By the time the recent financial collapse was in full swing, AIG, Citigroup and Royal Bank of Scotland, among others, represented such a large systemic risk to financial markets that their governments could not allow them to fail. History now has the alarming potential to repeat itself, since Google and Amazon loom so large within their respective markets that they represent a sizeable systemic risk to the dependability and reliability of the Internet. We provide some examples below.
Google helps you with advertising
Google is not only a leader in search services but also online advertising. These days it is trying to expand its reach by getting small companies to sign up for its services. On June 15, 2009 ComMetrics received a letter from Google enticing us to start using AdWords. Small businesses were given a voucher in the amount of about €80 – 120 and the registration fee was waived:
Hence, we went ahead, followed instructions provided by Google, came up with good keywords, a meaningful ad (see image above) and defined our geographical territory to improve our campaign’s effectiveness.
We also improved the landing page at My.ComMetrics, got a high score from Google for our keywords and the pay-per-click rate was fixed. We thought everything would be fine even though some have raised concerns about Google AdWords, such as:
- muppman ==> Magne Uppman Hvordan skal jeg tolke at denne AdWords-annonsen dukker opp på søk etter mitt navn? (How should I interpret the fact that a Google search of my name results in ads with and/or about my name?)
We tested our keywords using a computer in the geographical region we chose to have the ads targeted to by Google. However, Google either showed weird ones and failed to show our ad altogether or showed no ads at all.
As the screenshot to the right shows, we got little to no traffic as a result of our campaign with Google AdWords.
By contrast, giving conference presentations or publishing and regularly updating the FT ComMetrics Blog Index is getting us new subscribers aplenty.
This means that while the system works for Google, which earns nearly £10 million a day from ads alone, a small business such as ours cannot expect much, except possibly wasting our cash and time.
- Read also:
Google Ads basics as discussed here as well
How Long Does It Take For A New Google Adwords Account To Become Active?
Google’s effort to digitize books
Besides experiencing Google’s dominance in online advertising and not being too happy with the results, as US copyright holders of books we also had a chance to learn about its efforts to digitize books that are out-of-print. As it stands, the proposed settlement between US publishers, authors and Google tries to allow authors and publishers to maximize revenues while ensuring the widest possible access of out-of-print books. At least in theory.
However, some critics argue that giving Google control over past (out-of-print) books will translate into control over future ones.
The current proposal is such that all non-US publishers’ out-of-print books would be automatically included in Google’s digital library holdings unless the copyright holders opted out. As such the US settlement would remove foreign authors’ and publishers’ rights as enshrined in the Berne Convention for the Protection of Literary and Artistic Works (a nineteenth century international copyright agreement).
A US court hearing is set to formalize the settlement in October. If it is approved, the US regulator will literally be permitting US copyright holders to form a cartel with Google. That certainly would NOT meet any standard of fairness and good governance, since the agreement WOULD:
- 1) discriminate against foreign copyright holders and authors,
2) violate property rights of authors and publishers in foreign lands as specified in the Berne Convention, AND
3) proper procedures would not be used, such as a copyright holder opting out of the settlement by default unless otherwise stated (see privacy policies that require opting in to allow vendor to send product information).
Bottom line: Risk must be managed properly
The risk now presented by Google’s dominance must be managed properly. And if it’s dominance in the search market, cloud-computing services, online advertising and book-digitization are not examples of a systemic risk as far as the dependability of the Internet is concerned, what is?
The systemic risk that we failed to manage properly in the financial markets was at the heart of the factors that exacerbated, if not caused, the financial crisis. Systemic risk in the digital world refers specifically to the extent to which a service provider like Google could contribute to a general digital media and information crisis. The systemic risk represented by Google or Amazon must first be measured and then managed, unless we wish to repeat Wall Street’s mistakes: if we reach the point where we cannot afford to allow some players to fail, taxpayers will once again be footing a hefty bill. Good governance to the rescue!
- Read also:
Will Twitter and Facebook save UBS?
Wall Street: Four lessons learned
Wall Street déjà vu
Amazon with its Kindle disaster
Now it’s your turn. How should we manage the systemic risk to the Internet and its services as exemplified by the ever-increasing market dominance of companies like Google? Suggestions please.
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I notice that you do not mention anywhere Microsoft. That is odd since surely their position would be the closest parallel to that of Google and Amazon.
Why not? The EU actions there seem to have done what US judiciary was unable to accomplish- shift the company’s way of bundling its software. The efforts on behalf of customers still continue.
Dear Lilly
Agreed, I just chose Google to make the case but Microsoft or Amazon are two more …
Thanks for the comment.
Okay, besides Amazon and Google you don’t mention Microsoft that is also active in this business – cloud computing. As well rumours have it that Apple also intends to get busy there.
But Google is a great example – remember – do no evil
Its activities and market dominance regarding such services as computing in a cloud, web-based email or AdWords inherently represent systemic risk that must be managed. If we fail to do so we could face another ‘financial disaster’ kind of situation.
Lilly (see her comment above) is right in saying Microsoft matters and should be mentioned. Nonetheless, if we talk about network dependability I don’t think Microsoft’s computing in a cloud services matter that much so far. If we talk about market dominance – bundling its Windows OS software with IE8 or the Media Player – I agree with Lilly, Microsoft is THE dominant player.
But this is a great and insightful post, thanks. Ciao Clemento
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