February 2, 2008
If there's a sentiment that crops up with frequency in this column, it's that bigger is seldom better when it comes to how businesses treat consumers.
So I say today, with no small surprise and puzzlement: Go get 'em, Microsoft.
Google's great, don't get me wrong. I can't think of any other company that's deservedly succeeding through a combination of superior products, unbridled innovation and breathtaking vision.
Google is Apple, but much more so.
Yet as Google prepares to muscle its way into the wireless telecom market, and as it continues its virtually total domination of the Internet, I can't help but think that what this company needs more than anything else is some serious, in-your-face competition.
So my feeling is that Microsoft's nearly $45-billion offer for Yahoo is a good thing for the tech world and a good thing for consumers. Until, that is, it's not.
"It's very difficult to figure out upfront when these things are good for consumers and when they're bad," said Steve Morrissey, an antitrust attorney at the Los Angeles office of Susman Godfrey.
"Trying to figure out where these companies will be in five or 10 years is exceedingly difficult," he said. "It's really hard in such rapidly developing markets to know where you draw the line."
I guess it's like porn -- you know it when you see it. Google is a company that's become absurdly powerful in an absurdly short amount of time. Ten years ago, Google founders Larry Page and Sergey Brin were still cobbling together their computer gear in Page's Stanford University dorm room.
Now they're billionaires, and Google all but owns the Web. According to market research firm Hitwise, Google accounts for about 55% of all Internet searches, with Yahoo trailing at 17% and Microsoft's MSN a distant third at 5.2%.
Google is among the leading bidders -- though it remains to be seen how serious -- for a multibillion-dollar chunk of prime wireless bandwidth that could make the company a major player in cellphone circles. And it's not that farfetched to imagine the company's YouTube video service evolving into a 21st century TV network.
So how do you keep such a dominant force focused on making customers happy? You make sure it has robust rivals. And at this point, it looks like a merged Microsoft-Yahoo may be our best bet for giving Google a run for the cyber-money.
"It's probably inevitable," said Patricia Seybold, a business consultant and author of the book "Customers.com."
"But why do I have such a sinking feeling about this?" she asked.
Seybold pointed out that the best scenario for consumers is always a diverse marketplace with plenty of players. A Microsoft-Yahoo combo might be able to stand up to Google, but what then?
Are we now looking at a replay of what's happened in the telecom and cable industries, where the market is dominated by a relative handful of heavyweights and consumers frequently have to choose from only two or three service providers?
"Customers really don't trust the Microsoft brand," Seybold observed. "But they're also becoming suspicious of the Google brand."
Moreover, a supercharged Microsoft-Yahoo only turns up the heat for Google to go on its own shopping spree. So what happens next? Google buys Disney? Microsoft-Yahoo buys CBS? Google-Disney buys Verizon? Microsoft-
Yahoo-CBS buys AT&T?
And Rupert Murdoch buys everything that's left.
Remember what I said about porn? Now this is what I'd call obscene.
But from the consumer's perspective, what's the choice? For all its virtues, Google is becoming so powerful that it's everything we always thought Microsoft would be -- a world-conquering juggernaut capable of writing its own rules, and to hell with anyone who gets in its way.
Microsoft's playing catch-up here, and, like I say, that's probably a good thing. Before you know it, Google is ramping up its Gmail service to better compete with Yahoo Mail-Hotmail. Microsoft-Yahoo, in turn, is introducing all sorts of cool video services to better compete with YouTube.
Competition = innovation.
If history is any guide, though, the good times won't last.
Ten years ago, as Google was just getting started, Ed Whitacre, who was then chief exec of what was known as SBC, told wary lawmakers in Washington that his company's planned $72-billion acquisition of rival Ameritech would benefit consumers by boosting competition.
"I'd also like to address a concern raised by some who have suggested that SBC and Ameritech have set out to turn back the clock and re-create the old 'AT&T Bell System,' " he said.
"Nothing could be further from the truth," Whitacre testified. "The competition genie is out of the bottle."
Since that time, SBC has spent $16 billion acquiring AT&T (and the AT&T name) and $67 billion more acquiring BellSouth. Meanwhile, the old Bell Atlantic has become Verizon Communications, which in turn acquired MCI for $8.5 billion.
AT&T and Verizon are now the country's No. 1 and No. 2 telecom companies, respectively. The 'old AT&T Bell System' is very much alive and kicking.
I conveyed my concerns of a looming oligopoly in the Internet world to Bob Foster, a professor at UCLA's Anderson School of Management who focuses on the tech industry. As it happened, he was just at Google's campus in Mountain View, Calif., last week, meeting with former students.
"At the end of the day, we may have an oligopoly, but there's always room for niche players," Foster said. "There will always be opportunities for smart young technologists."
So go get 'em, Microsoft. And let's just hope some of those smart young technologists will be nipping at your heels before too long.
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