The X, Y, Z’s of Monopoly: Why Alphabet Is (Still) Dangerous

Press Club Luncheon With AOL's Tim Armstrong And Arianna Huffington
AOL CEO Tim Armstrong and Huffington Post co-founder / white feminist idol Arianna Huffington (yes, she named it after herself)

Back in February I reported on the first quarterly earnings that Google submitted as its new conglomerate Alphabet. In that piece I broke down how Leftists should be very concerned about this new conglomerate’s ability to avoid traditional means of breaking up monopolies and its rise as the leader of technological innovation, second only to the US government itself.

There have been two important developments since then that are worth addressing. First, that the European Union has brought a second antitrust charge against Google. Second, that the Morning Star of the internet Yahoo has been bought by internet service provider Verizon.

Monopoly is a tricky subject when it comes to Marxists, and exposes a major divide between its political leaders and its economists. Leaders like Che Guevara and Lenin regularly posited monopolies as an evil of capitalism or even a contradictory tendency of free market competition creating monopolies. Conversely, economists like Ernest Mandel and Michael Roberts are not convinced that monopolies are some inherent tendency of capitalism, or even in Roberts’s case find it to obfuscate that the issue is capitalism itself. Those who do find it of significance like the Monthly Review School still admit that “There are powerful counter-tendencies—the breakup of existing firms and the founding of new ones—which have been strong enough to prevent the formation of anything even remotely approaching [a worldwide] general cartel.”

Overall I lean more towards the view that the evil of capitalism is not that it creates monopolies, but rather that it robs people of their humanity by extracting the value of their labor, and all the resulting consequences. However, monopolies can be a powerful tool to accomplish such extraction in exceptionally cruel and powerful ways. So while breaking up monopolies should never be the ultimate goal, it may be one worth pursuing in certain circumstances. And despite the recent developments, I still believe that Alphabet poses a great risk to the workers of the world.

On April 20, the European Union charged Google for the second time with an antitrust charge (I talk about the first one in my  last post). Particularly EU regulators went after how Google requires mobile phone manufacturers to pre-install Google Search and Google Chrome if they want to have access to any other Google apps. Though it is not the first of such suits, this lawsuit demonstrates the evolution of the market and the increasing importance of apps for both advertising and subscription fees (though Google of course provides all of its apps for free). The EU states that Google’s tactic has allowed it to be the app used for a staggering 90% of searches made on Android phones. Since 80% of the EU’s smart phones are androids, this means 72% of searches made on smart phones there are done on Google. This is high, but only marginally higher than Google’s general market share of searches, reported last quarter to be 70.41%. While I would not claim to know where this lawsuit will go, market experts, Google staff, and all of its competitors aside from Mozilla Firefox have been fairly nonchalant.

The news which came out today is that Verizon is purchasing Yahoo for $4.8 billion. What does this have to do with Google? Last year Verizon bought AOL for $4.4 billion. Former CEO of AOL Tim Armstrong was intimately involved in this deal, seeing it as a way to accomplish what he had wanted when he proposed a merger between AOL and Yahoo in 2014. Both Armstrong and Yahoo CEO Marissa Mayer got their starts at none other than Google. Armstrong receives a lot of praise in the press, not so much for successfully turning the company around (he did not) but because of his character, that he stuck to AOL even though it was an unpopular company. However, it seems pretty clear that Armstrong does have a mission, and that mission was to unite AOL and Yahoo. With the two now under the same roof, they receive 50% total more unique visitors than Google does. And they have the backing of one of the largest internet providers in the world.

This merger has increased the Herfindahl-Hirschman Index of the search engine market (though it also rose because of unrelated factors). Yet even with the merger Yahoo is still only 4th in market share for search engines and 8th for email. It’s own hilariously named attempt at a browser AXIS (how did that get approved?!) was a complete failure and its acquisition of Rockmelt was met with disdain from its own investors. Tumblr’s acquisition was a gift that they squandered and WordPress quickly filled that gap, stealing thousands of users in 2015 (including yours truly).

In conclusion, monopolies are not everything and we should not let a preoccupation with them distract us from capitalism itself being the problem. However, Google is a force to be reckoned with, and even with its competitors in the market rallying against it, it does not look like its growth and acquisition of power will end any time soon.

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