There are fine lines between delusions of grandeur allowed to rise or fall in a free market and the forces of regulation that can make or break fortunes. They will continue to purge and reshape vital industry leaders, such as AIG, Lehman and Merrill Lynch, which were never considered vulnerable. The bottom line: giants bit off more than they could reasonably fund and placed questionable bets in mortgage securities.
Google in all of its innovator's glory--worth upwards of $150 billion on a good day and generating more than $2 million in revenue per hour--appears to have no direct ties with the a $1 trillion global conglomerate like AIG. Or the market tumult. But look again.
Only a decade old, Google is placing its bets on such far-flung interests as space exploration, cloud computing and managing personal health records. It is in the process of repositioning itself as the dominant force not only in search and information, but advertising and access on mobile smart phones (the imminent Gphone), on the Google Content Network, in its Lively virtual world and on any device or platform powered by Google software and applications.
Google's new Chrome browser is a direct hit on the application software market, having conquered 70% of the online search market and nearly half of all online advertising. Still, Google understands that its broad searches, which were the first step in unleashing the power of the Internet, are not sufficient to keep pace with the fragmented whims of user-generated content and niche social networks.
Google's influence will become broader and deeper as a result of its numerous new initiatives. On Wednesday, Google and General Electric (which owns NBC Universal) announced a major energy partnership to join resources in developing the next-generation power grid. Google is taking direct aim at Facebook and MySpace user-generated content and social networking.
The company is skillfully crafting YouTube into a repository for personal and professional video. As YouTube CEO and co-founder Chad Hurley blogged this week, 13 hours worth of video is uploaded to the Web site every minute, on the way to trumping all other players seeking to forge ubiquitous online video as the new accessible form of communication. (The World Association of Newspapers is leading the charge for regulatory blocks, given what it deems an anti-competitive pending Google-Yahoo search deal.)
The capital Google is using is its unmatched grip on the Internet, computing networks and all things digital. It is betting on an interconnected universe where all information, video entertainment, communications and commerce will pass through its branded portals and other platforms and apps. It is rapidly picking up steam while the rest of the world is distracted by the implosion of big-money players on Wall Street.
Google has its own venture funds, virtual laboratories and innovation platforms where money swiftly brings new enterprise to market. It's more than a media or an advertising company. It is a new breed of cyber-conglomerate creating mind-boggling wealth that, some are wondering in this volatile environment, could one day be susceptible to collapse--to the detriment of many.
One of the questions raised by recent events: How long government regulators should wait to proactively take action in companies, especially those that have such unprecedented dominance? Regulators are being chided for not having paid more attention and are now backstopping reckless investments with a running $400 billion in bailouts--$85 billion alone as a two-year bridge loan to AIG. These same regulators are reviewing the proposed advertising growth alliance of Google and Yahoo.
Clearly, no one wants to see heavy-handed regulation that stifles competition and capitalism--only the checks and balances that remind public companies that there are limits to playing Russian roulette with public funds and spectrum. Microsoft was once the monopolistic force that would rule the world with its universal software and applications; it considered the constant bombardment by global regulators a mere annoyance. Today, Google already seems to touch nearly all companies and consumers and every part of the economy. Like AIG, it touches many arenas; unlike AIG, the value or mayhem of its mega bets is still unknown.
While it is making formidable financial investments, Google generally is trading in digital interactivity and dominating the sphere. Capitalism should allow competitive forces and enterprising minds to flourish without interference, provided there is no fraud, reckless management or dangerous economic practices. The potential downside is devastatingly evident these days.
Google may never get to that point. Then again, it may not know it has been there until--like AIG--is too late.