How Monopolies Are Making Tech Worse

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4:04Better Offline Before we go any further, as a reminder, check out the show notes for links to back up everything I'm saying. I'm not creative enough to make this stuff up. it's real, I promise. Anyway, the start of August felt kind of surreal. For the first time since JetGPT launched in November 2022, there were signs that the markets were finally starting to wake up to the bullshit of generative AI, and kind of seeing that it wasn't making anyone money, really. You know, the very obvious thing that some of us have been saying for quite some time. Anyway, though, it was remarkable, but not as remarkable as what happened on August 5th, when a federal judge delivered his ruling in an antitrust case filed against Google by the US Department of Justice.

4:48In 300 pages of dense legal text, Judge Amit Mehta confirmed an excruciating detail that lengthened the breadth of what all of us kind of sort of knew, that Google has a monopoly in search and online general text advertising, and that's a specific term of art. For many reasons, this ruling was a humiliating one for Google, not least because it showed the sordid, nasty little details of how it's maintained its market dominance and actively impeded any chance of fair competition in the search market. Documents obtained through discovery revealed the incredible amounts of money that Google's been paying companies.

5:24They paid Samsung$8 billion over four years and Apple$20 billion in 2022 alone to remain the default search engine on their devices, as well as Mozilla that makes the Firefox browser where they pay about half a billion dollars a year. To be clear, this is one of the grislier pots. Mozilla is an organization I actually admire, and they do a lot of cool stuff technologically, but it also kind of revealed how dependent they are on Google's money to stay afloat. Anyway, Judge Mehta found that Google had violated the Sherman Act, a century-old antitrust legislation that, among other things, led to the breakup of Standard Oil in 1910, as well as the breakup of AT &T in 1982.

6:03This is a significant moment in Silicon Valley history, and it's an existential threat to Google. Well, Google's initial success came thanks to it being actually better than the alternatives. Anyone remember AltaVista? You heard of this? You seen this? Google's continued existence is largely thanks to various interconnected monopolies it's established, creating a chokehold on, well, search and, I'd argue, the web at large. Over half of Google's yearly revenue comes from Google Search. Over$175 billion are the$300 or so billion that Google makes every year. And it's hard to imagine that Google could sustain said revenue or its dominance without paying billions of dollars to starve the competition.

6:42And indeed, this ruling kind of proves that they can't. As I mentioned, the Sherman Act is roughly 130 years old. And since its creation, it's unwoven some of America's most intractable monopoly players, single-handedly ruining the days of oil company CEOs and rail barons alike. It's robust, powerful, and it's a really good piece of legislation, which in the decades since its creation has been augmented with new laws to cover the blind spots missed by the original authors. Problematically, the Reagan administration kind of detoothed it by refusing to actually enforce it. You heard a little of that from Matt Stolas' interview from last episode.

7:17But crucially, the Sherman Act has teeth. It contains provisions that allow judges to levy big fines, impose criminal penalties on CEOs or anyone else involved, and those penalties can be about a decade long. They can also order companies to perform specific actions like divesting a business unit to remedy the situation. It's good shit and it's exactly what we need. While I don't think that Sundar Peshai is going to prison, which would be very, very funny, mostly because hardly anyone ever actually gets prosecuted for violating the Sherman Act, I do think this ruling has the potential to kill Google.

7:50At least the current Google that we see today, this present form of this company that bankrolls its other entities using a crooked monopoly over the search market. And in this two-part series, I'm going to take a look at how Google created its monopoly, and how that monopoly allowed it to become fabulously rich. I'll also talk about what might happen next, which, for the most part, will involve a mixture of history lessons and a healthy dash of bullshit speculation. Ah, I'm kidding, it'll actually be good. But trust me, even the best-case scenario for Google here is fairly grim. you may also wonder why i've been going on about monopolies for weeks and i really want you to understand monopolies are a big part of why everything feels like it stopped working so many problems in the modern tech industry are a result of a lack of competition of monopolies and oligopolies that change the incentive of a company from selling you a service you a customer who likes the service and pays for it to extracting as much value from you as possible because you have nowhere else to go or leaving is difficult.

