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Searching for a Breakup

Scott Galloway@profgalloway

Published on September 15, 2023

“The notion that power should be limited so that no person or institution can enjoy unaccountable influence is at the very root of our democracy.” 

—Tim Wu, Columbia University

Capitalism is the most powerful system devised to elevate  the human condition. Its oxygen is innovation, which requires healthy markets. America has a proud legacy of knowing when a corporate organism has morphed into an invasive species suffocating an ecosystem via predatory pricing, bundling, or other actions that control the supply of products and/or services. Historically, we step in — a competitive marketplace takes precedence over an aggregation of individual or corporate power. Antitrust laws pierce the canopy, oxygenating the marketplace and preserving a core attribute of innovation and prosperity: churn.

In the 19th century a series of “trusts” were established, in the belief that a centralization of power and sectors, run by thoughtful men, would be good for the economy. Soon there was recognition that the resultant abuse and income inequality warranted an antitrust movement. When Teddy Roosevelt broke up Standard Oil, it was a signal to the nation that Americans were in charge, not American corporations. The government was the sheriff, protecting the little guy.

History is rhyming. This week in a federal court in Washington, the Department of Justice is attempting a similar Heimlich maneuver on the $180 billion search market.

Bill and Paul’s Excellent Adventure

Bill Gates and Paul Allen founded Microsoft in 1975, in the shadow of industry behemoth IBM. For decades, IBM was something akin today’s Apple, Google, and Microsoft rolled into one dominant company. So dominant, it was sued by the U.S. government for antitrust violations, which triggered a major change to IBM’s business model: It “unbundled” software and hardware, meaning it stopped giving its software away for free to its hardware customers. This created, for the first time, a competitive market for software. A market that Gates and Allen would enter just six years later, developing software for the emerging category of personal computers.

Over the next decade, MSFT software would power the PC revolution: MS-DOS in 1981, Word in 1983, Windows and Excel in 1985, PowerPoint in 1987. Tellingly, PowerPoint was acquired from a nascent competitor, not developed in-house. Over the next decade, Microsoft became known more for entrenchment than innovation. “Embrace, extend, and extinguish” was the company’s strategy for suffocating would-be competitors. It worked  — Microsoft supplanted IBM as the dominant force in computing. By 1998, Windows controlled over 90% of the PC operating system market, and Bill Gates was the wealthiest person in the world. 

As with IBM before it, Microsoft’s success was recognized with the business world’s Lifetime Achievement Award: a DOJ antitrust suit. The crux of the government’s claim was similar to that made against IBM a quarter century earlier: Microsoft was abusing its commanding position to limit rivals’ ability to get traction with competing products. The headline product in 1998 was the browser: Netscape represented Microsoft’s first serious competitive threat in a decade; to stop it, the company bundled its Explorer browser for free with Windows and cut deals with PC manufacturers to make Explorer the default browser on computers. The DOJ believed this was anticompetitive, the court agreed, and the company signed a consent decree ensuring PC manufacturers greater flexibility regarding the software they bundled with Windows-powered computers.

Google It

The DOJ’s enforcement action oxygenated the marketplace in ways nobody could have foreseen. The same year the department sued Microsoft, the cycle was beginning again. Larry Page and Sergey Brin founded Google in 1998, and over the next decade their company rode a wave of innovation to global dominance. Adwords, the revenue-generating portion of the business, launched in 2000. Then Gmail in 2004, Maps in 2005, Docs in 2006, Android in 2007, and Chrome in 2008. All built on the success of the company’s core products, Google search and the Android operating system — just as Microsoft built its empire on the dominance of its Windows operating system.

Would Google exist today had the DOJ not sued Microsoft? Unlikely. Microsoft tried to compete with Google in search and mobile in the 2000s, but, unable to deploy its bundling and exclusivity strategies, it had to rely on its products — which were inferior.

