As part of the ongoing battle between Google and EU regulators, Eric Schmidt published an open letter on the Google Europe blog arguing that Google is built for users first, not for publishers.
Ignoring the blatant lie in that statement – nowadays Google is built first and foremost for advertisers, their only real customers – if we take Schmidt’s statement at face value, it’s a horribly naive position for them to adopt.
In most industries, putting users first is perfectly sensible. Manufacturers especially should always take their users best interests to heart and design their products accordingly.
Google, however, is not a manufacturer. Google is an intermediary, connecting users with information sources. And, as any intermediary, it has a responsibility towards both sides of their value proposition.
If we take the examples of other intermediaries, we immediately recognise the need for these companies to perform a balancing act between what’s best for their users and what’s best for their suppliers.
The Balancing Act
Supermarkets are intermediaries, connecting consumers to manufacturers. A lot of supermarkets want to do what is best for their users – low prices – but need to balance this against the needs of their suppliers. If supermarkets like Tesco err too much on the side of consumers, the end result is a lower quality of product. It’s an inevitable outcome in their ecosystem, where continued price pressures on manufacturers urge them to drive down costs at the expense of all other concerns, which in turn leads to lower quality labour and ingredients, and eventually a lower quality product.
The same is true in the travel industry. Intermediaries like Expedia want to offer their users the best possible deals, but at the same time hotels and airlines want to maintain a decent standard of service. It’s a tight balancing act, and one that forces these intermediaries to weigh the benefits of their users against the needs of their suppliers.
In the travel industry, if there’s too much downward pressure on price, hotels and airlines can opt out of Expedia’s intermediary platform and try to win customers through other channels. This is a sensible option in many other intermediary ecosystems, which helps keep the intermediary platforms honest.
In Google’s case, however, their near-monopolistic dominance in Europe ensures it is commercial suicide for companies to opt-out of Google’s intermediary platform. The resources required to win customers outside of Google’s ecosystem is vastly beyond the limits of most organisations.
Google’s Unique Intermediary Economy
On top of that, Google has a rather unique position in that it has free access to the source of their offering. Due to the free and open nature of the web, Google’s ‘suppliers’ – the very publishers Eric Schmidt is criticising in his letter – have to opt-out of Google’s ecosystem. By default the entire web is Google’s supply chain.
In years past, the value proposition was clear for publishers: Google takes their content for free, and in return Google sends a lot of visitors to the publishers’ websites.
However, increasingly Google has skewed this value proposition in its own favour. Instead of sending users to the publishers’ websites, Google aims to keep them on their own properties so it can harvest more data from them and use this to make more money from their real customers (i.e. advertisers).
It is precisely this unbalancing of the ecosystem that publishers are riling against, and that the EU regulators want to address.
The Wrong Perspective
The problem is, at its core, that Google doesn’t see itself as an intermediary. Google sees itself as a manufacturer (of advertising platforms), and is loathe to take the needs of their suppliers in to account in any decision it makes.
This is problematic on many different levels. First and foremost, if Google continues to deny its place in the internet ecosystem as an intermediary, it will continue to monopolise users’ online behaviour to improve their value for advertisers and thus secure their growth.
As a result their suppliers – online publishers – will be forced to drive down costs, with all the negative repercussions. Many will go out of business entirely, which in the long run undermines Google’s own service as it will have less content to serve to its users, and the content it does serve will be of lower quality.
And it’s not just publishers that Google is putting under pressure. Almost every online industry is already, or will be at some stage in the future, subject to Google’s ‘users first’ mantra when it decides it can offer a better service. We already see Google moving in to verticals such as local, travel, and finance.
Eric Schmidt’s ‘users first’ statement is testament to the incredibly naive mindset that pervades Google. The company still believes at its core that it’s a small startup, fighting the good fight against the establishment. This is profoundly and willfully ignorant.
Google has long since ceased to be a small startup, and is in fact a monstrously dominant powerhouse capable of causing untold destruction to every industry it touches. The company’s failure to even remotely appreciate this fact should be a grave cause for concern for everyone that cares about the web’s egalitarian promise.