holiday party. "Buy me another drink, son," Mr. Lampshade slurs, confident that your deep pockets are deep enough.
Sober up, sir. Slough off the shakedown. You can't PhotoShop today's Larry and Sergey to resemble yesteryear's Mr. Bill.
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