Who's afraid of Google?

The world's internet superpower faces testing times

RARELY if ever has a company risen so fast in so many ways as Google, the world's most popular search engine. This is true by just about any measure: the growth in its market value and revenues; the number of people clicking in search of news, the nearest pizza parlour or a satellite image of their neighbour's garden; the volume of its advertisers; or the number of its lawyers and lobbyists.

Such an ascent is enough to evoke concerns—both paranoid and justified. The list of constituencies that hate or fear Google grows by the week. Television networks, book publishers and newspaper owners feel that Google has grown by using their content without paying for it. Telecoms firms such as America's AT&T and Verizon are miffed that Google prospers, in their eyes, by free-riding on the bandwidth that they provide; and it is about to bid against them in a forthcoming auction for radio spectrum. Many small firms hate Google because they relied on exploiting its search formulas to win prime positions in its rankings, but dropped to the internet's equivalent of Hades after Google tweaked these algorithms.

And now come the politicians. Libertarians dislike Google's deal with China's censors. Conservatives moan about its uncensored videos. But the big new fear is to do with the privacy of its users. Google's business model (see article) assumes that people will entrust it with ever more information about their lives, to be stored in the company's “cloud” of remote computers. These data begin with the logs of a user's searches (in effect, a record of his interests) and his responses to advertisements. Often they extend to the user's e-mail, calendar, contacts, documents, spreadsheets, photos and videos. They could soon include even the user's medical records and precise location (determined from his mobile phone).

More JP Morgan than Bill Gates

Google is often compared to Microsoft (another enemy, incidentally); but its evolution is actually closer to that of the banking industry. Just as financial institutions grew to become repositories of people's money, and thus guardians of private information about their finances, Google is now turning into a custodian of a far wider and more intimate range of information about individuals. Yes, this applies also to rivals such as Yahoo! and Microsoft. But Google, through the sheer speed with which it accumulates the treasure of information, will be the one to test the limits of what society can tolerate.

It does not help that Google is often seen as arrogant. Granted, this complaint often comes from sour-grapes rivals. But many others are put off by Google's cocksure assertion of its own holiness, as if it merited unquestioning trust. This after all is the firm that chose “Don't be evil” as its corporate motto and that explicitly intones that its goal is “not to make money”, as its boss, Eric Schmidt, puts it, but “to change the world”. Its ownership structure is set up to protect that vision.

Ironically, there is something rather cloudlike about the multiple complaints surrounding Google. The issues are best parted into two cumuli: a set of “public” arguments about how to regulate Google; and a set of “private” ones for Google's managers, to do with the strategy the firm needs to get through the coming storm. On both counts, Google—contrary to its own propaganda—is much better judged as being just like any other “evil” money-grabbing company.

Grab the money

That is because, from the public point of view, the main contribution of all companies to society comes from making profits, not giving things away. Google is a good example of this. Its “goodness” stems less from all that guff about corporate altruism than from Adam Smith's invisible hand. It provides a service that others find very useful—namely helping people to find information (at no charge) and letting advertisers promote their wares to those people in a finely targeted way.

Given this, the onus of proof is with Google's would-be prosecutors to prove it is doing something wrong. On antitrust, the price that Google charges its advertisers is set by auction, so its monopolistic clout is limited; and it has yet to use its dominance in one market to muscle into others in the way Microsoft did. The same presumption of innocence goes for copyright and privacy. Google's book-search product, for instance, arguably helps rather than hurts publishers and authors by rescuing books from obscurity and encouraging readers to buy copyrighted works. And, despite Big Brotherish talk about knowing what choices people will be making tomorrow, Google has not betrayed the trust of its users over their privacy. If anything, it has been better than its rivals in standing up to prying governments in both America and China.

That said, conflicts of interest will become inevitable—especially with privacy. Google in effect controls a dial that, as it sells ever more services to you, could move in two directions. Set to one side, Google could voluntarily destroy very quickly any user data that it collects. That would assure privacy, but it would limit Google's profits from selling to advertisers information about what you are doing, and make those services less useful. If the dial is set to the other side and Google hangs on to the information, the services will be more useful, but some dreadful intrusions into privacy could occur.

The answer, as with banks in the past, must lie somewhere in the middle; and the right point for the dial is likely to change, as circumstances change. That will be the main public interest in Google. But, as the bankers (and Bill Gates) can attest, public scrutiny also creates a private challenge for Google's managers: how should they present their case?

One obvious strategy is to allay concerns over Google's trustworthiness by becoming more transparent and opening up more of its processes and plans to scrutiny. But it also needs a deeper change of heart. Pretending that, just because your founders are nice young men and you give away lots of services, society has no right to question your motives no longer seems sensible. Google is a capitalist tool—and a useful one. Better, surely, to face the coming storm on that foundation, than on a trite slogan that could be your undoing.

Source: From The Economist

Murdoch, a Folk Hero in Silicon Eyes on Future of Media

At the Web 2.0 Summit a few weeks ago, MySpace held an after-party at the San Francisco Museum of Modern Art. With a guest list of Silicon Valley luminaries and a party room redone in white — carpet, chairs, table and yes, mostly people — it was a very post-modern indication that MySpace, the social network owned by the News Corporation, was ready to engage with its brethren to the north by opening an office here.

