Google takes the FTC to school | Hacker News Reader

Google takes the FTC to school

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107 pointsjamesbritt21 comments

The large profit margins newspapers enjoyed in the past were built on an artificial scarcity: Limited choice for advertisers as well as readers..

Ironically, that sounds rather like the state of online advertising today, where Google's large profit margins come from.

I wonder if/when we progress to discovering information that don't involve typing a string into a box for a list of results, we'll see Google's profit margins gradually begin to erode.

You're exactly right. The difference between the papers and Google is that Google is well aware of the situation and is using those stratospheric profit margins to enter dozens if not hundreds of other markets looking for revenue streams. They aren't trying to bribe their way into a government enforced status-quo.

That is not really a good parallel. Online advertising is very competitive and much cheaper than newspaper advertising used to be. You cannot possibly say that google creates an artificial scarcity by buying out competitors as the papers used to do. Google makes money by simply ensuring they are the best solution for the fields they are in. But it is a market that anyone can enter and google cannot stop them.

To your last point: we already have such engines, and Google indeed does not do well in those areas. For example, academic research is an area where Google's take on search does not work as well. But it will take more than the existence of such areas for Google to falter. It would take people in general not being able to find what they are looking for by typing a text query in a box, or finding such a means less efficient than some other. I doubt we will see anything like that before either neural interfaces or devices that can anticipate what you want without any interaction at all.

Original link: http://googlepublicpolicy.blogspot.com/2010/07/business-prob...

Google restates the FTC’s dissection of newspaper revenue: 80% advertising, 17% newsstand, 3% subscriptions. “Pay walls,” it says, “could be an effective way to raise the 3% revenue figure.”

Amdahl's Law, anybody? Its not just relevant for software optimization. Certain other hot topics could use a logical assessment like that (e.g. greenhouse gas emission).

I'd never never heard of Amdahl's Law before so I looked it up on Wikipedia.

Essentially, Amdahl's law is used to find the maximum expected improvement to an overall system when only part of the system is improved.

http://en.wikipedia.org/wiki/Amdahls_law

But Amdahl's Law isn't totally applicable in this case, because if you manage to gain more subscriptions via paywalls or whatever, you raise the 3% figure but also the total revenue. It's possible (albeit unlikely) that subscriptions could increase to the point where they account for 50% of revenue, without necessarily decreasing the number of newspapers sold via newsstand or the advertising take.

In the reverse case, where you're trying to reduce one of them to reduce the total, it would apply well; your greenhouse gas example seems appropriate. Or the way the media reports political spending, for example; they like to focus on small examples that people relate to better, which make very little difference individually to the overall total.

Amdahl's law does not apply to a situation where you are trying to change the sizes of the parts involved. In this situation, you could increase the returns from 'paying customers' ('subscriptions' and 'newsstands') to constitute 80% of the whole, while the returns from advertising stay exactly the same.

Google only is taking the FTC to school if they realize they're being taken to school. Good luck with that!

The problem isn't that the FTC needs to be educated. As part of the ruling class, facts are irrelevant. It's just one part of the ruling class (the FTC) giving aid and comfort to another part (the newspaper moguls). They form and mold the facts to fit whatever conclusion best increases their own influence and power.

Schmidt makes great arguments for why government should not meddle with newspapers. Unfortunately the same arguments could be made to say government should not meddle w/ ISP's who charge web services for premium pipes.

How so? The argument isn't that ISPs aren't allowed to offer their own services, simply that they're not allowed to degrade services for others. This is delineating the nature of ISPs as two things: content providers and utilities. The part that needs government regulation is the utility, not the content provider. Personally, I believe we would all be much better off if the government owned and was responsible for all the dark fiber and companies simply leased control to provide services. Hell, there's even a considerable argument to nationalizing all utilities which have a natural monopoly.

Those who wish to regulate or tax search engines and aggregators for the way they siphon revenues away from newspapers think that certain monopoly and informational-public-goods arguments are relevant. In the absence of intervention, they say, value is collected by undeserving Google/HuffPo/Drudge, not the deserving traditional newsgatherers. Only by intervening to curtail the distribution endpoints' new power over audience access, they say, will we get the quality and competitive news we need.

That's a mirror in many ways of the argument for net neutrality regulations. Neutrality advocates want to regulate one layer of providers -- the pipes -- for the way they intervene between content/service providers and audiences, siphoning revenue from the endpoints. the absence of intervention, they say, value is collected by the undeserving network tollkeepers, not the deserving novel internet services. Only by intervening to curtail the midpoints' chokehold, will we get the competitive and quality network services we need.

