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How evil is Google?

20 January 2010

Google’s announcement that it is no longer prepared to cooperate with the Chinese authorities in ‘filtering’ search results and may pull out of the country altogether is proof positive for the faithful of just how different a company it is. The fact that there were probably business considerations behind the decision as well as moral scruples makes some commentators cynical, but cynicism is just another form of over-simplification: not to have weighed up the business implications would have been negligent, just as there was certainly a case for the original rationale that a global company ought to have a presence in China and that offering Chinese users some information was better than nothing.

The fact that Google has now come close to acknowledging that that was a mistake shows that it is pretty different from most large companies. For businesses feeling threatened by the Google juggernaut, however, its ‘don’t be evil’ mantra is hypocritical cant: Google is as ruthless and destructive as Microsoft was in the 1990s. But if we look at what Google has actually done, as opposed to what strategic speculation suggests it might do, there is not much evidence.

I explained in my last post why I didn’t like ‘commoditisation’ as a description (frequently deployed as an accusation) of damaging adjacent businesses by charging little or nothing for products and services that are their lifeblood, but let’s not quibble about words. Is Google guilty of pursuing this as a deliberate strategy?

The publishing industry has been its most vociferous critic, but then words are its business and it has been in pain for a long time. Newspaper circulations have been declining in the US since the 1970s and in free fall in all Western countries for most of this decade. It is a mystery to me how a company which only had revenues of $19 million in 2000 could be responsible, but those looking for scapegoats tend not to examine the evidence too carefully. If anyone is to blame for the commoditization of news on the Internet – not a good way of understanding this complex tragedy – it is newspaper executives. Nobody forced them to give away their products free online – or Rupert Murdoch to start a price war from which the British industry has never recovered. Google’s role in this is so marginal as to be insignificant. Its aggregation of news frequently has the effect of directing users to sites they would not otherwise have visited. This may not be particularly profitable traffic for the papers as few of them ever become subscribers, but that’s hardly Google’s fault. Its AdSense was specifically designed to allow papers and other content sites the chance to share revenue from contextual advertising

Book publishers may also be looking a gift-horse in the mouth. Distribution is one of their biggest problems, and the long tail of books that can never be found in shops, and often not even in libraries, is enormous. Yet Google’s project to digitize eventually all the millions of books in the world and make them universally accessible is treated by many publishers as more of a threat than an opportunity. Google may not have treated the industry with the respect it feels it deserves and its motives may not be entirely altruistic, but it is hard to see how it will make much money out of this initiative. Certainly the last thing it will do is ‘commoditize’ books. But as Jeff Bezos realised in 1994 ‘this is not a rational industry’.

Google is also accused of ‘commoditizing’ software by for example offering applications programs like word-processing and spreadsheets free to consumers online. But it did not invent the business model of ‘free’ software or Software as a Service (SAAS) which have been around in different forms for more than a decade. Unlike most of its smaller rivals it has the chance of generating significant revenues from these consumers thanks to the scale and low sales costs of its advertising machine; business customers pay a per capita charge for using Google Apps. This is part of a broader, and perfectly legitimate, strategy of encouraging a shift in the focus of computing away from the desktop (and Microsoft) and towards the Internet/Cloud, where Google is currently the leading player.

Where the commoditization charge has more force is in the rapidly changing world of online maps and satellite navigation. Bill Gurley has argued that Google is in the process of disrupting this market, hitherto controlled by the duopoly of Tele Atlas and NavTeq, acquired in 2007 by TomTom and Nokia respectively. Google made those acquisitions look very expensive when it stopped using both of these suppliers last year and announced that it would offer its own online maps and turn-by-turn navigation on all phones using Android, its operating system for mobile devices. That creates big problems for the leading suppliers of smart phones, who currently charge a fat fee for this information, and of course for rival suppliers of mobile operating systems, notably Microsoft.

This is all very clever and immensely ambitious, especially its latest venture of selling its own phone, Nexus One, in direct competition with its former ally, Apple. But it is hardly sinister or evil. If it were, then virtually every company that has undermined the business models of others, from Southwest Airlines and Ryanair to Craigslist, Wal-Mart and Tesco would be in the dock. Subverting the business model of incumbents is one of the ways that creative destruction works. The main winners are generally consumers paying lower prices, and in most cases the damage to incumbents is collateral rather than deliberate.

Contrary to what some armchair Machiavellians believe, business is very different from warfare. Success is basically about winning customers and keeping them, rather than destroying competitors. All the cases I’ve written about where, instead of concentrating on carving out a defensible new markets, valiant new ventures attempted frontal assaults on powerful incumbents – Apple v IBM, Netscape v Microsoft, and Webvan v giant supermarkets – ended ignominiously. And even Microsoft’s crushing of Netscape turned out to be an almost pyrrhic victory.

It is most unlikely that Google will succeed in all its ventures – none has so far produced revenues remotely comparable with AdWords and AdSense. It could well be getting to that dangerous, hubristic point, reached by all businesses that have scaled incredible heights very quickly, of biting off more than it can chew. (Pride comes before a fall applies to Apple too – it has been there before.) Google is no more invincible than any other company.

Nor is it any more dangerous than any other organisation that has become as powerful as it has. Potentially then it is very dangerous, since power always tends to corrupt, but so far Google has been distinctly less evil than most. Search may not yet organize all the world’s information for us and probably never will, but it still fulfills Larry Page’s promise in 2004: “to provide an important service to the world – instantly delivering relevant information on virtually any topic. Serving our end users is at the heart of what we do and remains our number one priority.”

I for one am still grateful. If more companies were like Google we’d hear a lot less about the evils of capitalism.

8 comments to How evil is Google?

  • Apart from a rematch with Arona, or someone else he has already beat, who is he likely to get an exciting matchup with? I can see him fighting a lot more Japanese cans…

  • Kieran

    That’s something that hadn’t previously occurred to me. I must give it some thought.

  • Well it’s Google’s fault for coming up with the moniker of “Don’t be evil.” They set themselves up for everyone analyzing their situation as a black and white case. When Google does this, they’re evil. When they do that, they’re not evil. It’s like naming your comedy show, “The funniest show ever.” Inevitably you’ll get some critic write, “It wasn’t even the funniest show for the two hours I watched it.”

    The reason Google’s moniker stuck for a while is because what they’re doing does have value to the greater good even if they’re burning the farmers’ crops in their wake.

    They’re a business just like everyone else’s. It’s just the way they make money is making us look at more screens. That’s it. That’s the core of their business. The more we look at Internet connected screens, the more money they will make. As long as we always understand that’s their objective, then we’ll understand what is and isn’t evil about them.

  • Kieran

    Surely evil has to include intentional harm? Every successful business causes some collateral damage to others, but that doesn’t make them evil. Google’s certainly been guilty of arrogance towards publishers and lots of other people, but that’s not a crime.

    I agree that the original phrase may have been asking for trouble, but it’s surely commendable, and unusual, to try to hold to a moral compass.

    And a business like any other might imply undifferentiated, commoditised even! Great businesses strive to be different. One of the ways that Google is different is that it genuinely seems to care about things other than making money.

  • Almost my search ends here after going through this article. The article very exact and nice. The information provided by you is perfect. thanks for sharing.

  • This blog helped me explain this subject to my son. Thanks :)

  • Kieran

    Thanks to both the last contributors.

  • Thank you. Extremely useful post.

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