Does breaking up Google make sense?
News Corp has called for Google to be broken up in its latest submission to the ACCC's Digital Platforms Inquiry. Mumbrella's Paul Wallbank questions if that's feasible, or if dismantling the online giant might actually backfire.
As the responses to the ACCC’s digital platforms inquiry roll in, probably the most audacious – and predictable – is News Corp’s call for Google to be broken up.
News Corp Australia’s executive chairman Micheal Miller added to the calls to break up Google in an opinion piece for The Australian
In its submission, News Corp correctly pointed to Google’s dominating 85% share of the ad tech market, saying: “The layers of the Google ad tech stack have been built through successive acquisitions, internal restructuring and merging of businesses/product lines.”
That share is growing. Last year, Group M reported Facebook and Google took 135% of new digital advertising spend.
News Corp also highlighted in its submission how Google’s other services such as search, news, voice and Accelerated Mobile Pages complement its advertising functions.
If anything, News Corp’s submission understated the strength of Google’s complementary services. Services like Maps, Docs, Gmail and the constant stream of data through its Android mobile platform add to the treasure trove of information the US giant is amassing on consumers and businesses.
News Corp are not alone in expressing concern about Google’s dominance. European competition regulators have flagged Google’s control of the adtech sector, while US Democrat Elizabeth Warren last weekend called for all the tech giants – including Apple and Facebook – to be broken up.
As if to illustrate Warren’s point about the tech giants’ power, Facebook removed her campaign advertising – which criticised the social media giant – from their platform, before restoring it a few hours later.
So News Corp has good grounds in calling for the break up of the tech giants. But they should be careful what they wish for, as history shows that breaking up monopolies can actually make the resulting businesses stronger.
The history of US corporate breakups
In 1984, the US broke up its huge private telephone company, AT&T Corporation into seven independent operating companies. The break up, and subsequent deregulation of the American telco market, saw a fiercely competitive industry develop.
One of the quirks of history is this allowed the internet to quickly develop in North America as, unlike in Australia under Telecom and later Telstra, there wasn’t a big fat incumbent protecting its slow, legacy services and their fat profits.
The break up was also good for shareholders, with the ‘Baby Bells’ reporting far better profits and share price performance than the staid, old ‘Ma Bell’ of AT&T days.
A similar thing happened in the early part of the Twentieth Century with the break up of Standard Oil, then the world’s biggest and most powerful conglomerate.
That breakup saw the formation of Exxon, Amoco, Mobil and Chevron, and the competition created by having rival oil companies also heralded the automotive age that defined last century.
Google itself is similar to the AT&T of 1980 or the Standard Oil of 1910 in that it is a sprawling, monolithic bureaucracy with a range of businesses that would probably perform better as standalone operations, rather than being seen as adjuncts to the lucrative advertising business.
In fact, this was the hope at the time Google re-organised into Alphabet in 2015. The reshuffle promised to bring more transparency into the company’s disparate operations, but under the new structure, the bulk of the businesses remained under the Google umbrella.
So it’s highly likely that a broken up Google would prove to be more powerful and lucrative than the current behemoth.
Indeed it should be pointed out that Rupert Murdoch’s breaking up of News Corp itself, particularly the splitting of print from Twenty-First Century Fox, has delivered for the group’s long beleaguered shareholders.
The death of newspapers
There’s also the fact that Google is not wholly the villain in the decline of media, a point made by the company’s executives and by Facebook in its own submission to the Digital Platforms Inquiry.
Newspaper circulations had been in decline for two decades prior to Google’s founding in 1998 and the World Wide Web, started in 1994, quickly eroded the industry’s distribution model.
If it hadn’t been Google, any one of the multiple adtech businesses founded in the late 1990s would most likely have smashed the print media’s business model anyway.
The print business model is hopelessly broken, and dismantling Google isn’t going to stitch it back together.
A degree of hypocrisy
News Corp calling for the break up of a dominant industry player could be labelled hypocrisy, given the company was gifted a near-monopoly on Australian newspaper publishing in the early 1990s by supine Labor government and then-treasurer Paul Keating, who was anxious to curry favour with Rupert Murdoch.
That near-monopoly gave News Corp dominance over Australia’s metro and local print advertising and classified industries, but as technological change bit hard, the rivers of gold started to dry up. A similar story can be told by News Corp’s dominance of Australia’s pay TV sector.
News Corp’s own experience with locally-gifted monopolies should give us pause about what the ACCC will recommend.
If anything, the breaking up of Google would only further unleash forces that Australian businesses and regulators have repeatedly shown themselves to be incapable of dealing with.
Once again, Australia’s media industry should be careful of what they wish for.
So can someone explain how you can get 135% of new digital advertising spend
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Time you learned the difference between compliment and complement in the above article.