Does that help illustrate the contradiction?

The issue here isn't whether search engines or ISPs or other middlemen collect deserved or undeserved value; net-neutrality is not at all about capping the ISP's income!

Net-neutrality rules are meant to ensure that the ISP will keep a level playing field for all business passing through it. Google has kept the playing field perfectly level for all news shops, it's just that the field has become very bad for all of them.

If an ISP wants to offer differentiated services X, Y, and Z, because it thinks that will maximize its revenues, and then the FCC says that service mix is illegal due to the costs it imposes on others, then yes, that 'neutrality' enforcement is about curtailing the ISP's revenues, preventing them from capturing the value others create, boosting other businesses.

The FTC's trial balloons around taxing aggregators, enforcing new 'hot news' rights, or subsidizing news producers are also motivated by the desire to provide a 'level playing field' for newsgatherers and story-originators, where a near-monopoly like Google, or thinly-staffed all-cut-and-paste-no-research aggregators, can't capture all the value news media create.

Once you invite committees and congresspeople to set rules to reallocate the revenues from an activity, where do you stop? (Even if economist/philosopher-kings can tell the difference between the right places to intervene, and the wrong ones, can our political system?)

If the FCC can ban certain service packages in the public interest, why can't the FTC force republishers to buy distribution rights from traditional media in the public interest?

Google wants its pot-of-gold to be protected from meddling network operators by new rulemaking. Why can't the newspapers ask for their pot-of-gold to be protected from Google by new rulemaking?

That a loose analogy can be drawn between network neutrality and newspapers does not mean both cases have equal merits.

One of the merits of each case must be their practicality, and at least to me, net neutrality seems relatively straightforward compared to newspaper regulation. It is more-or-less the default state of the internet today, I believe, while newspaper regs appear harder to craft.

Regulators could fail to discern the right vs. wrong places to intervene, as you say, but that's all the more reason we ought to point them out.

Hi, thanks for coming back!

> [...] then yes, that 'neutrality' enforcement is about curtailing the ISP's revenues [...]

But is that really what it's _about_? I think it is a result, but the aim isn't to affect their revenues, the aim is to ensure fair competition, by preventing the ISPs from abusing the monopoly that the public have granted them (exclusive frequencies, cabling, etc). That is, I see it as an anti-monopolistic measure.

> The FTC's trial balloons [...] are also motivated by the desire to provide a 'level playing field' for newsgatherers and story-originators, where a near-monopoly like Google, or thinly-staffed all-cut-and-paste-no-research aggregators, can't capture all the value news media create.

You point out and I agree that Google is a near-monopolist, but that fact doesn't automatically make these measures anti-monopolistic in spirit. They are measures that would regulate any provider of aggregation.

Wouldn't implementing such rules suggest that we see aggregators as simply parasitic? And if that's the case, why can't we just let the newspapers be protected under good old copyright (another public-approved monopoly)? No need to demand a tax on aggregation, just disallow the crawler access to your site.

> Once you invite committees and congresspeople to set rules to reallocate the revenues from an activity, where do you stop?

Sorry, I think that's a slippery-slope argument.

Btw, wrt net-neutrality: the government started meddling with this from day one, by licensing frequencies, handing out cabling contracts, etc. So the way I see it, net-neutrality is not a market-intervention, it is a band-aid to another market-intervention.

> If the FCC can ban certain service packages in the public interest, why can't the FTC force republishers to buy distribution rights from traditional media in the public interest?

I think they could. The question then is, are both in the public interest?

> Google wants its pot-of-gold to be protected from meddling network operators by new rulemaking. Why can't the newspapers ask for their pot-of-gold to be protected from Google by new rulemaking?

Yeah, there's too much legislation that just seems designed to protect someone's pot of gold. I like the other point better: what's in the long-term public interest?

>Personally, I believe we would all be much better off if the government owned and was responsible for all the dark fiber and companies simply leased control to provide services.

Ack. The U.S. government is already talking about an internet "kill" switch. If they owned the infra as you suggest they wouldn't have talked about it...

So this is an article about how newspapers need to learn how to deal with the web as a source of news. A few years back I read Walter Isaacon's biography of Benjamin Franklin and guess what - Franklin and plenty of other Americans back in the day ran tiny newspapers comparable in content to today's blogs. I'm going to end up doing a blog post about it at some point, but it kills me that journalism and freedom of the press today are considered to be the New York Times when the founders were thinking more like the Pennsylvania Gazette.

Agreed. Welcome to the internet/technology committee of correspondence.

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