Google doesn’t dominate computing today to the extent Microsoft did in 1998. Nobody does, as “computing” is a much broader space. But its control of search — the most common entry point to the internet — is a nearly pitch-perfect echo of Microsoft circa 2001. Similarly, a quarter century after its founding, Google has a more than 90% market share, a sclerotic artifact of market power vs. a function of innovation. Its market dominance creates a virtuous cycle of increasing power. An estimated 9 billion Google searches occur every day, vs. 400 million for Bing. The massive delta of data and reach makes for a better product: Click-through rates for ads on Google are 30% greater than on Bing. More usage = more data = more advertising, and so on. Today, Google’s parent Alphabet is worth $1.75 trillion and employs 175,000 people.

However, what was the last innovative Google product? Restructuring the brand’s architecture under Alphabet? Earnings growth has, mostly, been a function of finding new ways to extract profits from its monopoly: Google search results have become a billboard for Google-sponsored results interspersed with content harvested from other sites and links to Google’s own services. In 2020, The Markup found that Google-associated results (ads for or links to the company’s other services) constituted over 60% of the first screen of an average Google search result. And in 1 of 5 searches, the entire first screen is Google results. This is the meat of its business: Search ads generate 57% of the company’s revenue.

Despite turning search results into a carousel of ads and Google services, Google has racked up 90% market share in search queries — 95% on mobile. How? As Microsoft once did, it leverages its control over the most popular mobile operating system (Android) and spends unprecedented sums on deals assuring it is the default search engine on computers and phones — more than $10 billion per year. Google says it’s the leader because it has the best product, but if that’s so … why pay $10 billion a year to be the default? Dominance in search is also self-fulfilling, as it gives the company unrivaled data re what people search for and what results generate clicks. And Google’s ability to harvest additional data from adjacent products, including Mail, makes it increasingly difficult for competitors to get traction. 

One difference? Google learned from the sins of the father and has tried to insulate itself from antitrust enforcement through lobbying and PR. Google spent over $10 million on lobbying in 2022 — in the late 1990s, Microsoft’s only presence in D.C. was an office in the suburbs focused on selling software to government agencies. In addition, today’s tech giants recognize CEO “likability” is key. Wojcicki, Pichai, and Sandberg made millions for their management skills, but billions as likability heat shields for their businesses’ abuses.

The New Gilded Age

The DOJ’s current lawsuit, one of several actions the federal government has taken against tech companies on antitrust and other grounds, reflects a much needed renewal of our free market instincts. Yes, government action is a component of a free market, despite what the techno-libertarian crowd would have you believe. Markets are not the product of divine creation coupled with a laissez-faire approach to regulation but a function of human effort that depends on rules and enforcement to work efficiently. We’ve lost our way with respect to this (see above: lobbying) and are paying the price with declining competition and innovation.


And not just in tech. Three companies control 95% of the U.S. beverage market. Four dominate the meat business, and rising meat prices are the largest contributor to food price inflation. Four airlines control over two-thirds of U.S. air travel, though they are substandard — the highest-ranked U.S. airline by quality of service is Delta … in 20th place, behind Air New Zealand. The next is United, in 49th place, trailing Azul Brazilian and Malaysia Airlines. Monopoly has its privileges, however: In 2014 the Economist calculated that U.S. airlines generated $22.40 in profits per passenger, while European airlines, subject to the rigors of a free market, earned just $7.84.

We see similar consolidation in banking, pharmaceuticals, health care, retail drug stores, publishing (where the DOJ recently had a big win, stopping the merger of Penguin Random House with Simon & Schuster), eyeglasses, and beer. Waves of consolidation are washing over nearly every sector.


Antitrust enforcement actions are perceived as punishments or moral judgments, but we should think of them as recognition. If a company is good enough for long enough, it can achieve market dominance and earn its profits from stifling competition vs. competing on products or services. It’s the logical, shareholder-driven thing to do. And when we stop them, the benefits accrue to almost everyone. When the U.S. broke up Standard Oil in 1911, its largest shareholder, John D. Rockefeller, became the wealthiest man in the world: The separated companies, free to compete and innovate in the market, were worth dramatically more than when bundled together. The breakup of AT&T unlocked enormous value in the telecommunications industry, leading to more patents, more profits, and eventually the fertile ground needed for the internet market explosion in the 1990s. Microsoft wasn’t broken up in 2001, but it flourished despite the limitations the DOJ put on it, becoming a more innovative company. The action also fired the starting gun for growth in a sector that’s created enormous stakeholder value.

