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Google and the German Angst

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The other day the German minister of justice, Heiko Maas, was asked in an interview how often he is using Google to crawl the Internet. His answer: "Everyday and in an exorbitant manner. Therefore, unfortunately, I am part of the problem." The way the Social Democrat was describing his digital behavior was shedding light on the uneasiness that descends upon Germans when using Google services -- whether it is the search engine, whether it is Gmail, Google Maps, Google Translate or anything else Google. The Internet giant has not only become ubiquitous. Google has become inescapable. When looking something up on the Internet, 90 percent of Germans are using Google -- that is significantly more than the worldwide average of roughly 70 percent. But Germans do it with remorse. They feel guilty.

Why? Because Google is associated with data mining, clandestine data transfer to government authorities, secret surveillance, disrespect of privacy, submissiveness against the NSA and so on. Google is the octopus of the Internet, swallowing up whatever it suits. That's at least the narrative. And in Germany -- it sticks.

After Heiko Maas had been complaining over his own digital footprint he began ruminating about possible consequences. If a company dominates a market by more than 90 percent, he said, and if this company is misusing its de-facto monopoly, antitrust authorities would be quick to react. "Then, as a last resort, breaking up (of Google) should be taken into consideration." Although Maas only echoed what the Minister of Economics and Vice-Chancellor Sigmar Gabriel had said earlier, now with the backing of the justice department Gabriels call has even more clout.

But is asking for breaking up of Google -- like it happened to AT&T or Standard Oil in the past century -- really the right thing to do? Is it not only the desperate answer to a trend that leaves many people clueless, irritated and even frantic? Moreover the debate about possible legal action against Google is giving the false impression that by imposing restrictions technological progress and advance could be stopped or at least rerouted.

It is true: The digital world is expanding at a speed that is breathtaking. The accomodation service Airbnb is killing hotel chains, the taxi service Uber is putting a squeeze on traditional cab services, Homejoy (a Google subsidiary) is trying to make conventional cleaning services obsolete and Facebook, Google and eBay (through their offspring Paypal) are even applying for bank licenses. Moreover: Market capitalization of many of the digital newbies are often easily outperforming traditional companies. The public is stunned by the fact that the market value of the web platform Airbnb is already bigger than that of the whole Hyatt hotel chain. Furthermore, Timotheus Hoettges, CEO of Deutsche Telekom, recently was complaining that a company like WhatsApp (a few months ago acquired by Facebook for 19 billion dollars) is using Telekom infrastructure to virtually destroy a whole business area of Telekom -- the once profitable text messaging.

It seems though that what we see here is not the end of the story but only the beginning. If Jeremy Rifkin, economist, theorist and political adviser, is right, the digital age is going to reduce marginal cost in the production process to almost zero -- at least in a significant number of areas. Why? Because it makes not much of difference whether a webplatform like Uber is used by 100,000 or 1 million or 10 million people. Connecting things with the Internet increases productivity -- and at the same time rendering invalid business plans that lasted decades. And Google -- whether rightly or wrongly -- stands as its nasty symbol.

When Google earlier this year acquired Nest Labs -- a company that designs and manufactures sensor-driven thermostats and smoke detectors -- even the most naïve of observers realized what Google really wants to become: The key digital hub of the world. Whether you want to connect your refrigerator, your heating or your dish washer to your computer or smartphone you can and will do it through Google or one of its subsidiaries. This thinking is also behind the most recent acquisition of Google. For roughly half a billion dollars the company from Menlo Park bought Dropcam, manufacturer of cameras that wirelessly monitor everything from household appliances to cars and machines. This is a further step to grow the "Internet Of Things," the merging of the Internet and goods.

First, the digital economy has eaten up the traditional companies of the news media business through online websites, ebooks and Twitter. Then the music industry suffered from Internet downloads and iTunes. The same is true for movie companies. Next in line now is the energy sector, that will be fundamentally altered once the Internet will manage consumption and energy production. In the not-so-far future when 3D printing has improved we will reach the next level in that process. Consumers will turn into prosumers, as Rifkin says, because people will consume and produce at the same time. They already produce energy from their solar panels on the roofs of their houses, share and make news through Facebook and blogs and will be able to manufacture things with the help of 3D printers.

Now, with all that in mind the debate about Google easily gets aggressive and biased. The head of the mighty German publishing house Axel Springer, Mathias Döpfner, a couple of weeks ago even stated in an open letter to Google chairman Eric Schmidt, that he is in fear of Google. "Wir haben Angst vor Google," he wrote. In fact Springer, step by step, has sold his realm of print products keeping only a tiny number of newspapers. The publishing house turns into a digital media company -- but not entirely out of their free will. Like Springer many of the German media businesses have no alternative given the demise of "old media" due to the Internet and changing reading habits. But even going digital is not necessarily doing the trick -- and here comes Döpfner into play -- since companies like Google rule the Internet.

Döpfner is complaining that the secret algorithm, the news aggregation, the sheer dominance of Google makes publishers dependend on Google. Much of the traffic to their online products goes through the Google bottleneck. This means that Springer to a significant degree can not control by themselves what is happening on their websites -- but Google does. And if that was not enough, Google gets the clicks for free. They don't pay Springer or any other media business for the content they are using -- while the producer of the news can only hope that the user will not remain on the Google website but will be moving on to the original source. Only then Springer is paid by the currency of the Internet: Clicks, traffic and advertisement revenue.

In this emotionally-charged atmosphere voices that are trying to put reason first are having a hard time. Yes, Google is dominant -- but is there really proof that they are misusing their position in the market? Is Google driving out competitors the way Nelson Rockefeller of Standard Oil once did? And after all: Who is preventing consumers from using other search engines as Bing, Yahoo! or the French Qwant; other email providers which are still ample; or Mapquest instead of Google Maps? And is it really the job of antitrust authorities to rule that Google must also present search results from competing providers? The whole debate reminds of the court case against Microsoft when the company was accused of abusing their monopoly of the operating system Windows because they offered buyers only their own web browser Internet Explorer. But as a matter of fact: The decline of the Internet Explorer had more to do with its technological shortcomings and the strength of the competitors than with court decisions.

Granted: Google is not helping their own cause by avoiding paying taxes or by using every tax loophole they can find (even if somewhat legal), by not being transparent, by not taking part in debates about what they do. This arrogance (in stark contrast to their corporate motto "Don't be evil") makes them an easy target, much easier than they already are. Google has to understand that in Germany and in other parts of Europe they are not considered to be only an Internet company but a major part of American cultural and technological hegemony. In the age of Snowden, the almighty NSA and Big Brother, Google has to take these arguments and concerns very seriously.

Vice versa German politicians should be careful in waving with the big stick. Maybe Google is so dominant because they are simply better, more innovative and bolder than European companies. And maybe Europe painfully missed out on a number of chances in the digital world.