8:53Competition is deeply important. After all, if you're not worried about the competition, why would you worry about your customers leaving? The incentives of the monopolist are inherently degenerative. Monopolists are not concerned about building better products, no. They're concerned about squeezing their captive audience as much as possible. The documents I covered back in April in The Man Who Destroyed Google Search are a great example, showing how Prabhagar Raghavan, God I love saying his name, the former head of ads at Google, demanded an increase in queries, meaning more searches rather than better results, as a means of increasing the amount of time one would spend on Google, which in turn would allow Google to show you more ads.

9:34However you feel about capitalism, a better economy is one where actual, real competition between businesses exists, one based on their ability to meet customers' needs. This stuff feels very obvious, but it needs repeating. A company that fears the competition is one that will compete to win a customer's business and heart, and conversely, a company that has no real fear of losing customers because they've dominated the market with, say, a monopoly or set up a healthy cartel of friendly other bigger, quote, competitors where newcomers are effectively chased out. Yeah, they can make their products worse without fear that customers might do something annoying like choose another option.

10:13You see a lot of it outside of Tech 2. Ticketmaster and its associated properties have dominated live events to the point that they control both on-sale tickets and the resale market, leading to things like their horrifying platinum seats deal, where Ticketmaster reserves tickets so that it can sell them for a higher price to fans that couldn't buy them the normal way, which Ticketmaster also runs. And that's why the Department of Justice is suing them. And they sued them in May for their monopoly. I wish the executives at Ticketmaster nothing but the worst. Four companies control 80 % of US air travel after decades of acquisitions, allowing them to effectively charge whatever they want.

10:53And because there are so few of them, they'll pretty much keep their prices around the same amount. It's a fake competition and a fake competitive environment. And it's bad for customers and it's disgusting. Now, you may think, ah, I got really shitty internet speed and whenever I call customer service, they don't seem to pick up. And that's because most Americans have no real choice in internet providers, thanks to monopolies run by companies like Comcast, Charter, CenturyLink, and Cox, who can charge what they want, perform a fairly mediocre standard, and effectively abandon less profitable rural areas, discarding some to ultra-slow DSL internet that many of you probably have not used in decades.

11:31And one of my favourite ones are the real fucknuts, the scumbags over at Frontier, Frontier Communications, which is partly owned by a private equity firm called Cerebrus Capital Management, which owns part of Albertsons, a grocery store that's currently in the midst of a battle with the FTC over a larger chain called Kroger's trying to buy them, with the FTC correctly arguing that it would eliminate competition and allow one firm to control grocery prices. hey that reminds me of something you remember when inflation was increasing prices everywhere yeah if you read like a journalist who was writing actually it's it's nothing to do with the companies you're fucking wrong you were wrong at the time and you should not write anymore it's disgusting what actually happened was the increasingly dwindling amount of competition in many consumer goods companies allowed them to all raise their prices at once gouging customers in a way that should have had someone sent to jail, rather than make$19 million for CEOs that were bleeding Americans dry.

12:28It's also much, much easier for a tech company to establish a monopoly, because they often do so nestled in their own platforms, making the monopolies just a little bit harder to pull apart without a 300-page legal document. One can easily say, if you own all the grocery stores in an area, that means you can control the price of groceries. That one's a bit more obvious, but it's a little harder to point at the problem with the tech industry. Because said monopolies are pretty new and different, yet mostly come down to owning on some level both the customer and those selling to the customer. There are no alternatives.

