[This fragment is available in an audio version.]
It’s easy to say “Break up Big Tech companies!” Depending how politics unfold, the thing might become possible, but figuring out the details will be hard. I spent the last sixteen years of my life working for Big Tech and have educated opinions on the subject. Today: Why and how we should break up Google.
Where’s the money? · Google’s published financials are annoyingly opaque. They break out a few segments but (unlike Amazon) only by revenue, there’s nothing about profitability. Still, the distribution is interesting. I collated the percentages back to Q1 2018:
| Ads on Google | Ads off Google | Ads on YouTube | Cloud | Other | |
|---|---|---|---|---|---|
| 2018 Q1 | 70.97% | 14.84% | ? | ? | 14.19% |
| 2018 Q2 | 71.69% | 14.77% | ? | ? | 13.54% |
| 2018 Q3 | 71.73% | 14.58% | ? | ? | 13.69% |
| 2018 Q4 | 69.05% | 14.32% | ? | ? | 16.62% |
| 2019 Q1 | 70.99% | 13.81% | ? | ? | 14.92% |
| 2019 Q2 | 70.36% | 13.66% | ? | ? | 15.98% |
| 2019 Q3 | 70.97% | 13.15% | ? | ? | 15.88% |
| 2019 Q4 | 59.39% | 13.10% | 10.26% | 5.68% | 11.57% |
| 2020 Q1 | 59.76% | 12.68% | 9.76% | 6.83% | 10.73% |
| 2020 Q2 | 56.05% | 12.37% | 10.00% | 7.89% | 13.42% |
Note that they started breaking out YouTube and Cloud last year; it looks like Cloud was previously hidden in “Other” and YouTube in “Ads on Google”. I wonder what else is hidden in there?
Why break it up? · There are specific problems; I list a few below. But here’s the big one: For many years, the astonishing torrent of money thrown off by Google’s Web-search monopoly has fueled invasions of multiple other segments, enabling Google to bat aside rivals who might have brought better experiences to billions of lives.
Google Apps and Google Maps are both huge presences in the tech economy. Are they paying for themselves, or are they using search advertising revenue as rocket fuel? Nobody outside Google knows.
In particular, I’m curious about Gmail, which had 1.5B users in 2018. Some of those people see ads, but plenty don’t. So what’s going on there? It can’t be that cheap to run. Where’s the money?!
The maps business, with its reviews and ads, has a built-in monopolization risk that I wrote about in 2017. It needs to be peeled off so we can think about it. We definitely want reviews and ads on maps (“Where’s the nearest walk-in clinic open on Sunday with friendly staff?”), but the potential for destructive corruption is crazy high.
Used to be, there were multiple competing map producers and some of them were governments. The notion of mapping being a public utility (Perhaps multinational? What a concept!) with competing ad vendors running on it doesn’t sound crazy to me.
The online advertising business has become a Facebook/Google duopoly which is destroying ad-supported publishing and thus intellectually impoverishing the whole population; not to mention putting a lot of fine journalists out of work. The best explanation I’ve ever read of how that works is Data Lords: The Real Story of Big Data, Facebook and the Future of News by Josh Marshall.
The world needs Google Cloud to be viable because it needs more than two public-cloud providers. It’s empirically possible for such a business to make lots of money; AWS does. GCloud needs to be ripped away from its corporate parent, just as AWS does, but for different reasons.
I note the pointed absence of Android in any of the financials. It’s deeply weird that the world’s most popular operating system has costs and revenues that nobody actually knows. Of course, the real reason Android exists is that Google needs mobile advertising not to become an Apple monopoly.
YouTube has become the visual voice of several generations and is too important to leave hidden inside an opaque conglomerate. Is it a money-spinner or strictly a traffic play? Nobody knows. What we do know is that people who try to make a living as YouTubers sure do complain a lot about arbitrary, ham-handed changes of monetization and content policy. Simultaneously, Google’s efforts to avoid promoting creeps and malefactors aren’t working very well.
