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Will Google Need a Bailout Some Day?

24 November 2008

A pair of articles today — one on how useful Google is, and how Google wants "a little bit of Google in many parts of your life", and one on reported layoffs at Google (but also see this) — made me wonder: if, 50 years from now, Google is in some sort of crisis, would it be too big to fail?

Naturally, it's hard to imagine that Google could fail. Of course, 50 years ago, it was hard to imagine the state of today's U.S. auto industry, or what has happened to this country's steel industry. It's certainly not inconceivable that some day, Google, too, may be a creaky dinosaur, unable to cope with a changed environment. But a bailout? Perhaps...

The defining characteristics of those companies that are the current recipients of today's Federal largesse is that they're big: AIG, Citigroup, etc. They've been called "too big to fail", because their failure would have a drastic effect on the rest of the economy. Could that describe Google some day?

Today, Google all but owns the search market. They're a major player in Internet advertising. They're one of the biggest mail hosts. It isn't a stretch to believe that several decades from now, there won't be other major players, and that we'll all be massively dependent on Google. Besides, there's another issue: if they do fail, what happens to all of their data on Google users? Sold to the highest bidder? What will happen? What should?

To be sure, much (arguably, most) of Google's prominence is due to sheer technical excellence. But "too big" is too big, regardless. Would we be better off if there were barriers to any companies achieving such market dominance in critical fields? As I understand U.S. antitrust law, market dominance per se is not illegal; however, anti-competitive practices to achieve or maintain such dominance is. Perhaps that is the wrong standard?

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