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Here's why some people think breaking up Google is just 'sour grapes'

Jerrick Media Holdings CEO Jeremy Frommer says it’s ‘illogical’ to suggest Google acts as a monopoly

A soft-board with cue cards spelling Google
More than one critic called for Google's break up on '60 Minutes'

On the heels of a hard-hitting "60 Minutes" segment on Google's unparalleled market share in online search, Treasury Secretary Steve Mnuchin said the Justice Department needs to seriously look at the issue of tech monopolies.

And Gary Reback, the antitrust lawyer who persuaded the Justice Department to sue Microsoft Corp (NASDAQ:MSFT) in the 1990s, called Google a monopoly in “search and search advertising” during the CBS Sunday night broadcast, putting the tech giant squarely in the antitrust crosshairs.

But there’s no factual evidence that Google parent Alphabet Inc. (NASDAQ:GOOG, NASDAQ:GOOGL) acts as a monopoly and manipulates search results to take out its competition, say some analysts and CEOs.

“Absolutely not,” said Jerrick Media Holdings Inc. (OTCMKTS:JMDA) CEO Jeremy Frommer, who repudiates the idea that Google should be regulated or broken up.

Read: Mnuchin on Google and tech monopolies: 'You have to look at the power they have'

Frommer, a veteran Wall Street hedge fund manager turned serial entrepreneur, is the driving force behind digital media and tech company Vocal, a long-form social media platform.

“Gary’s perception of antitrust laws is from the mid-'90s, an era in which I was deeply involved in technology M&A and is incorrect in my opinion,” Frommer told Proactive Investors. “Quite frankly, most blocked M&A transactions by federal regulators inevitably look illogical in hindsight given the extreme pace of evolution in the tech space. Office Depot and Staples, a classic '90s deal broken by regulators for dominance in the office supply space, makes no sense in today’s digital environment, where office supplies are available on Amazon cheaper than anywhere else.”  

Zero empirical evidence

The American Enterprise Institute told CNBC's Closing Bell "there's zero empirical evidence" that Google acts as a monopoly and does real harm.

"We need to be extraordinarily careful before we think about heavily regulating them — breaking them up," James Pethokoukis of the American Enterprise Institute recently told CNBC's "Closing Bell."

"There needs to be an actual theory of harm. We're not going to go after the companies just because they're very successful or they're very big."

Google itself is afraid of competition from giants like Amazon.com Inc. (NASDAQ:AMZN) to nimble start-ups, Pethokoukis said. As a result, the search giant spends "tens and hundreds of billions of dollars a year on R&D," he said.

"That is not the behavior of some dominant forever monopoly who is squelching innovation," Pethokoukis said. "All I hear is an anecdote here and anecdote there. I don't actually hear an actual portfolio of evidence that would lead me to believe that there's an actual problem here."

Frommer said it was a myth that Google had a competitive advantage. “It’s not the type of monopoly it was years ago. It is susceptible to serious competition, which is why it is always buying new technology. The digital playing field is perhaps the fairest market environment I have ever seen, far superior to that of the financial markets,” said Frommer.

Google declined to comment on the "60 Minutes" story but offered a statement saying that its algorithms do not give specific placements in its results for certain companies but instead seeks to provide the best search results.

Yelp’s case of sour grapes

In the salad days of the Internet, Google’s “Don’t be evil” was a mantra — a motto closely held, if casually phrased. Alphabet, now Google’s overlord, has ditched "Don’t be evil" for "Do the right thing." Yet, quite a few tech companies had damning things to say about Google, insinuating it wasn’t quite doing the right thing.

Yelp Inc. (NYSE:YELP) co-founder and CEO Jeremy Stoppelman told “60 Minutes” that if he were starting out today, he “would have no shot of building Yelp.” He said that “opportunity has been closed off by Google and their approach.” He accused Google of collecting and bundling its own information on things like shopping and travel and putting it at the very top of the search results, regardless of whether it belongs there on merit.

“That sounds like sour grapes from someone who has difficulty adapting their platform in a competitive environment,” quipped Frommer.

Read: Yelp posts smaller-than-expected Q1 loss, but shares fall on profit-taking

“This conspiracy theory makes no sense for two reasons," Frommer explained. "First, these so-called algorithms people speak of are not simply a few lines of code or some secret formula. They evolve every day, create problems every day, and demand solutions every day. The perception that Google is running around, other than in the normal course of business, intentionally manipulating search results for the benefit of a few is counterintuitive. Google’s goal is to essentially create a fair environment for search and advertising. For those who take the time to deeply study the tools and data provided by Google would know this. Those who prefer conspiracy theories will deny it.”

Friend to global media industry

Critics have long argued that Google squelches innovation by demoting competitors in Google's algorithmic search results. But publishers like Fairfax Media Limited (ASX:FXJ) say there are “significant opportunities” for publishers to work together with Google to sustain journalism, but there has been less progress for commercial partnerships with Facebook Inc. (NASDAQ:FB).

Fairfax recently told the Australian Competition and Consumer Commission's Digital Platforms that there are “marked differences” in the business and commercial models of Facebook and Google, and their approach to publishers.

"In recent months, we have noted a series of examples of Google working increasingly proactively with the industry to help address challenges or create conditions for publishers to capitalize on market opportunities," said Fairfax.

In December, Google and Fairfax Media struck a deal to promote the publisher's premium content and engage new audiences.

In March, Google announced it would invest US$400mln in new products aimed at building a more sustainable relationship with the global media sector, including helping with subscriptions and ending its "First Click Free" policy, which forced publishers to provide a minimum three free articles per day via Google searches before readers hit a paywall.

Wall Street nonplussed

Wall Street didn’t think the “60 Minute” broadcast would stir things up for Google beyond a point.

In a note to investors, CFRA Research reiterated its Strong Buy rating on Google, as reported in a story by "Barron's".

"We do not think the segment revealed or made news, highlighting only Google critics, including three interviewees (of the four featured in the piece) who have been well-known and mostly long-time antagonists of the business," wrote CFRA Research analyst Scott Kessler.

"We acknowledge legal and regulatory risks, but see a compelling valuation, and think a federal U.S. inquiry is unlikely," added Kessler.

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