13:04This is a fairly basic part of all commerce. One cannot have a lawyer represent both sides, and one ideally should not have the same agent represent both the buyer and the seller of a house, which does happen in some states, which is insane. And yet it's these conflicts of interest that the tech industry has made billions of dollars off of, and I'd argue that they can't operate without. Meta's monopoly over the advertising on both Instagram and Facebook, as well as its own black box algorithms, allow it to make the products that you use every day so much worse, just to show you more ads, and they can increase advertising prices whenever they want, something they've done multiple times without anybody really covering it.

13:43As a result, Meta is also the only source of truth for how successful your advertising is, to the point that it tricked the entire media industry into pivoting to video using phony numbers. Hundreds of people lost their jobs. Nothing happened to Meta. Meta, as with any digital advertising monopolist, can basically say whatever it wants to you, inflating stats where they need to as a means of getting more money out of you, which is why there is a$7 billion class action suit against the company for literally doing that. How has it taken this long to do anything? It drives me fucking in... Anyway.

14:15Again, it's about incentives. If Meta has no competition, Meta does not have to act honestly or give detailed metrics about ad performance. Because where else are you going to go? You're going to go to the other advertiser on Facebook? As Matt Stoller said in the last episode, as Meta isn't really losing business as their products decay, that seriously suggests they've got a monopoly over, well, the advertising on their own products. Now, I know some of you say I'm too easy on Apple, but don't worry, I'm righting the ship. Apple has, at least outside of Europe, where the European Commission has ruled the company must allow third-party app stores, the monopoly over the iOS and associated app stores, as well as the advertising connected to it.

14:55Meaning that it can set the prices, such as its 70-30 revenue split, what can be installed, and how said apps are monetized. Which is, again, why the Department of Justice has recently sued it for antitrust violations. There is only one way to buy apps on your iPhone. And that's why the App Store is so utterly swamped with microtransaction-pumped filth and random flashlight apps with invasive advertising and spyware and shit. There's not really quality control. And that is usually, by the way, what their argument is. Especially Apple. And I use Apple devices. I'm recording this on an Apple device.

15:29I use an iPhone and a MacBook. But come the fuck on. The whole point of the App Store this whole time, with Apple holding onto it with their nasty, gauntleted fist, was that they hold the quality up. But what you see with the App Store today is a disgrace. Everything is microtransaction-filled. And I know the argument is, well, that's what customers want. Fuck you. It's what you allow. Apple allowed the microtransaction industry to grow on iOS, and in doing so, effectively killed gaming on your phone. The reason that most games require some kind of... They're free to play, but they require some kind of microtransaction to really use them is because these games are insanely profitable.

16:10They're also deeply evil and exploitative. Yeah, Apple allows them, because Apple makes so much money off of them, 30 % of each transaction. If there was a just world here, if we lived in a just society, if the App Store was a just society, Apple would have said, no, this is an evil kind of money-making thing. There is no reason why this should exist. And I know I sound a bit radical on this, and I'm sure someone would disagree and say, oh, I like playing Warlords, Battlemasters. I don't care. Those games are evil. There's a reason why mobile gaming is so thin, and it's because of companies like Apple.

16:49And Matt Stoler said this on the last episode, and I really like this. When you have such a strong monopoly, you're effectively a political power, and things grow within the system, evil things, when you use that monopoly and that power in a way that incentivizes them, Apple could and should have, and the Play Store to an extent, sure, but Apple really created this market, should have crushed microtransaction-filled free-to-play games. They should have rate-limited them, I don't know, or they should have just not allowed them to live. Companies like Ebony, for example, have got so rich over these games that require people to put hundreds of dollars to even compete.

17:24Hey, it's another competition thing. Alright, I'll stop ranting about this, though. We'll get back to the advertising side of the App Store. And Apple, just to be clear, is the only advertising firm on the App Store. And that is a big problem. Apple has aggressively moved against tracking of iOS users. A good thing, by the way. Yet they hold a complete monopoly on any advertisements on the App Store on their phones and any associated advertisement at all on the iPhone. And yeah, you just have to trust them, by the way, on the results there. As that's the only company you can advertise with. There's not really any other choice.

