How Google, Facebook, and Former Outsiders Are Becoming Old School in Unexpected Ways

By Drea Knufken  DEC 12, 2012 3:05 PM

The revolving door between Washington, DC, and c-suite offices in the private sector now extends to the tech firms we once thought would change everything about corporate america.

 


MINYANVILLE ORIGINAL

Sometimes it seems that everybody in the world is in favor of democracy, just as long as it gives them the result they want.
Jack Lessenberry
 
Democracy on the Web works.
–Google
 
Back in the olden days of the 1990s, Microsoft (NASDAQ:MSFT) ruled the world. Most computer users had PCs that came pre-installed with Microsoft’s familiar suite of products, including Windows and MS Office. Around the dawn of the dot-com boom, however, the United States District Court in DC decided that Microsoft was too ubiquitous, not to mention thuggish in its business practices, and a series of court battles began. The software giant lost momentum in the booming online space. Google (NASDAQ:GOOG), meanwhile, established itself as the Road Runner to Microsoft’s Wile E. Coyote, continually outmaneuvering the software giant to establish online market dominance.
 
If you go online today, however, you’ll be hard-pressed to avoid a new breed of omniscient players. You can’t log into any number of apps without Facebook Connect (NASDAQ:FB). Similarly, in order to post videos, read your Web-based email, look at a map, or find something online, good luck avoiding Google. Apple’s walled gates might run your music and mobile device. Yesterday’s outliers are today’s big boys. Microsoft may be a laggard in online market share, but the winner-take-all precedents it set are alive and well. Even the Federal Trade Commission (FTC) is seriously considering slapping an antitrust lawsuit on Google for manipulating search results to favor the company’s own services.
 
Humble to Huge
 
Like many other tech companies before it, Google, Inc. was first headquartered inside of someone’s garage. As the company grew, it cultivated a collegial work culture that included beer fridges, company ski trips, and lofty mottos like “Don’t be evil.” Employees were made to feel as though they weren’t just cogs in a giant online machine. Instead, Googlers were convinced that they were changing the world.
 
Fast-forward 15 years. Today, Google looks more like a businessman in a suit than a geek in a garage. Grown-up Google has private jets, billion-dollar acquisitions, and fancy court battles, for example the recent allegations of illegally collecting user data with a fleet of Street View cars. This year, Google also doled out more than $14 million to government lobbying efforts, the third-biggest corporate lobbying spender behind General Electric (NYSE:GE) and Blue Cross/Blue Shield. Chevron (NYSE:CVX), by contrast, only spent about $7 million.
 
Protecting Margins in a Maturing Industry
 
Google’s story reflects a larger trend in America’s technology sector. Yesterday’s fresh-faced start-ups have become today’s corporate America. Internet-based companies are now following the lobbying footsteps set by established behemoths such as IBM (NYSE:IBM) and Microsoft. Facebook, Google, LinkedIn (NYSE:LNKD), Amazon (NASDAQ:AMZN) and others spend millions of dollars on lobbying efforts every year.
 
Just this year, a number of Internet-based players banded together to form the Internet Association, a lobbying organization that will advocate policies for its member companies. The online, advertising-based business model has matured, and companies are working hard to protect their bottom lines from intrusive legislation. He Who Tracks the Most, Profits Best
 
The ongoing effort to kill the Do Not Track initiative, which would enable users to either opt out of online tracking or control which cookies they want to accept, is an example of how online companies are trying to build fences around their margins. During the first half of 2012, online ad revenues reached $17 billion, according to the Interactive Advertising Bureau (which also seeks to influence government policies). Mobile revenues were at $1.2 billion, a 200% increase from the same period a year ago.
 
There’s a secondary market supporting advertising’s viral revenue growth, and that market is precisely what lobbyists seek to protect. Corporations are collecting and selling derivatives of their users’ identities to middlemen, who then re-package and resell that information to marketers at other companies.
 
An example might involve a cellular provider selling a package containing the location data and anonymized Web browsing histories of 5,000 of its users to a middleman. This middleman — examples include Advertising.com and BlueKai — would then offer that data as part of a marketing solution for clients seeking to target and refine their prospect lists. If you’re a marketer and you want to target your ads to right-handed 65-year-olds living in the Fort Lauderdale area who like to shop in the afternoon and golf on Saturdays, you can gain access to that kind of information.
 
