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The European Commission has finally thrown down the Google gauntlet. But effectively defanging the search giant could require the EC to fundamentally reshape the nature of the search business in Europe.
The EC contends that Google (NASDAQ:GOOG) favors its own comparison shopping products in search results. The separate investigation it has launched seeks to uncover whether Google enforced anti-competitive agreements and otherwise hindered competition in the mobile devices and services market.
The house that Sergey and Larry built is pretty resilient - with its legions of lawyers and deeply rooted business partnerships throughout the world. And the EC's record of success in pursuing titans is decidedly mixed. Investors, certainly, were sanguine - Google's stock fell just a bit more than 50 basis points in early trading.
The EC looks to have the wrong end of the stick. Google is not like an auto maker that has cornered the market and can be shaken free by antitrust actions. The company - despite its prodigious size and influence - is still inventing the market it dominates. So the European regulators might be using an inappropriate analogy - Google is not the modern day Standard Oil.
Yes, the EC's accusations could ultimately prove damaging to Google. But it is becoming increasingly clear that the business model for dominant big data companies like Google appears to have an inherent, monopoly generating effect.
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In a Financial Times article in January, Evgeny Morozov, a longtime critic of Google and big data companies in general, threw some cold water on European regulators ambition to separate Google's search data from its other services. Morozov makes the case that this approach is short-sighted because, as he put it in the FT, "a company that has organized say, 90 percent of the world's information would naturally do better than any company holding just one-tenth of that information."
In other words, a dominant monopoly is an inevitable outcome in the search market, because hoarding and manipulating data through proprietary algorithms is the basis of the business.
The same may be true with social media companies, who rely even more on personalized data. Facebook (NASDAQ:FB) has by far the most users, and its ability to target ads based on the data it collects on its users (past and present) has only improved exponentially as it has grown.
Regardless of whether Google is intentionally abusing its position in the market, it appears that business models reliant upon big data will inevitably result in monopolies. How can this effect avoided?
For his part, Morozov argued for a system that is "radically decentralized and secure; no one should be able to obtain your data without permission, and no one but you should own it. Stripped of privacy-compromising identifiers, however, they should be pooled into a common resource. Any aspiring innovator or entrepreneur - not just Google and Facebook - should be able to gain access to that data pool to build their own app. This would bring an abundance of unanticipated features and services."
That sounds very nice, but it will take a massive shift in public opinion along with many more "statements of objections". If regulators like the EC seriously want to curtail data monopolies, it will require this kind of fundamental change. In the meantime, you can count on giants like Google and Facebook to maintain their dominant position.