Say It Ain't So

Google never thought about its competition before. It didn't have to. That's because the company's rise from dorm-room business to NASDAQ behemoth in just seven years was based less on practicing corporate brinksmanship than on exploiting and extending the underlying ethos of the Internet itself.

But Google's recent decision to purchase 5 percent of AOL from TimeWarner for $1 billion in cash marks a dramatic and possibly disastrous shift in strategy for a company that, quite frankly, never had to bother with strategy before.

Until now, Google couldn't really have cared less about what its competition might be doing. Google was in the business of making the internet as easy and rewarding to use as possible. Its core technology -- the search engine -- found its supremacy in its bottom-up calculations of what real people on the internet were linking to. Instead of wasting time and money figuring out how to categorize every page on the Web -- as most search companies were doing -- Google let the internet do its work for it.

Adhering to a naive but entirely internet-appropriate corporate motto of "do no evil," Google made sure pretty much every one of its technological and business processes was characterized by egalitarianism. The company held auctions for everything from sponsored ads to its own stock, angering traditional advertising agencies and brokerage firms alike, who were used to being able to offer preferential treatment to their best customers.

As Google's founders well understood, that's what this whole internet thing was about: upending the zero-sum game of market competition and replacing it with the abundance that results from collaboration, transparency and open networks. Learning and extending the lessons of shareware and open source, Google saw how it could create value for individuals, businesses of all sizes and even itself by sharing or giving away its most valuable services.

This marked a shift in the assumptions underlying business practices since the Renaissance, when the emergence of centralized currencies and chartered corporations combined to create an economic landscape characterized by scarcity of capital, competition for resources and tactical maneuvering. Doing business became less about developing a core competency than diminishing or at least defaming the other guy's core competency.

Google has been the poster child for a new way of doing business, made possible by both network effects and the spirit of cooperation they engender. While Bill Gates conceded that "Google kicked our butts in internet search" before launching a prototype of his own, Google CEO Eric Schmidt has always insisted that many players can "coexist quite well." While Microsoft looked over its shoulder, Google simply plowed onward, ignoring whatever the competition might be doing and exchanging this paranoia for a full-time dedication to research, a passion for engineering, and most of all, a culture of fun.

Google owes its success to its consonance with internet values and its willingness to dispense with the competitive militarism of earlier business eras. That's why it's so disheartening to see Google cave in to the pressure to compete against Microsoft for a piece of AOL.

No, Google has no real need for AOL. Now that it's a part owner of the company that nearly brought Time-Warner into bankruptcy, Google will find its allegiance split. It is responsible to a group of shareholders with a very different set of expectations of a corporation from those that Google's own shareholders might hold. AOL's fee-for-service and property concerns are also contradictory to some of the principles underlying Google's open access and unbiased auctions for ad space. The qualities making Google so very attractive to the smallest businesses makes much less sense for a partner like AOL.

Of course, Google understood that discarding the standard corporate penchant for scarcity and competition for one of abundance and collaboration actually made great business sense in a networked economy. But, as Google expert John Battelle explained to the New York Times, now Google is saying "we will take some of our pawns and block the move to our queen by Microsoft." In other words, Google didn't want AOL for itself; it simply wanted to prevent Microsoft from becoming AOL's partner in Bill Gates' own advertising venture. And it was apparently worth sacrificing a billion dollars and Google's core operating principles to stop this from happening.

Google may have won this particular battle, but Microsoft has won the real war: It finally turned Google into a competitor.


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