18:01Sorry. Also, that's why Apple is also being sued by the DOJ for alleged Sherman Act violations over allegations its control of services like iMessage, which is unavailable on Android or Windows, and as internal documents show, is seen as a useful tool for ensuring customer loyalty, has allowed it to restrict competition in the messaging, smartphone, and wearable markets. And what's frustrating here is Apple is probably not as evil as Google, and I've definitely gone to bat for Apple, but when you really sit and think about it, does it need to be like this? Could Apple not open this stuff up? There's not really a quality control thing.

18:38Eddie Q, if you're listening, come on the show, shoot the shit with me, because I'd like to hear the justification. Steve Jobs was a horrible man, a deadbeat dad, a real piece of shit, but he at least realized that there was a level of quality you had to provide, and the App Store doesn't have it. There is an App Store episode coming, by the way. I'm going to really take it to task, because I think that Apple's responsibility to society here is yet another thing they've defaulted on, just like Google has defaulted on search. And you know, this whole thing is, it comes down to restrictions. And I don't think you should live restrictful lives, though.

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23:17See mintmobile.com. And we're back. But I want to make it clear. And I will make it clear. The competition is good. You want competition. Every one of these companies has sold you a lie that allowing them to control the experience makes it better because it'll be curated by the company that made it. Yet the companies that make these things are huge, constantly laying people off, though this isn't the case with Apple, and when given the chance, will take as many liberties as they can to squeeze as many dollars out of every user. And when they don't have to compete, they get lazy. They get domesticated.

23:54They don't have to innovate or impress you. They just have to keep you there. And keeping you there can be as simple as it's really difficult to move, or where else are you going to go? I keep using my iPhone because I genuinely like iOS, but I also know that if iMessage was an app rather than a thing only found in Apple products, I'd absolutely consider using another platform. And I'm sure someone's going to message me about goddamn beeper or something like that. It's not a good UX. I don't like it. Sorry, Casey. Anyway, when you have a marketplace entirely dominated by one company selling advertising on services it runs, you really have no idea what you're buying.

24:30And this is when we get back to Google. and specifically their AI-powered Performance Max platform, a four-year-old black box advertising solution that covers all of Google's properties, letting you run one campaign across every Google property. Man, how convenient, right? You just tell Google what you want, how much you want to spend, and roughly who you'd like to see it. With what you're advertising, Google will magically tell you at the end how many people saw your ads and how much you owe Google for the pleasure. And no, you do not know where the ads ran, which is a problem that means that hundreds of large brands find themselves every year spending money on spammy and scammy websites that likely never get them any real customers and as an aside by the way i'm hearing tell that there's a big problem in cpm advertising cost per mile so impressions where uh i don't know the impressions might not be real people they might be bots and you know what i have to wonder if the end of this trial doesn't involve that data being shared with the rest of the companies in the industry and us finding out it's a much bigger problem.

25:34I have an advertising episode coming up as well. This, by the way, all of this horrible monopolistic chicanery, this is what keeps the lights on for these companies. Google and Meta own both the products and the advertising services available on those products and thus set the terms of every part of the transaction because there's no other way to advertise on Google Search, Facebook, or Instagram. There are entities competing for placement, but that competition is done on the terms and the platforms set by the platforms themselves, which in turn control how and when the ads are shown and how much you'll be charged for them.

26:08Crucially, these companies also control all the data involved. They are both the company selling you the ad space and the company auditing said ad space and the business. If you do not like Google as an advertising vendor on Google or Meta as a partner to advertise with on Facebook, you are shit out of luck, both if you want to try an alternative and if you need them to improve the product in question. This is the exact reason that Google is so nervous about its upcoming antitrust trial over its accused monopoly over digital advertising, because the government wants it to divest its ad management division, which would in turn create an entirely different marketplace, one where it actually, I don't know, had to compete.