Standard Oil and Google

The buzz today is that Google is manually slapping a PR penalty on blogs that do PayPerPost advertising. You can read more about it here on the IZEA blog: Google Goes after the Everyday Blogger.

What Google is doing smacks of monopoly behavior, using its power in one area to control the market in another. This is very similar to what Standard Oil did in the 1880’s and 1890’s in the oil business.

What Standard Oil Did

Standard Oil BuildingMuch like Google, Standard Oil was the technology leader in their day and relied upon an efficient delivery system and responsible management to provide consumers with petroleum products. They even “did no evil” by being surprisingly ‘green’ for their day and time, finding ways to resell waste products rather than polluting with them.

However, they soon became evil by using aggressive practices to destroy competitors’ businesses. Standard Oil bought and influenced railways in order to prevent competitors products from reaching the marketplace. They were in such a position of power they could set the price they wanted for oil and the non-negotiable price they would pay to transport the oil. Think of it as the PageRank of that day. Just like Google and its control of both search and online advertising, they were perceived to own and control all aspects of the petroleum business in the United States.

Eventually, Standard Oil was one of the first companies to be broken up under the Sherman Anti-Trust Act.

What Google Is Doing

The GoogleplexGoogle is using its search PageRank to strangle competitors in the field of online advertising, probably in an attempt to compel publishers to use its Adsense and Adword products. They’re using their dominance in search to “block the railroad tracks” of competitors in the online advertising arena.

In short, if Google continues this monopolistic behavior they will earn themselves an appointment in US Federal Court on anti-trust charges just like Standard Oil, AT&T and Microsoft did due to their behaviors.

I like Google though. I think what they’ve built in terms of a search engine and advertising method is great. However, when they start using their influence in search to take out competitors they cross the line from being “good” to being “evil”.

What Google Should Do

Google should entirely separate search and advertising in separate companies. They could even make Google Search non-profit. They should also replace the public 0-10 toolbar ranking with a more meaningful and useful metric. Google Ads could go on to build an advertising company that’s not only online but in mobile and other areas as well. I think that if the truly want to “do no evil” they should do this themselves as soon as possible and save the taxpayers considerable money taking them the court.

Has Google crossed the line? Do you think they’ll have a date in Federal Court anytime soon? Do you think they should split into separate companies? Leave me a comment and let me hear your thoughts.

 


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10 Comments »

Comment by Jason A Clark
2007-11-15 13:54:13

I think the analogy with Standard Oil is a good one and quite accurate. I’m not sure if making Google Search non-profit would work since they need the search in order to sale the ads. I’m not a fan of the PR so anything they do to make that better would be fine with me.

I don’t think we’ll see them splitting the company any time soon. I’m not sure we’ll see anyone from Justice going after them anytime soon either. I don’t think the government even realizes what Google is doing or has a firm enough grasp of how their business works to understand that they have a monopoly and that they’re flexing some major muscle.

Comment by jfc
2007-11-15 15:09:04

Hi Jason,

I think that Google’s advertising could do quite well without the search although funding the search might be difficult without the advertising revenue.

PPP is already organizing a “write your Congressperson” campaign and it’s likely that other affected companies might do the same. You don’t want your company being the subject of a Congressional investigation or, even worse, have someone at the Justice Department building a career on taking your company down. I think this is the way Google is headed though if they keep beating up on the “little guys”.

 
 
Comment by Jason
2007-11-15 14:55:03

Very nice article. You make some really great points.

Comment by jfc
2007-11-15 16:06:58

Thanks for stopping by Jason

 
 
Comment by Markk
2007-11-15 15:54:08

This is one of the better arguments to shed light on the direction that Google is heading instead of the usual “stick up the middle finger” kind of rants coming from those who got hit. You raise a good point about Big Oil vs the little man. And as Jason puts it, it’s as close an analogy as one can get when we think of Big G. However, I suspect there’s more to it than “beating up the little guys” for paid links and paid posts. Just can’t put a finger on it yet, but maybe it will surface later when the dust finally settle. Cheers.

Comment by jfc
2007-11-16 07:27:10

Hi Markk,

Akismet didn’t like your comment for some reason so I had to rescue it from a trashbin filled with ads for ‘enhancement’ products.

I think it’s a trap that well run companies, like Standard Oil and Google, encounter as their technical and business expertise captures a large percentage of the market. In their competitive zeal they run roughshod over small competitors and those who associate with them. I’d like to see Google avoid this trap.

 
 
Comment by Christoph Cemper
2007-11-15 20:15:13

Wow - this is a great post - a great comparison, and indeed it is obvious that Google uses it’s PR toolbar to hurt their competitors in advertising…

the whole anti-paid-link propaganda they ramped up last March or so is just to drive more and more business to Adwords… Where your ranks, and increasing costs, are guaranteed…

Comment by jfc
2007-11-15 21:55:53

Hi Chistoph,

I think Google will determine that putting that little green bar in their toolbar was a mistake because it put them in the business of determining the value of websites to the whole world.

If they had kept PageRank to themselves and developed an objective, hands off, metric based on traffic and a few other public factors it would have been much better.

 
 
Comment by DigMyPage
2007-11-16 02:09:10

The comparison is not valid. If Google removes a bunch of sites from their top rank, those spots are filled up by other sites. It is not that Google is getting a kickback to fill those top spots. Some go because of their behaviors and new one fill those spots.

Those new ones may be as good as the old one.

Comment by jfc
2007-11-16 06:40:28

Hi ‘DigMyPage’

Of course, I think it is quite a valid comparison. Google is behaving the same way as other companies that have run into problems with anti-trust laws. I could have just as easily drawn comparisons between them and AT&T or Microsoft.

I do think they have time to change direction. I wish they would avoid the problem since some of my retirement investment depends upon them continuing to make money and not on them being distracted by a long, drawn out, legal battle.

 
 
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