What to do? · First, spin Advertising off into its own company and then enact aggressive privacy-protection and anti-tracking law. Start by doing away with 100% of third-party cookies, no exceptions. It’d probably be OK to leave the off-site advertising in that company.
But YouTube definitely has to be its own thing; it’s got no real synergy that I can detect with any other Google property.
I’m not even sure Android is a business. Its direct cost is a few buildings full of engineers. Its revenue is (indirectly) mobile ads, plus Play Store commissions, plus Pixel sales plus, uh, well nobody knows what kinds of backroom arrangements are in place with Samsung et al. Absent the mobile ads, I doubt it’s much of a money-maker. Maybe turn it into a foundation funded by a small levy on everyone who ships an Android phone… Other ideas?
What to do with Maps isn’t obvious to me. It’s probably a big-money business (but we don’t know). In combination with the reviews capability it should be a great advertising platform, but the opportunities for corruption are so huge I’m not sure any private business could be trusted to manage them. First step: Force Google to disclose the financials.
I think Google Cloud could probably make a go of it as an indie, if only as a vendor of infrastructure to all the other ex-Google properties. And I think the product is good, although they’re running third in the public-cloud race.
To increase Google Cloud’s chances, throw in the Apps business; Microsoft classifies their equivalent as Cloud and I don’t think that’s crazy. My Microsoft-leaning friends scoff at the G Apps, but they’re just wrong; with competent administration the apps offer a slick, fast, high-productivity office-automation experience.
Finally, as a standalone company, we could hope they’d break Google’s habit of suddenly killing products heavily depended-on by customers. You just can’t do that in the Enterprise space.
The politics · So there should be at least four Google-successor organizations, each with a chance for major success.
I think this would be pretty easy to sell to the public. To start with, what’s left of the world’s press would cheerlead, eager to get out from under the thumb of the Google/Facebook ad cartel. Legions of YouTubers would march in support as well.
Financially, I think Google’s whole is worth less than the sum of its parts. So a breakup might be a win for shareholders. This is a reasonable assumption if only because the fountain of money thrown off by Web-search advertising leaves a lot of room for laziness and mistakes in other sectors of the business.
Also, it’s quite likely the ex-Googles could come out ahead on the leadership front. Larry, Sergey, and the first wave of people they hired made brilliant moves in building Web search and then the advertising business. But the leadership seems to have lost some of that golden touch; fresh blood might really help.
When? · The best time would have been sometime around 2015. The second best…
Comment feed for ongoing:
From: David Hofer (Jun 29 2020, at 08:09)
Thanks for this interesting writeup. One quibble: I think you're underestimating the revenues Google gets from the android market (estimated $24.8 billion in 2018): https://www.businessofapps.com/data/app-revenues/
A lot of it comes from games, like in-app purchases. Total cash cow.
[link]
From: Deliberately with held (Jun 29 2020, at 11:33)
About five years ago YT had a mid-single figure billion dollar run rate
It's not that expensive to run
[link]
From: John Cowan (Jun 30 2020, at 10:55)
OpenStreetMap is a wiki-style worldwide mapping web application. It's poor but honest; if it had some more money, it might be rich and still honest.
[link]
From: Rob (Jul 01 2020, at 12:17)
I am shocked, shocked I tell you, to hear that an organization's financial statements are opaque! In this day and age no less!
[link]
From: Yuhong Bao (Jul 01 2020, at 15:10)
Thinking about it, it would be funny if the broken up Google moved to different cities.
[link]
From: PeterL (Jul 01 2020, at 15:20)
Splitting out Cloud would help the rest of Google.
The internal cloud (borg, bigtable, et al) is way more complex than it needs to be. No outside users would want to use that (or could, without access to the source code), so it would need to be vastly improved to be profitable. And that would remove the hidden tax of the over-complexity from the rest of Google.
[link]
From: ChrisJ (Jul 03 2020, at 02:28)
Which of the components would Search go with?
[link]