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Even if News Corp get there way it doesn’t matter. The majority of advertisers aren’t ever going back to their way of doing things.
Like it or not, Google revolutionized advertising forever. Customers/clients demand a model like that (a pay what you can afford model) and that’s where Google really changed things – especially for SME’s who could never take advertising seriously in the past.
If News Corp would like to be taken seriously they need to drop these minimum spend ($30K + or whatever it happens to be that week) requirements from their responses. Guys your digital offering just isn’t that good.
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Thanks Anthony, we have fixed that now.
Paul, asserting that news media readership remains very strong across channels. Newspapers remain a significant element in the cross channel news mix, they represent a terrific creative canvas and reach huge trusting audiences. Finally both newspapers and digital news media subject themselves to industry accepted measurement, unlike Google. Newspaper and digital media – very much alive and fighting old son.
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These businesses scream and shout when Google takes all their money, but when it comes to ad stacks they crumble and use Google cause it is easier.
Why don’t we implement a rule about common sense. You pay peanuts you get Google using and loving monkeys.
People joke that you can’t get fired for buying on Google, but you also can’t get fired for choosing to use Google tech.
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The point of divestment is that competition is increased, and monopoly power is decreased. All your examples of previous divestment support this point. Your conclusion that ‘a broken up Google would prove to be more powerful and lucrative than the current behemoth’ is a red herring, since a broken-up Google would not be Google. Each part might be stronger as a separate business, but they would be separate businesses, with their own management and business models. That’s the point.
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135%? That’s a a novel idea…
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Pretty hypocritical of the News Corp behemoth to whinge about monopolies. Their poisonous reporting has negatively impacted every country they have been a dominant force in.
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It’s all inflated percentages. When you are the player and scorekeeper you can keep score any way you like…
Google, FB, influencers its all good until the economy stumbles then the weakness is exposed, destroys business and ultimately jobs of people associated.
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Paul – can you substantiate the claim that News Corp had a near monopoly on newspapers and classified advertising ? Fairfax dominated classified advertising – the famed rivers of gold – and had leading daily and weekend mastheads in Sydney and Melbourne.
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Do not go gentle into that good night, Pete.
Rage, rage against the dying of the light.
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Trust Rupert and his redneck kids who are ruining the USA with the horrific Fox News?
https://thehill.com/homenews/media/380060-maher-fox-news-is-running-the-country
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It’s explained there:
Facebook and Google took 135% of new spending in the digital advertising – meaning they gobbled up all of the new available growth, plus taking share from other digital media companies.
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It’s explained there:
Facebook and Google took 135% of new spending in the digital advertising – meaning they gobbled up all of the new available growth, plus taking share from other digital media companies.
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Yep, well, Newsdoch sat all-powerful – and possibly smug – for decades, wielding unheard-of and unwanted, let alone unwarranted power over all-and-sundry including yourself, myself and said Keating
Having not recognised the value in investing in the growing interweb and digital, its influence and power have progressively declined
So… complain-while-you-still-have-some-influence, eh?
Alphabet splits out to a number of competing units, the recipients of the enormous, resultant funds free-for-few buy up Newscorp for a song, close it down… or offer free newspaper subscriptions via a most-rewarding licensing link-up with NewGoogle and New Android, over both of which they retain majority control, the ‘free’ subs coming with amazing, amazon-beating shopping offers and Netflix-killing deals bannered on every second page, with every alternating page giving free club memberships for one’s favourite code club to every 100th reader
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Hey Gezza, I didn’t say News had a near monopoly on newspapers and classified advertising. I said it dominated the nation’s newspaper and classified industries – as it did and continues to do so.
Look at ad formats as well. Every News digital publication is a hellscape of mastheads, takeovers, roadblocks, auto-play videos and anything else you can possibly imagine to annoy the reader and distract from the content.
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Sorry I must have misinterpreted the bit where you wrote “That near-monopoly gave News Corp dominance over Australia’s metro and local print advertising and classified industries”
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Paul, you say that tyhe Australian newspaper market has been in decline since the 1990s. But it has been much longer than that … indeed back to the 1950s. While there has been growth in circulations the decline in the market on a per capita basis has been particularly evident (mainly in the capital cities) given population growth. To some extent the Sunday Blatts were insulated, but now they are on a downward trajectory. The dailies ignored potential growth markets, namely immigrants—Greeks and Italians in the first instance and, later, those from Middle East and Asian cultures. A perfect example of legacy White Australia.
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This is the best comment I’ve seen on Mumbrella in awhile. Well done.
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Newscorp have content now?
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Exactly what I was thinking… Newscorp have been rigging elections since way before Facebook and Russia made it cool. Pretty rich to come crying poor now.
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Way to make this article an argument about race when it clearly isnt!
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