The Google Shakedown

http://www.futureofcapitalism.com/2011/04/the-google-shakedown

"Google and Cisco to Join White House Effort to Promote Entrepreneurship" is the headline over a Bloomberg News article about Google's announcement that it is "committing up to $100 million to Startup America Partnership member companies to enable entrepreneurs to promote their companies with Google advertising over the next year."

The Google blog post says what the White House announcement doesn't: participants will "receive a $1,000 Google match for $1,000 spent between June 1, 2011 and June 1, 2012." So it's not really free advertising, it's 50% off advertising, on a product for which Google's marginal costs are low and its operating margins are high. I wouldn't be surprised, in fact, if Google actually on a net basis increased its profits on the basis of this "commitment."

I've got nothing against either Google making money or startups getting cheaper advertising, since I am both a Google shareholder and an owner of FutureOfCapitalism LLC, the startup that operates this Web site.

Still, as question of public policy, this raises some issues that the Bloomberg article leaves unexplored.

For example: should the federal government be in the business of essentially taking sides in favor of startups in situations in which startups are challenging established companies? Suppose I own a long-established, profitable, tax-paying carwash business, and I'm paying full price for my Google ads. Some upstart decides to compete with me by opening a carwash across the street. Should the White House really be facilitating half-price Google ads to help the newcomer compete with the established business? Or shouldn't the government be treating all businesses equally, no matter how long they've been around. That'd mean no special help for startups, but also no bailouts for long-established or large companies like General Electric, General Motors, or Goldman Sachs.

Another set of questions: Was the White House involved in soliciting the $100 million commitment from Google? What was Google supposed to do, say "no"? At a time when the Obama administration is issuing leak after leak about a possible antitrust investigation of Google? Would any of the White House officials involved in the startup initiative (the president? the chief of staff?) be involved in okaying, or stopping, any big federal antitrust action against Google?

by Ira Stoll  |  Apr 20, 2011 at 12:14 pm Related Topics:  Auto Industry, General Electric, Goldman Sachs, Google, President Obama, Regulation receive the latest by email: subscribe to the free futureofcapitalism.com mailing list