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Google Considered Too Big To Fail
theodp writes "Doc Searls is worried about the way Google makes money. 'Nearly all of it comes from advertising,' he frets. 'That's what pays for all the infrastructure Google is giving to the rest of us. As our dependency on Google verges on the absolute, this should be a concern.' Have we reched Peak Advertising? Blogger Dave Winer says amen, asking if Google is already 'too big to fail.'"
As we know "Too big to fail" does not mean that they can't fail, but that they are so large that failure would mean intervention from the governement on a large scale as it would otherwise take down the country. Which means that if they fail, something will be done to guarantee that somebody must take over the damage.
Look at the banks that failed and were called "too big to fail."
Don't fight for your country, if your country does not fight for you.
If, in fact, the efficacy and saleability of online ads is crumbling, then we are currently enjoying a period where assorted google services and development initiatives are being subsidized for us by the suckers at various firms with advertising budgets. Presumably, if they catch on to the fact that they aren't getting bang for their buck, that subsidy will dry up.
It is always a sad occasion to lose a subsidy that was previously benefiting you; but it is only a disaster if there aren't other ways of paying for whatever it is that you need. In the case of Google, they have already been playing with pricing schemes for enterprise versions of various of their services, and it wouldn't be rocket surgery for them to roll out retail equivalents if the ad market really tanks(Frankly, I for one would in some respects be relieved to be paying straight, rather than in personal data). Given their years of experience running their services on the comparatively thin sauce of advertising money, Google could still easily offer very competitive pricing.
The people I would be much more worried about are the huge number of random third party websites that run ads in order to more-or-less break even on bandwidth/hosting. Because Google is big, and comparatively trusted, and offers services that most of its users use more or less continually(ie. I might visit "randomwebsite.com" once, or once every few months, but I'm likely to check a gmail account or do a bunch of google searches every day to every few days). If the ad market does in fact tank, Google, and similar large entities, will be able to just start billing directly without transaction costs eating them alive. Since micropayments are still more or less a pipe dream, the little guys won't be able to do the same.
Having to pay $X/year for gmail would be a minor nuisance. Having large numbers of ideosyncratic 3rd party sites either dry up or move into walled gardens who would act as payment processors/aggregators(Hello iTunes!) would be a serious and negative change to the web.
This is particularly a concern because, while Google is quite good at what it does, most of its offerings are in substantially commodified markets. Gmail is one of the better free webmail services out there; but it is hardly the only one. Even if all free webmail services dried up, pay webmail services of quite modest cost are also a dime a dozen. Our only "absolute dependence" on Google is exactly the same dependence on any email provider, the fact that switching email addresses sucks. In search, again, Google is good at search; but switching to a different search page isn't terribly difficult. A few legacy devices/programs that depend on some search API and cannot be usefully updated might be up shit creek; but everybody else would be fine. Android would probably suffer if its primary developer/main unifying backer disappeared or defunded the project; but there would be nothing stopping the core OSS components moving forward on the devices of whoever wanted to use them. The fact that all this has traditionally been free is handy; but switching to paying for it, either from Google or from somebody else, would be doable.
It is the thousands of random little guys, occupying all the weird little unique niches, that would be more of an issue. Few of them are large enough to make subscription pricing reasonable, even if people would stand for that, and micropayment is going nowhere outside of walled gardens that aggregate the micropayments, which aren't a terribly encouraging development.
This I fundamentaly agree with. In my view "too big to fail" actually means "too wedded into the rest of economy to be alowed to fail". The banking system (certainly here in the UK and as I understand it in most of the world) was just that. Not only were individual banks so big that if they collapsed they would bring down vast sections of the economy but they few huge banks there were all made the same stupid mistakes so the same conditions meant they were all about to fail at the same time (the 1930s would have looked like nothing if the governments hadn't stepped in).
By comparison Google provide:
- web searching services; but if they disapeared then most of us would just move to Bing or Yahoo.
- maps and GPS navigation; most of us would get by without it, thouse that wouldn't are probably using TomTom anyway
- email; this could cause more of a problem for people as email accounts take a while to mature. That said, not many businesses use Google mail so it would people's personal mail boxes that would be effected and people can probably manage their lives without them.
- other web tools (e.g. blogging, Google Health, YouTube etc) OK; a few people might be a bit upseat and Google Health might have to be sold off but, big deal.
My gut feeling is if Google disapeared overnight a lot of us would be confused for a few days an then get over it. Hardly too big to fail.
But... supposing they DID control significant parts of Business communications; or DID manage 50% digital health records; or DID run the most successful micro-payment scheme in the world; etc. Not unlikely scenarios and then I think they might be too big to fail.
- Christopher