Google CEO Eric Schmidt recently told the BBC that the U.S. should break up banks that get "too big to fail." What about Google? Is it too big — and should the government take action?
Schmidt got a big scare when the Bush administration moved to block a deal to have Google sell search advertising for Yahoo, a move the companies made to fend off Microsoft. In the last weeks of the campaign, he loudly endorsed Barack Obama and signed up as an economic advisor. Schmidt and other Google executives shelled out for pricey tickets to Obama's inauguration, and Google threw its own inaugural ball. The White House even hired a Googler, Katie Stanton, to run its Web outreach efforts.
But another hire has caused consternation in the Googleplex. Christine Varney, the lawyer Obama nominated to run antitrust enforcement, said last year that "Microsoft is so last century" and the new, more compelling problem in antitrust was Google's "monopoly in Internet online advertising."
So much for Schmidt's cozying up to the administration.
Varney is a bright, respected lawyer, and may well prove a formidable opponent for the brainiacs of the Googleplex. But it doesn't take a brilliant mind to notice Google's outsized profit margins, which fund lush perks for employees and wasteful spending on pet projects sponsored by its quirky founders, Larry Page and Sergey Brin. Analysts believe that just by taking a scalpel to that waste, Google will prove able to ride out the recession with ease.
But that ease is coming at someone else's expense: Namely, anyone who advertises on the Internet, where Google is an inescapable force, especially since its acquisition of banner-ad broker DoubleClick. The rates they pay are ultimately reflected in the prices they charge, which is where consumers feel the pain.
So it seems like a hubris-filled Schmidt is tempting the gods when he calls for other companies to be broken up into smaller, manageable pieces. When will his own turn come? The government was ready to sue over the Yahoo deal before a chastened Google hastily abandoned it. A Google antitrust suit seems like a matter not of if, but when. A notion Schmidt might entertain: spending less time opinionating on other people's businesses, and more with his lawyers.
Here's the rest of his BBC interview: