Google Photos, Big Tech, and Government Intervention
Competitor Crush
Last week, Google announced that new “High Quality” uploads to Google Photos will start counting towards Google Account quotas from June 2021, ending the unlimited photo backup gravy train that over a billion users were enjoying — yours truly included. Predictably, as with most price increases, there was consternation, proceeded by outrage. Amazingly, it appears these folks would have either preferred another addition to the Google Cemetery, or a change in business model:
What followed was more surprising: accusations of a grand scheme to deceive customers and crush competitors. Many cried foul, alleging Google had engaged in predatory pricing. However, predatory pricing comprises two stages:
- Predation: the dominant firm offers a good or service at a below-cost rate, which reduces the firm’s immediate profits in the short-term. This drop in price forces the price market for those goods or services to readjust to this lower price as an equilibrium, putting smaller firms and industry entrants at risk of closing and leaving the industry.
- Recoupment: the dominant firm readjusts its product and service prices close to monopoly prices to recover their losses in the long-term. This price adjustment can put consumers under pressure, as they are now forced to absorb it without the competition to offer a better price, resulting in consumer harm. This is what separates predatory price from normal competitive pricing.
Exercising rudimentary reading comprehension and analysis skills, it would be plain to most that Google’s move does not fit this description. Morever, based on the aforementioned Google Cemetery, I would propose that Google generally does not even possess the patience (and/or foresight) to execute such a cunning, underhanded scheme. Indeed, if the test for predatory pricing merely consisted “Major company X offers significantly reduced price relative to competitors”, then few would escape judgement.
As for the photo backup startups laid to rest, it would seem many are unfamiliar with basic business practices:
Indeed, Nabeel Hyatt, an investor in Picturelife, has credited Google Photos’ success with its solid functionality, rather than its low price alone:
Monopoly Man
Rather than lazily relying upon the predatory pricing angle, Will Oremus attempts a different tack in his widely-shared piece, “Google Photos Just Made the Case for Breaking Up Big Tech”:
Instead, this move is best understood from the standpoint of competition and antitrust. It’s Google’s vast size and scope — the way its products in different markets complement and cross-subsidize each other — that gave it unmatchable advantages over smaller rivals. In retrospect, the free storage offer looks a lot like predatory pricing, whether that was Google’s intent or not. But the bigger picture is that Google, like other dominant platforms, has its hand in so many different, mutually reinforcing lines of business that it will always be incentivized to leverage them in anticompetitive ways. From a certain standpoint — the standpoint of maximizing profit and shareholder value — it would be foolish not to.
[…]
There’s a common misconception that calls to break up Big Tech are motivated by enmity or jealousy of success. No doubt such enmity and jealousy exist, but those aren’t why serious antitrust advocates believe we need to act. And the serious proposals on the table to “break up Big Tech” aren’t about vengefully smashing the companies to bits as I explained in August. They’re about restricting the largest platforms’ free rein to leverage their power across different business lines. [emphasis mine]
For a primarily web services company like Google, who acquired Picasa in 2004 and replaced it with the critically acclaimed Google+ Photos, which became Google Photos, and who has offered cloud storage since 2012, this argument simply doesn’t add up. It is akin to proposing that Facebook launching Facebook Chat in 2008, or Apple creating iCloud was venturing beyond business bounds. There are multiple convincing examples of companies doing so, but Google Photos is not one:
Government Intervention
This debate led me to consider the larger concept of government intervention into “Big Tech”. I take issue with many of the proposals due to the often-underlying entitlement:
Nobody is entitled to success. There is a reason the majority of startups fail. It is not government’s place to promote competition through punishing a company that has fairly earned its market position, or prop up businesses that failed in their duty to anticipate market changes, for example:
Ben Thompson: free distribution enabled by the Internet is what hurt the newspaper business, rendering geographic monopolies predicated on owning printing presses and delivery trucks obsolete, dramatically increasing competition for attention even as new platforms predicated on delivering consumers individualized content turned out to be massively superior options for advertisers looking to target individual users.
Some would counter that the playing field was never level, with companies’ increasing lobbying and startups enjoying years of venture capital injections without turning a profit. However, these are structural issues beyond the scope of antitrust action and, indeed, this piece.
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