Business December 2007

Google’s Tar Pit

Can Google “not be evil” and still fend off the government?

The lawn outside Google’s headquarters in Mountain View, California, is dominated by the imposing visage of “Stan”—tail thrashing, jaws agape, a full replica of the largest Tyrannosaurus rex fossil ever discovered. Stan mysteriously appeared on the lawn one morning several years ago, and is presumed by Google employees to have been a gift from the company’s quirky founders, Larry Page and Sergey Brin.

Like its corporate mascot, the search-engine giant has established itself at the top of the food chain, which helps explain why it has begun drawing scrutiny from Washington—much as Microsoft did when it was the hottest business of the 1990s. For now, interest is focusing on Google’s proposed $3.1 billion acquisition of the online advertising firm DoubleClick, a deal the Federal Trade Commission delayed earlier this year over antitrust concerns. Any day now, the FTC is expected to decide whether the merger would create an entity that controlled so large a share of the online advertising market that it would be, in effect, a monopoly.

At the same time, many businesses overshadowed by Google have begun looking for political arguments that might slow its seemingly unstoppable ascent. “There is no company on the face of the planet that scares as many businesses as Google,” says Blair Levin, a telecom and media analyst at the financial-services firm Stifel Nicolaus. The most popular and potentially effective argument against Google is the charge that it has become a monopoly that needs reining in. (The political power of this criticism is increased by fears that Google will misuse the vast amount of personal data it has accumulated.) In late September, Congress held the first antitrust hearings concerning Google—the opening salvo in what is likely to be one of the most important business and policy stories of the next few years.

The computer world is in the midst of its next great transition, as many applications and services—word processing, spreadsheets, e-mail, data storage—migrate from the personal computer to the Internet. Success for all sorts of businesses will soon depend on whether customers have easy and fast access to these Internet-based applications. Because gaining primacy will involve winning battles over regulation and federal oversight, companies like Microsoft and the major cable and telephone companies are now squaring off against Google in an arena where it has never competed and they have: Washington.

Until recently, a company’s Washington strategy tended to evolve at the same pace as its business. As the company grew larger, it would add lobbyists and advisers to protect its interests. But as Microsoft grew more powerful in the 1990s, it mostly ignored politics. It had gotten to the top of the new economy without aid or interference from Washington—why change? Microsoft assumed the government posed no threat—until its competitors persuaded the Justice Department to launch an antitrust suit. Though the company avoided a breakup, its stock price stagnated for years.

Microsoft’s example illustrates a pro­blem that can plague any fast-growing tech company: You can control vast markets and terrify your competitors, but still be a Washington rookie. As the government focuses on Google, the city’s familiar machinery is gearing up for battle on the question of whether the company is the large but benign force for innovation its corporate slogan, “Don’t be evil,” suggests—or whether, like Stan, it’s a carnivore on the loose.

Six years after settling its antitrust suit, Microsoft now spends around $9 million annually to maintain a powerful presence in the capital. Its example certainly shows that you ignore the government at your peril. But Google has achieved astounding success by doing things differently—by taking what it cloyingly calls a “Googley” approach to business. And it’s now trying to take what one official described to me as a Googley approach to Washington: bringing the company’s quirky style to a place that is a bastion of rules and traditions.

Google says it doesn’t plan to follow the time-tested strategy of hiring lots of Washington lobbyists, the way rivals like AT&T and Verizon do. (Last year AT&T spent $23 million on lobbyists; Verizon $13 million. Google spent less than $1 million.) But it has lured presidential hopefuls, including John McCain and Hillary Clinton, to Mountain View: A tour of the “Googleplex” has become a campaign rite of passage. YouTube, a Google subsidiary, has sponsored presidential debates. In Washington, the company has been offering free classes to Hill staffers, ostensibly to familiarize them with the latest cool apps—but really to familiarize them with the company and to push back against the notion that it has become too big and too powerful.

The “try us, you’ll like us” strategy at the heart of Google’s self-image—the belief that familiarity will breed friends—has usually worked. But not always. A few applications, such as Google Earth, have generated alarm—some people were less than delighted when highly detailed photographs of their front yards began appearing online. And so far the strategy hasn’t been very popular in Washington.

Earlier this year, Google failed to win legislation that would have ensured it could serve customers as quickly as its rivals, using media such as the cable lines and wireless spectrum those rivals control. The telecoms adopted a conventional strategy, buying expensive “issue ads” in Washington newspapers and on cable-television stations. Google chose a nontraditional route, creating ironic Web videos that aimed for viral appeal. The ads were clever, they were Googley, and they didn’t do the job.

The company did win a partial victory on another big issue. In January, the government will auction off the block of wireless spectrum that will become available in 2009 when television broadcasters switch from analog to digital. Google lobbied the Federal Communications Commission to make the block freely available to any Internet-based application—the core of Google’s future business. Instead, the FCC declared that only a portion would be open, leaving Google with the option of deciding if it will participate in the multibillion-dollar auction to buy the entire block or make do with access to just a portion of it.

But the battle it really needs to win— the one it has so far been unable to head off—is easing government antitrust concerns.

Google has yet to hit upon a strategy that combines the innovation it is known for with an appeal to the self-interest that is the currency of the capital’s power brokers. One reason AT&T and Microsoft have succeeded in stoking antitrust interest against Google—quite ironic, given that both companies have been subject to large government antitrust actions—is that they’re better versed in the fine points of lobbying. Both companies, for example, hold sway over many lawmakers by frequently reminding them how many employees live in their districts (“jobs” is a metric lawmakers respond to).

But the number of people who earn money advertising on Google is also impressive: a reputed 2 million to 3 million (Google won’t provide the number), in small businesses and big corporations alike, spread across congressional districts throughout the country. If Google could learn to speak the language of Washington—jobs, small businesses, constituents—and harness these millions of entrepreneurs to support both its interests and theirs, it would be much closer to creating a strategy that is both Googley and effective.

In the meantime, the best thing Goo­gle has going for it is that even though it is by far the leading provider of online advertising, it has displayed none of the hyperaggressive attitude of Microsoft at a similar ascendant stage. But even a responsible company can grow into a monopoly, and Google’s professed desire to “organize the world’s information” suggests no lack of ambition, even if the company also professes that it will do no evil.

Just as Google has begun thinking creatively about Washington, the government has been thinking about Google. In his 2005 book, The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture, John Battelle notes that Microsoft’s control of the PC’s basic operating system in the 1990s made its system a virtual gateway to the Internet, and he posits that as the Internet continues to expand, the search function itself might become a similar gateway. The idea has found purchase among some government lawyers thinking about Google—and could suggest a Googley approach to antitrust law. As Google continues to grow, its greatest challenge may come not from Verizon, AT&T, or any of the other rivals plotting against it. As with Microsoft a decade ago, the challenge may come from the federal government.

Joshua Green is an Atlantic senior editor.
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Joshua Green is a former senior editor at The Atlantic.

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