This month’s trial concerning Google’s search dominance likely won’t lead to the breakup of Alphabet. However, I believe severing YouTube and Google would create significant value for shareholders, employees, and customers, who’d see their rents decline. Soon after the breakup, the Alphabet board would demand a strategy for competing in video, and the newly constituted YouTube board would ask how the company was going to challenge its former parent in text search. Even without a breakup, limitations on Google’s ability to perform infanticide on emerging competitors would be welcome. History suggests we are at the start of another 25-year cycle. Just as the web was driving innovation in 1998 (when Google was founded) and personal computers drove Microsoft’s early success, AI appears to be the emerging volcanic force. We need to ensure that the nascent challengers to Google (and to Meta and Apple and Amazon) have the light, air, and space needed to survive and create trillions in shareholder value and hundreds of thousands of jobs.

Ground Zero

This isn’t about just search engine advertising, or even tech. The power of incumbents to suffocate insurgents before they can grow is mirrored in our society at large. Ground zero for many of the biggest challenges facing America can be traced to one core problem: For the first time in our nation’s history, 30-year-olds aren’t doing as well as their parents were at 30.

This creates rage, shame, and a loss of faith in one another and the country. Limiting Google’s default deals or breaking it up won’t cure these ills. But it’s a step, and a model for what we need to do elsewhere: clear incumbent overgrowth, creating the light and space for the young to prosper.

Life is so rich,

P.S. My newest lecture, The AI Optimist, is happening next week. Sign up for free to learn how AI will transform our lives and work. Register here.



  1. David Merkel says:

    People worry too much about oligopolistic corporations that are largely doing good for society as a whole, and worry too little about monopolistic governments that only have the illusion of serving the people.

  2. MFM says:

    Would be interesting to investigate the reasons why we see huge consolidations in many industries.

  3. Juanita Kingsley says:

    Scott, this was a great history and economics lesson. Thanks, as always, for the clarity with which you present.

  4. Parker says:

    Worth noting that breaking up AT&T also precipitated the demise of Bell Labs, among the most stellar science labs in the country.

  5. Nate says:

    Nice read …thanks.

  6. Joseph Sorbello says:

    Very interesting article and responses. We all know that government is among the most pervasive of the problems as far as economy goes. I think we all realize, to different extents, that the daily life we experience really is Matrix-like. It is my belief that our reality is that which we are MADE to perceive as reality and that there are monopolies or, if you prefer, “powers that be” that actually control the economy at both the micro- and marco- levels. It very naïve of anyone or any group to actually believe that they control their sphere of influence. I’m talking about the very powerful people and conglomerates (e.g. the Military Industrial Complex, other power players, oligarchs, billionaires, corporations and governments world-wide). Ours is a life of illusion. We are the puppets and the sheeple.

  7. Jeffrey says:

    Society largely advances by the private market, not by the public/ government. Increasing size presents obvious benefits of economies of scale. Preventing consolidation only reduces efficiency while aiding businesses in foreign countries not hobbled by such limitations. Importantly, monopolies are not illegal per-se, only illegal monopoly behavior is. All private monopolies eventually are usurped, proving time and time again how unnecessary and counterproductive antitrust law actually is.

    • michael train says:

      It is a myth that the private market has been the historical driver of economic progress. From the time of the pharaohs to the rise of great cities around the walls and cathedrals of the middle ages and through government investments on space & technology – it has always been the spending of institutional wealth, ie, the riches of rulers and authorities, that have launched massive irrigation projects, ships of exploration, transcontinental rail lines and canals, wars, technologies, the digital age… Without the massive applications of wealth and organization having been put forth by these institutionalized players almost none of the private market successes of today could have come about.

  8. Jeffrey Isaac says:

    “…If the tendency of monopoly businesses was to hold back progress, they would be dangerous, and we’d be right to oppose them. But the history of progress is a history of better monopoly businesses replacing incumbents. Monopolies drive progress because the promise of years or even decades of monopoly profits provides a powerful incentive to innovate. Then monopolies can keep innovating because profits enable them to make the long-term plans and finance the ambitious research projects that firms locked in competition can’t dream of.