Half an hour into the party, there was a ripple of excitement, and people started murmuring and pointing toward the door. When the crowd parted, I expected to see Mark Zuckerberg, the young overlord of Facebook, or Steve Ballmer, the battle-hardened Microsoft veteran. Then again, this is a MySpace party, so maybe Britney Spears or Lindsay Lohan? Instead, it was Rupert Murdoch — old school, old media, and at 76, just plain old.

From the reaction of the crowd, it might as well have been Lindsay Lohan. He was overwhelmed by an immediate onrush of hospitality as the geekerati lined up to get a word with him.

Back East, the elites generally regard Mr. Murdoch, most especially with his purchase of The Wall Street Journal, as if a particularly unpleasant coup was under way. He is treated much the way he is in London (where he has owned The Times for more than 20 years), as an immigrant, a man of suspect values and provenance, even though he runs a $70 billion diversified media company.

In the United States, Mr. Murdoch’s appeal is thought to work in the heartland, where Fox News takes aim. But on the left coast, Mr. Murdoch is truly among friends. The attendees at the Web 2.0 conference know him as the ultimate market timer, the guy who swooped in out of nowhere and bought MySpace for $580 million two years ago, before its audience doubled and before social networks became the platform of the future. And this was before Facebook got a valuation of $15 billion via an investment from Microsoft on Wednesday.

“This is not just another rich guy — there are a lot of those around here,” said John Battelle, one of the summit’s hosts. “He built News Corp. from not much, with his own two hands, and this is a room full of entrepreneurs. The other thing this room respects is intelligence, and they can tell he is smart, really smart, not just from what he says, but what he has done with MySpace.”

The same characteristics that make Mr. Murdoch a nonmember of the club in the East — a lack of correctness and, occasionally, business civility — make him something of a folk hero in the context of the new economy, which is peopled by insurgents who see him as a fellow pirate, even though he already captains a giant ship.

In a joint interview on the stage of the summit with Chris DeWolfe, a MySpace founder, earlier that night, Mr. Murdoch brandished both humility and hubris. He said that the folks at News Corporation were “trainees” when it came to new media but added elsewhere that CNBC was “half dead,” that MySpace was probably worth 30 times what he had paid for it, and he all but licked his lips when he responded to a question about whether he would like to use The Wall Street Journal to “kill” The New York Times.

“That would be nice,” he said.

At a conference where most chief executives proceeded with euphemistic elegance — Mr. Ballmer stonewalled questions about negotiating for a piece of Facebook even as the deal was being consummated and gave a long answer to a question about Google without mentioning its name — Mr. Murdoch answered almost every question put to him, often naming names and frankly laying out his ambitions. He was a hit in the room and the belle of the ball afterward.

And in a move that plays like raw meat in this lion’s cage of developers, Mr. DeWolfe and Mr. Murdoch said MySpace would open the platform to applications or so-called widgets from outside programmers, a decision Facebook made in the spring.

“He is candid and he is aggressive,” said Jason Calacanis, who sold his start-up, Weblogs, to AOL for a reported $25 million two years ago. “He said during the discussion that he basically wanted to crush The New York Times and crush CNBC. When do you hear somebody in that kind of position being so candid?”

It’s not just Mr. Murdoch’s aggression the audience responds to. In a speech to the American Society of Newspaper Editors in 2005, Mr. Murdoch suggested that newspapers were “immigrants” to the digital space who needed to learn from “natives.”

He seems to have gotten the hang of things pretty quickly, telling the Web 2.0 crowd, “No one delivers huge audiences anymore.” One of the conference’s themes was that advertisers, who will finance things as diverse as cellphones and desktop applications, are no longer after just eyeballs, but consumer behavior, too.

For a so-called old media company, News Corporation has done significant work to move from taking orders for mass inventory to offering focused buys with specific audience characteristics. Mr. Murdoch recently bragged at a conference about being able to deliver, say, all the optometrists in the London area — which is very Web 2.0, as they say.

I waited my turn in the queue at the party, and Mr. DeWolfe, who had just signed a deal for two more years with News Corporation, made an introduction. Amid the throbbing house music, Mr. Murdoch and I chatted briefly about his purchase of The Wall Street Journal, which will be completed in December.

Perhaps in an effort to keep cognitive dissonance at bay, the journalists I know at The Journal have changed posture from doomsaying to a growing curiosity about what it will be like to work for someone who actually wants to invest in newspapers. I mentioned as much to Mr. Murdoch. “That is the sense I am getting,” he said.

I also joked that he might have to cut a lot of checks to compete with my employer for national and international news, adding that this has been a tough business of late. But he insisted there was “plenty of room for growth” in the newspapers.

“We can’t wait to get started,” he said.

Others can’t wait either. “Who isn’t interested in seeing some other newspaper people who want to fight and do bold things?” Mr. Calacanis observed. “Murdoch is someone who is actually investing in newspapers. Even you have to be rooting for that.”

Source :nytimes.com