European Affairs

Perspective: Google and German Angst     Print Email
Thursday, 07 August 2014

mzeiner01Recently, Germany’s Minister of Justice, Heiko Maas, was asked how often he used Google to search the internet. His answer: “Everyday and in an exorbitant manner. Therefore, unfortunately, I am part of the problem.”

The way the Social Democrat described his digital behavior reflects the increasingly ambiguous relationship many Germans have with Google’s services ---whether it is the search engine, Googlemail, Googlemaps, Googletranslate or anything else Google. When looking something up on the internet 90 percent of Germans use Google – significantly more than the worldwide average of roughly 70 percent. The internet giant has not only become ubiquitous. Google has become inescapable.

 

However, in the wake of the Snowden revelations about NSA surveillance, Google is also associated with data mining, clandestine data transfer to government authorities, secret surveillance, disrespect of privacy, and cooperation with the US government, That is at least the narrative. And in Germany – it sticks with many.

After grumbling about his own digital footprint, Heiko Maas began ruminating about possible consequences for Google. If a company dominates a market with more than 90 percent share, he said, and if this company is misusing its de-facto monopoly, antitrust authorities would be quick to react. “Then, as a last resort, breaking up (of Google) should be taken into consideration.”

Maas is not alone, echoing what German Minister of Economics and Vice-Chancellor Sigmar Gabriel had said earlier in an op-ed for “Frankfurter Allgemeine Zeitung” last May, Gabriel wrote “that a [Google] break-up as we did with the energy and gas networks should be seriously considered.” Germany has “to oppose the dictation of the Internet giants.” His ministry will look into Google's actions and see whether there is a misuse of market power, he announced.

Although the European Union has refrained so far from calling for a break-up of Google, Competition Commissioner Joaquin Almunia has opined in a letter that the European Commission was prepared to investigate “various practices” in the new “markets that are affected.” In particular, he cited social networks, streaming, cellphone operating systems and mobile apps as areas that could face scrutiny.

But is asking for breaking up of Google - as happened with AT&T or Standard Oil in the past century – really the right thing to do? Is this merely the anxious response to the explosion of the internet and Google’s growing dominance.

It is true: The digital world is expanding at a speed that is breathtaking and uncomfortable for some. The accommodation service Airbnb is serious competition for hotel chains, the taxi service Uber is putting a squeeze on traditional cab services. Homejoy (a Google subsidiary) is trying to make conventional cleaning services obsolete by providing an internet platform where self-employed cleaners can advertise themselves – for $20 an hour. Facebook, Google and Ebay (through offspring Paypal) already have or are applying for bank licenses. In April, the Financial Times reported, that Facebook “is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others”. In the UK Google Payments LTD is already authorized and regulated as an electronic money institution.

It seems likely that what we see here is only the beginning. If Jeremy Rifkin, economist, theorist and political adviser, is right, the digital age is going to reduce marginal cost in the production process to almost zero – at least in a significant number of areas. This is what he lays out in his new book “The Zero Marginal Cost Society” that was published in April. Why? Because web platforms like UBER can be expanded from 100,000 to one million or ten million visitors - with only minimum expense. Connecting things with the internet increases productivity – and at the same time rendering non competitive old businesses that rely on pre-internet models. And Google – whether rightly or wrongly – stands as the symbol for all of this “creative destruction.”

It is against this background that the head of the noted German publishing house Axel Springer, Mathias Döpfner, recently shared his growing concerns in an open letter to Google chairman Eric Schmidt. “Wir haben Angst vor Google,” [‘we have angst about Google”] he wrote.

Döpfner, a marquee Google critic, complains that the secret algorithms, the news aggregation, and the sheer market dominance of Google makes publishers increasingly dependent on Google. Since much of the traffic to their online products goes through the Google bottleneck, Springer has only limited means to steer by itself the traffic to its own website. And if that were not enough, Google gets the clicks for free. They don't pay Springer or any other media business for the content they are using - while the producer of the news can only hope that the user will not remain on the Google website but will be moving on to the original source. Only then Springer is paid by the currency of the internet: Clicks-traffic and advertisement revenue.

Markus Ziener is an author, University teacher and former Washington Correspondent of the German business paper Handelsblatt. He is based in Berlin.