In The Plex

by Steve Levy

  The Haiti experience was one of several high points for the tech Obamanauts. Another was the success that Chief Information Officer Vivek Kundra had in applying Google-style metrics to the delivery of data to the general public. Just as Google’s engineers constantly monitor “dashboards” that probed vast databases to find relevant information in a given moment, Kundra set about building a number of dashboards for citizens to extract information from previously inaccessible government databases. Though not a Google initiative per se, his mission seemed to be a variable of Google’s: making all the government’s information universally available and accessible.

  On the other hand, many of the Obamanauts’ dreams seemed to dissipate. Julius Genachowski’s efforts to extend broadband coverage met resistance at every turn. He did manage to get some billions of stimulus-related dollars devoted to building out broadband. But his efforts to enforce “net neutrality”—ensuring equal treatment of Internet services by providers such as AT&T, Verizon, and Comcast—were blocked by the corporations and even the courts. (In late 2010, Genachowski managed to push through a set of net neutrality rules intended to serve consumers while appeasing telecoms. The rules were quickly challenged in court by Verizon.)

  Both the government and Google found themselves targets of the powerful communications companies, who had used their power to profit from a system where Americans paid more for and got worse Internet service than much of the rest of the developed world. The corporations spent millions of dollars lobbying Congress to make sure that regulations would not impede their efforts. They funded think tanks to create studies that attempted to prove that the current U.S. broadband coverage really wasn’t so bad. (What’s wrong with being twelfth out of the top twelve economies in the developed world?) One organization the corporations helped finance, called Consumer Watchdog, created a blog called “Inside Google” that demonized every move from Mountain View, from Google’s China policy to its ad quality algorithm. Opponents of Google characterized net neutrality as akin to communism.

  The big telecoms and cable companies were particularly incensed by a Google initiative announced in February 2010. The Google Fiber for Communities project invited municipalities all over the nation to vie to be the lucky recipients of an experimental ultra-high-speed broadband network. The plan was to service between 50,000 and a half-million people with faster and cheaper Internet than the current providers were promising for even a decade hence. Without laying a single inch of fiber, the plan dramatized the inadequacy of the current system, in which AT&T, Verizon, and Comcast basically controlled an overpriced, undersupplied system. Thousands of communities exposed their desperation for adequate connectivity by stunts more worthy of candidates for the studio audience of The Price Is Right. The city of Topeka, Kansas, actually changed its name to Google for the month of March. (Google reciprocated by renaming itself Topeka on April Fool’s Day 2010.)

  The Obamanauts found themselves on the wrong end of political stilettos. Andrew McLaughlin became a victim when Google foes petitioned to view his electronic correspondence through the Freedom of Information Act and found that he was still in contact with some of his former Google colleagues. The emails were innocuous—in one of them he actually turned down an invitation to speak at an event at Google’s D.C. office because of a perceived conflict of interest—but he drew an official reprimand.

  “You have to be extraordinarily careful,” Katie Stanton said.

  Of course, the tribulations of the Obamanauts were trivial compared to those of the man they followed to Washington. Constantly criticized for an overly rational approach to government, the new president found that the logical, metrics-based values that served Google so well did not ensure cooperation in Washington’s morass. And contrary to the expectations he expressed to Google about his vision in promoting issues like health care, the facts did not always win the day.

  Ten years earlier, Larry Page had felt the world would be better when people had instant access to the truth. Google had delivered the means to do this, but it didn’t seem to matter a bit.

  Katie Stanton felt she’d had enough. “I feel like I’m a vegetarian trapped inside the sausage factory and it’s kind of ugly on the inside,” she said in the spring of 2010. In July, she left the State Department and took a job at Twitter. Despite her tribulations, she felt that her government time had been well spent. But there was one thing she could not understand. For all the love that Google got from its users and all the support that the Obama administration had gotten from Google, actually being from Google was almost like a handicap. “I was shocked at how much it almost hurt me,” she said. “Sometimes people treated it like a criminal record.”

  2

  “Did you ever think you’d see the day when you were hiring the antitrust lawyer?”

  Eric Schmidt could be frank about the difference between the world’s reaction to the mature Google as opposed to the young Google. “Because of our size, and because we have a lot of money, we’re getting sued to death,” he said. “That’s just a consequence of the American legal system. I’m not happy about that. But because we’re Google, we have extra scrutiny. The regulators pay more attention to us, the Antitrust Division pays more attention to us.”