The practice of personal data collection remains shrouded in mystery, enabled by a lack of transparency to users. For example, most online privacy policies contain more words than the Declaration of Independence, The Economist reports. As newer tools like geolocation and wireless mobile payments become more common, however, privacy issues will continue to surface, and lobbying orgs will have more fodder on their hands.
 
The Revolving Door, e-Edition
 
In addition to lobbying, online companies are using the old “revolving door” tactic of integrating Beltway veterans into their workforces. Google started in on this trend early on. The company’s strong ties to the Democratic Party go back at least a decade. Not only has former Vice President Al Gore been a longtime advisor, but former Vice President of Global Sales Sheryl Sandberg, now chief operating officer at Facebook, joined Google after being the chief of staff at the United States Treasury, under Larry Summers.
 
Sandberg took her Deputy Chief of Staff David Fischer with her, first to Google and now to Facebook, where he runs the company’s advertising department. Summers, meanwhile, is now a special advisor to venture capital firm Andreessen Horowitz, which also recently hired a former mayor of Washington, DC, Adrian Fenty, as another special advisor.
 
Marne Levine, who used to work under Summers as the National Economic Council chief of staff, is now Facebook’s vice president of global public policy. Former Clinton communications secretary Joe Lockhart, perhaps best known as the guy who answered the Lewinsky scandal questions, joined Facebook around the same time that Levine did, to lead the company’s communications team.
 
The list goes on. Former FCC senior counselor Colin Crowell now leads Twitter’s public policy organization. Crowell used to work directly with FCC Chairman Julius Genachowski, and helped create a number of the agency’s tech-oriented laws and regulations, according to The Hill. Genachowski himself is a former executive at Internet brand conglomerate IAC/InterActive (NASDAQ:IACI) (About.com, OKCupid, CollegeHumor, Newsweek and Thesaurus.com, among many others). David Kappos, director of the US Patent and Trademark Office (USPTO), also revolved out of the private sector, spending 25 years at IBM before being selected to lead the USPTO. In a similar vein, at least four former Googlers went on to work with the Obama administration.
 
Government and Tech: A Family History
 
When Al Gore supposedly said in 1999 that he invented the Internet, he should have said, “The government been supporting the Internet since Day One.” After all, the Web itself was born in a government lab, as ARPANET. SRI International, a major government R&D contractor formerly associated with Stanford University, helped develop ARPANET, and was also behind the computer mouse, hypertext, videoconferencing, Windows, and, more recently, the technology behind Apple’s SIRI. Ross Perot invested $20 million and sat on the board of directors of NeXT Computer Inc., the company Steve Jobs founded in 1985 after leaving Apple.
 
In other words, the public-private ties in the tech sector run long and deep. In establishing a Beltway presence, Google, Facebook and their ilk aren’t doing anything that hasn’t been done before. The bigger danger lies in consumers not knowing the price they truly pay for free utilities like search and social media, namely, that these services re-package and sell pieces of their users’ identities, and that they will go to great lengths to maintain that privilege.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opin= ion about the performance of securities and financial markets by the writer= s whose articles appear on the site. The views expressed by the writers are= not necessarily the views of Minyanville Media, Inc. or members of its man= agement. Nothing contained on the website is intended to constitute a recom= mendation or advice addressed to an individual investor or category of inve= stors to purchase, sell or hold any security, or to take any action with re= spect to the prospective movement of the securities markets or to solicit t= he purchase or sale of any security. Any investment decisions must be made = by the reader either individually or in consultation with his or her invest= ment professional. Minyanville writers and staff may trade or hold position= s in securities that are discussed in articles appearing on the website. Wr= iters of articles are required to disclose whether they have a position in = any stock or fund discussed in an article, but are not permitted to disclos= e the size or direction of the position. Nothing on this website is intende= d to solicit business of any kind for a writer's business or fund. Miny= anville management and staff as well as contributing writers will not respo= nd to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.