ARTHUR Charles, Kogan Press, 2011, 264 p.

Digital Wars. Apple, Google, Microsoft and the battle for the Internet, Charles ARTHUR

Charles Arthur

If journalism is the first rough draft of history, then journalist Charles Arthur has done a useful job capturing the history of Web 1.0. He is well suited to the task. As the technology editor at the Guardian newspaper he has written on technology for over 25 years. As well as providing an accessible account of the Internet’s evolution since the late nineties, this book will also be of relevance to the antitrust reader interested in better understanding competitive dynamics between Internet platforms. This often complex task is simplified by Arthur’s focus on three dominant platforms: Microsoft, Google, and Apple, as well as four game-changing Internet enabled technologies: search engines, digital music, smartphones, and tablets.

The book starts out in 1998. Microsoft’s Windows – as yet untainted by antitrust – runs on 95 per cent of the PCs in the world. Microsoft’s rival Apple – back then a mere desktop PC developer – is struggling to compete with the Microsoft Windows juggernaut. Meanwhile, Google has just started up in a Palo Alto garage. The single largest threat to Microsoft’s desktop franchise is neither Apple nor Google, but rather the Internet browser Netscape. Microsoft decides to go after Netscape; cuts off its “oxygen supply,” and the rest is history – or at least antitrust history.

Arthur provides his reader with a brief overview of the DOJ case against Microsoft and its immediate impact on the company. But the Microsoft antitrust saga is more ably documented elsewhere (Ken Auletta’s “World War 2.0” comes to mind in this regard). What is fresh and interesting – at least to this reader – about Arthur’s telling of the DOJ story is his reporting on the long-term repercussions of the case and its legacy effect not only on Microsoft, but also on its competitors. Arthur leaves little room for doubt that increased antitrust oversight at Microsoft slowed the company’s internal decision making down in the long-run, creating space for start-ups such as Google to incubate. But the DOJ antitrust trial had wider implications for the nascent Internet sector in general. It exposed Microsoft’s corporate DNA to the outside world in a lasting, seemingly negative, way. Silicon Valley was put on notice not to “moon the [Microsoft] giant” as Netscape had, for fear of becoming the next Netscape. Google took this lesson to heart so much that it was not until its 2004 IPO – which forced the company to publicly disclose its revenues – that Microsoft even realized how wildly successful the Google search engine actually was. Not only had Google been profitable since 2001, but it was already, in 2004, a $1 billion company. Microsoft has played catch-up with Google in the search space ever since, although its struggle cannot be explained by antitrust alone. By Arthur’s telling, Microsoft has also made some bad business judgments along the way. In 2003, the company decided to build a search advertising platform to rival Google’s from the ground up instead of purchasing Overture – at that time Google’s leading rival. Arthur describes this make-or-buy decision as “[a]rguably, the key mistake that Microsoft made at an inflection point in the search business.” The prevailing internal logic at Microsoft was that the company’s technology could catch up with Google’s “in a matter of months.” By 2005, online advertising was a $5 billion industry with a 40 per cent growth rate, and Microsoft was still chasing Google.

Microsoft does not, of course, have a monopoly on bad judgment. Even the legendary Apple CEO Steve Jobs made bad decisions in his day; but Jobs somehow managed to turn several lemons into lemonade. The iPod story nicely illustrates this point. By Arthur’s account, the iPod was driven as much by strategic error as Apple’s innate inventiveness. In 2000, Apple missed the boat on PC CD burning technology just as the digital music revolution was emerging. Apple’s PC sales quickly declined by one third. But this blunder forced Jobs to look at music afresh, and from this process came the game-changing iPod, and arguably even its progeny: the iPhone and iPad. Similarly, Apple’s iPhone success was seemingly born in no small part from the lessons learned when Apple co-developed the ROKR phone with Motorola and Cingular in 2004. Arthur describes this process from Apple’s perspective as “a classic multi-company design car crash.” Following the ROKR episode, Apple decided to go it alone – with some limited help from AT&T – and the result was the phenomenally successful 2007 iPhone.

One theme permeating the book and the platforms it analyzes will be of particular relevance to the antitrust reader. Loosely speaking, it is the “open-versus-closed-debate.” In antitrust parlance, this debate – most recently at issue in the 2010 Oracle/Sun merger review before the EC Commission – tends to boil down to open=good, closed=bad. While Arthur does not take a position on open v. closed strategies from an antitrust standpoint, he does describe in some detail what he sees as the reasons underpinning the strategies from a corporate standpoint. His account may result in some interesting insights for the antitrust reader. The most striking example in this regard is Steve Job’s Apple: the Ur-closed platform. The company can and does enable an aftermarket to its software and hardware – Apps and iPhone chargers are ubiquitous examples – but from design through retail, Apple keeps a firm – even obsessive – grip on its product. The point made by Arthur is that this grip might be as much a function of Apple’s obsession with design integrity – see, “ROKR phone” example above – as a desire to foreclose its competitors. In contrast to Apple, the Google platform thrives on openness, but not solely for altruistic reasons. True: the company’s mission statement is to ‘make the world’s information available and organize it’, and its Android mobile operating system is open source to (almost) all comers. But freely available information also happens to be good for the company’s bottom line. After all, free information=searches=eyeballs=advertising revenues for Google.

The book’s omissions are few - quite a feat for a book of fewer than 250 pages spanning a long and busy decade. Arthur does not delve into the Web 2.0 world. Social media platforms such as Facebook and Twitter receive no mention, and this is a pity. It would have been helpful to see Arthur’s take on the impact social search and related advertising may or may not have on search engines such as Google and Bing. Similarly, although Arthur delves into tablet competition, he does so without telling the seemingly riveting story of how Steve Jobs took on Amazon in e-books – something of particular interest to the antitrust reader of both sides of the Atlantic. A “Digital Wars 2.0” chronicling these new and emerging Internet platform battles would be a welcome successor to this worthwhile read.

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Author

Quotation

Abigail Slater, Digital Wars. Apple, Google, Microsoft and the battle for the Internet, Charles ARTHUR, September 2012, Concurrences Review N° 3-2012, Art. N° 48315, p. 271

Editor Kogan Page

Date 15 April 2012

Number of pages 272

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