  Google’s legal department, which had ballooned to more than three hundred employees by 2009, had its hands full of lawsuits from content providers who felt Google was infringing copyright, advertisers who felt that the ad quality algorithms were discriminating against them, trademark holders who objected to competitors buying their corporate names as ad keywords, and foreign governments objecting to numerous activities, including the humiliation of mentally challenged children on YouTube. (The last involved a video of Italian kids bullying a classmate; Italian officials filed criminal charges against four Google executives including David Drummond. Though none of them had seen the video before a user posted it and Google had removed the video immediately upon the first objection, an Italian judge found the executives guilty of a criminal misdemeanor.) While some Googlers felt singled out unfairly for the attention, the more measured among them understood it as a natural consequence of Google’s increasing power, especially in regard to distributing and storing massive amounts of information. “It’s as if Google took over the water supply for the entire United States,” says Mike Jones, who handled some of Google’s policy issues. “It’s only fair that society slaps us around a little bit to make sure we’re doing the right thing.”

  Civil lawsuits had to be taken one by one, but Google’s interests in an increasingly hostile Washington environment required some concerted action, and Google was tardy in responding. Not until 2005 did Google hire its first lobbyist, Alan Davidson, a former associate director of the Center for Democracy & Technology. For some months he was alone in the company’s D.C. office.

  A big part of Davidson’s job was educating legislators, staffers, and regulators on exactly what Google did. He also had to produce the celebrity founders, which was a challenge. Visiting bureaucrats and lawmakers, says Brin, “is not, like, my favorite activity—when I’m in the D.C. area, I prefer to spend time with my family.” In 2006, Davidson lured Sergey Brin to Capitol Hill for a trip that even Brin described as a disorganized, last-minute venture. Davidson, though, considered the trip a success, claiming that the meetings Brin did take—including a long mind meld with then-Senator Obama—were productive. Brin did become alerted to the brewing opposition from telecoms when reporters informed him that an AT&T-backed industry coalition was running ads in the D.C. area claiming that Google, by supporting open standards, was “going to blow up” an opportunity for people to have choice in cable television. “I am probably naïve,” said Brin. “I am very surprised to see this.”

  In the next few years, the Washington, D.C., office expanded. In 2007, The Washington Post reported that the company had twelve lobbyists on staff, including former Clinton speechwriter Robert Boorstin. It also retained lobbying firms associated with both political parti
es. That number increased dramatically as Google moved into a 27,000-square-foot space on New York Avenue. “Google’s role in Washington is really quite different,” said Eric Schmidt. “We’re behaving more like a mature corporation.” Well, not totally mature—the new office had Googley touches such as a game room and a German-made Cyber-Relax massage chair.

  Google was following a traditional narrative of Silicon Valley companies arriving in Washington—after an initial denial of the necessity of wasteful nonengineering efforts spent on politicking, Google realized that not playing the game would leave the company vulnerable to lobbying by its foes. A bustling D.C. office populated by minor figures from previous administrations, a well-subscribed PAC, and a blizzard of contributions followed. But Google still saw itself as different. Just as Google’s engineers believed they worked not just on technology but on improving the world, the lobbyists in Google’s D.C. office viewed themselves on a higher plane than the standard white-shoe operator. “The one company I was willing to work for in D.C. was Google,” says Pablo Chavez, who joined the company after working first for the Wilson Sonsini Goodrich & Rosati law firm, then as chief counsel to John McCain. “It’s a kind of extension of public service—it’s really advocating in favor of the Internet, in favor of openness and democratization of information. As opposed to absolute and utter spin.” Chavez did admit that there were those who saw the effort as an attempt to gain more influence and power than Google should have. “The hope is that we can play the game differently,” he says. “We can try to bring more rational discourse and be more of an information provider, instead of using a raw power approach, instead of funding Astroturf groups, instead of hiding behind benign-sounding, but ultimately [compromised] organizations.”

  The Google lobbying office handled many issues, including net neutrality, broadband improvement, and privacy. But as Google became increasingly viewed as an Internet behemoth, a more pressing challenge emerged: Google had an antitrust problem.

  The first antitrust salvo came in 2007, when the company sought approval of an even bigger purchase than YouTube: the ad network Double-Click, the leading company in helping advertisers and agencies decide which websites would be the most effective hosts for the display ads they placed. (Display ads are graphics that occupy part of a web page; the advertiser pays per impression, not by click.) One of the more powerful technology tools DoubleClick used was a “cookie” (a small piece of code that identified visitors to websites) that enabled a website to access the user’s browsing history and other information, thus allowing relevant ads to be chosen at the instant someone arrived at a web page.

  The very idea that Google would buy the biggest force in display advertising represented a shift from its original beliefs. Google’s original ad policy was based on Page and Brin’s premise that banner ads and their ilk were unwelcome intrusions. That view had clearly changed. Google was hearing from its AdSense customers that it would be easier to run online campaigns if they could go to one place for both search and display ads. Given that incentive, Google began to consider the ways that maybe display ads weren’t so bothersome to users. Because they drew on a user’s browsing history, display ads could sometimes be more relevant than AdSense ads. If you went to a wine-oriented website, for example, you might see an AdSense ad for a Sonoma vacation that might or might not interest you. But if you bought wine online all the time, the DoubleClick cookie would know that and maybe show you a banner ad about wine while you were on the Sports Illustrated site.

