Kara Swisher

Recent Posts by Kara Swisher

Too-Powerful Google Thumbs Its Nose at Everyone–Good Luck With That, Eric!

It used to be, many years ago, that longtime Silicon Valley tech exec Eric Schmidt could work up a very significant head of steam when talking about the thuggish monopolistic practices of Microsoft and its negative impact on the tech industry.

And, for the most part, Schmidt was dead right–Microsoft’s overwhelming power then had a malevolent impact, both directly and indirectly, on innovation and openness in the digital sector.

Thus, BoomTown is both gobsmacked and a bit in awe that Schmidt–now sitting atop the high-tech pig pile as CEO of the powerful search giant, Google–can, with a straight face, make the argument that everyone is wrong to be nervous about its deal with Yahoo to serve some of its search and text advertising, even though the pair control more than 80 percent of the search market.

Because while Google displays none of the bullying tactics of Microsoft in its glory days–think of it more like a giant that could accidentally squash all us little people with its big dumb feet–the worries about it amassing too much power are well-founded.

Along with customers, competitors and anyone who fears a concentration of power in the hands of one player, I have been a critic of the deal since it was announced in the spring as a Hail Mary play to get Yahoo out of the clutches of Microsoft.

In addition, the Justice Department has hired an outside litigator to decide whether to proceed with an antitrust investigation of the deal and possibly look into Google’s business more deeply.

And just today, comScore released new stats for search market share for August; Google’s rose once again to 63 percent, up from 61.9 percent.

Both Yahoo (YHOO) and Microsoft (MSFT)–the distant No. 2 and No. 3–lost share, logging in at 19.6 percent and 8.3 percent, respectively.

In addition, Google (GOOG) accounted for 77.4 percent of all search engine spending in the second quarter of 2008, according to Efficient Frontier.

And–oh, yes–Google-owned YouTube dominates online video rather significantly.

Translation: Scary, like that-bullying-banker-Mr. Potter-from-“It’s a Wonderful Life” scary.

Still, at a press conference yesterday– my invitation must have gotten lost in the email so I will have to rely on the quotes collected by others–Schmidt went on the offensive to defend the Yahoo deal, which is set to begin in a few weeks, in a most peculiar way.

“While we have been talking to regulators, we don’t know what their position is,” Schmidt said. “We don’t know if they think it’s a good deal or poor deal.”

But Schmidt and other Google execs–including co-founders Larry Page and Sergey Brin–said they would move forward with or without regulatory approval.

“Time is money in our business,” said Schmidt, who also noted the deal was “designed precisely to meet the terms of antitrust law in the United States.”

Well, I am not sure being within the letter of the law is quite the argument I would make. After all, one can be entirely correct–and Google does love to be mathematically accurate!–and still be completely wrong.

Yet Schmidt pressed on!

“You face a question as a large company trying to change things: How many initiatives do you want to take on that are unpopular or lead to criticism?,” he asked, pontificating as if he were fighting for better health care for the world’s poor instead of just being able to sell small text ads hawking things like Viagra and electronics.

Schmidt said the deal would have “strong user benefits” and not raise online ad prices, part of Google’s basic argument that its auction-style business model makes that impossible.

As a side note, Brin–who was, I think, being completely genuine–said Google also felt a debt to Yahoo co-founders Jerry Yang and David Filo for helping Google get started a decade ago.

(Ironically, being the search option on Yahoo’s homepage was the key way Google grew and Yahoo damaged its future prospects).

But, while the payback argument is very touching, it ignores the fact that–on its very face–the No. 1 and No. 2 search and search-ad companies should never be in business together.

That Google leadership does not seem to understand these fears is disturbing.

And with what can only be described as an oafishly arrogant style, they seem to be dismissing anyone who raises concerns as being uneducated or simply a front for Microsoft’s lobbying efforts.

“We are quite certain Microsoft is busy helping everyone get upset about things,” said Schmidt, who has long loved to slap Microsoft at any opportunity.

As if we are all in the thrall of Microsoft (whom I, for one, smack around daily for its dopey Web strategies).

Google, it seems, is in the thrall of no one.

While the deal has been voluntarily delayed by three months, the redacted agreement Yahoo released said it had 105 days from June 12 to start. That would be Sept. 25.

Under terms of the agreement, either Yahoo or Google could end the deal after 120 days from when it was struck, if it was not “commercially reasonable” for either to defend. That would be Oct. 11.

In addition, Yahoo or Google can end the deal if a court later enters an injunction.

But Google does not seem to care about a possible noisy government investigation, which it should.

While Google is in no way guilty of the kind of behavior that got Microsoft into hot water, not caring what anyone thinks was perhaps the most disastrous error of hubris that Microsoft’s Bill Gates (he is pictured on the stand here) made when the federal government came at him and took him to trial.

After a long and bruising court battle in which the judge ruled the company had violated antitrust laws, in which Gates came off very badly, Microsoft eventually settled via a consent decree to rein in some of its behaviors.

And I think we can all agree that Microsoft emerged from that encounter deeply wounded and with diminished momentum that continues to resonate today for it.

There was one thing that Schmidt said yesterday at the press conference that I do agree with: “There is a natural fear of things getting larger.”

Yes, Eric. And, naturally, more people than ever fear Google.

And while that fear has not seeped down to consumers and impacted Google’s terrific brand quite yet, it surely will, especially if Google keeps claiming that it is not all that powerful when anyone with eyes can plainly see that it is.

Just ask Microsoft.

Please see this disclosure related to me and Google.

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— David Pogue on why he’s joining Yahoo