  (In a much less significant but even more drastic departure from original values, Google sponsored a thirty-second ad during the 2010 Super Bowl. Page later said that running the ad was a low-risk way to see whether Google’s distaste for TV ads still made sense. “It sort of violates every known principle that we have,” he admitted. “But every once in a while, you should test that you really have the right principles. You don’t want to end up too rigid. Maybe that’s my Montessori training.”)

  In any case, if Google didn’t buy the top display-ad network, its competitors would. Microsoft also coveted DoubleClick, and a bidding war erupted that was arguably as much about keeping the prize away from a competitor as about winning it. Google paid $3.1 billion for DoubleClick, its biggest acquisition ever. (It didn’t seem so overpriced when a few months later Microsoft bought a competing ad network, aQuantive, for $6 billion.) The purchase, announced in May 2007, was so huge, and the concern about Google’s power so widespread, that the government launched an investigation to see if the deal violated antitrust law. The Federal Trade Commission undertook the study, and the European Union did its own.

  “DoubleClick was a big wake-up call for the company,” says Google lawyer Dana Wagner, whose presence at Google was itself an indication of the new reality. Wagner had been hired in 2007 largely because of his experience working for the Justice Department’s Antitrust Division in the early 2000s. When he introduced himself to Page at a meeting, a product manager asked Page, “Did you ever think you’d see the day when you were hiring the antitrust lawyer?” Page acknowledged that it was very, very odd. But that was Google ten years after PageRank.

  Wagner later said that from Google’s point of view, the alarming thing about the DoubleClick probe was that “there was never a good antitrust argument against the transaction.” Nonetheless, it was a rigorous and lengthy process. The focus of the investigation was on whether the DoubleClick purchase would allow Google too much domination over the ad market. Predictably, Google argued that its activities should be seen in the larger universe of the advertising world, not just the corner of it that involved search. Google might have been raking in billions of ad dollars, but it had “only” a 10 percent share of the ad industry. “There is no such thing as a market share in search advertising because it isn’t a market,” says Wagner.

  Google also argued that comparisons to Microsoft’s monopoly were misleading. When you used Microsoft Windows, virtually all your work was conducted on applications that ran solely on that operating system; thus you were locked in to Microsoft. Google executives loved to claim, in contrast, that its competitors were only a click away. If you didn’t like a search result, all you had to do was go to Ask.com or Yahoo or Microsoft. Earlier that year, Google had had a rare service outage and users had been unable to pull up the search engine for a few hours. Data showed that during that period, millions of Google users had simply switched to Yahoo or other search engines for their searches. This turned out to be a fortunate turn of events for Google; thereafter its lawyers always pointed to that moment as evidence that with search there was no lock-in.

  The length of the government investigation, which began in May and wasn’t concluded until a few days before Christmas, was unsettling for Google, used to operating at Internet speed. DoubleClick was based in the same building as Google’s New York headquarters. Google had a huge operation in New York City—more than a thousand employees covering several floors of a structure that filled a long city block in the Chelsea neighborhood, between Eighth and Ninth avenues. (There were rows of scooters to speed passage from one end of the space to another.) “We had different elevator banks that we could go through and nobody could talk to anybody else,” says Neal Mohan, then a DoubleClick executive and later Google’s vice president of product management. “There was no joint planning conversations, and we had to keep running the business, building products for customers in our individual silos, and then spending a lot of time with the regulators, both in D.C. and in Brussels [the headquarters of the European Union], educating them on our deal.” In one case, people developing a new Google ad product were separated only by a wall from DoubleClick people working on a nearly identical product; work on both projects proceeded even though both teams knew that when the merger was completed, the duplication would be redundant.

  On September 17, 2007, the Senate Judiciary Committee held a hearing on the issue. (Congress would not be involved in the FTC decision on the merger but apparently felt t
he need to weigh in, nonetheless.) It began with a blistering assessment of the Internet marketplace by Senator Herb Kohl. “Will advertisers and Internet publishers have no choice but to deal with Google, giving Google a stranglehold over Internet advertising?” he asked. David Drummond, the first witness, did his best to answer in the negative, contending that Google and DoubleClick weren’t competitors. Google sold ads, he explained, and DoubleClick was a technology to help determine where ads should be placed. “Google is to DoubleClick what, say, Amazon is to FedEx,” he said. “Amazon sells books; FedEx delivers them. And by analogy, we sell ads. DoubleClick delivers them. Two different businesses.”

  Bradford Smith, the general counsel of Microsoft, disputed Drummond’s statement. He noted that Google already had 70 percent of the global market for search advertising, and, should the merger be allowed, it would have 80 percent of spending on nonsearch ads on third-party websites. “Google will become the overwhelmingly dominant pipeline for all forms of online advertising,” he said.