    …In the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot. Monopoly is therefore not a pathology or an exception. Monopoly is the condition of every successful business.

    …All happy companies are different: Each one earns a monopoly by solving a unique problem. All failed companies are the same: They failed to escape competition.” Peter Theil

  9. Matthew says:

    Hmmm. A lot of blind faith in one trust (Government) knowing how to implement “anti-trust” because an industry player triggers a certain share of a market – with little discussion of whether or not that market could function best for consumers without consolidated resources. There’s no evidence in many markets that it is better functioning with 4, 8 or 108 players (the airline industry for example cannot run with 20 domestics) or that the larger the player the worse for consumers (look at hospitals – bigger is definitely better; the fragmented market in Vegas has undeserved the consumer for decades, whereas Brighams in Boston can get you seen asap…)

    Sorry, I think this article is a great defense of an assumed premise: and that is that Government knows better. And no mention that many “trusts” in earlier times were “government created” in the first place (telco, railroad, etc). Ask the TSA how that’s working out these days.

    I’ll protect myself against Microsoft or Google, thanks. I know where the plugs are.

    • Jeff says:

      Ty for presenting an opposing viewpoint. Government is not the answer, and frequently hinders progress while embodying corruption and crony capitalism.

  10. iEraj says:

    Alphabet has been really taking advantage of its position, buying out any potential competition, they even bout Fitbit for crying out loud! Although not a big fan of pretentious DC bureaucrats, there should be some restraint on this tech behemoth.

  11. Jeffrey Isaac says:

    On the other hand…
    “ Antitrust laws are fluid, non‐​objective and frequently retroactive. Because of murky statutes and conflicting case law, companies can never be sure what constitutes permissible behavior. Normal business practices — price discounts, product improvements and exclusive contracting — can somehow morph into an antitrust violation when examined by government antitrust regulators. Companies can be accused of monopoly price gouging for charging more than their competitors, or accused of predatory pricing for charging less, or accused of collusion for charging the same.”

  12. C Cook says:

    We have given more power to Washington, DC politicians than to all industrials combined. Break up Washington, eliminate unneeded Departments. Move powers not vested in the Constitution to the States or to the Counties. Otherwise, the act of ‘trust busting’ will just turn into another spending and campaign financing orgy for Congress. Washington is too big, fix that first.

  13. Moze Mossanen says:

    Great article, Scott. Most informative. You also write with a fluency and richness of language that’s a pleasure to read.

  14. Geo says:

    Agree. Thanks for the perspective on capitalism and our democracy’s need to regulate dominant businesses. An excellent source for deeper coverage of antitrust regulation is Matt Stoller at this column “Big”. Worth reading.

  15. Jeremy Williams says:

    Anti-anti-trust : “What’s good for M&M Enterprises is good for America” – Joseph Heller, Catch-22.
    As the story goes, after leasing the USAAF bombers to the Axis to bomb his own airfields, Milo Minderbinder was let off “once he opened his books and disclosed the huge profit made.”

  16. Patrck says:

    It’s just a shame that the big boys have to be spanked to let the little boys with fresh ideas in the door to play the game. Not the American way.

  17. Michael Zappas says:

    Excellent article. It seems that the parallel universe in politics is suffocating our society. We need an anti trust crusade to break up the Democrat and Republican parties. They don’t innovate. They force the geritocracy down our throats. They give the illusion of embracing change but are the reason we have this mess. SCOTT RUN FOR PRESIDENT. FORM A PARTY AND MAKE SURE IT CAN’T BE CONTROLLED BY OCTOGENARIANS. HELP US FREE THE COUNTRY FROM THE FOSSILS. MITCH, PELOSI, BIDEN, TRUMP, FEINSTEIN ALL NEED TO GO. THROW THE BUMS OUT.
    MIke Zappas
    Atascadero, CA

  18. Robert Rudolph says:

    Interesting article, I am sure there are many more examples, maybe not as dramatic or as familiar as these, not to mention all the companies that would like to have more and more market share. Note. tried to Register for AI lecture but since I am retired it was unhappy I had no title or employees and gave up.

  19. Todd Grace says:

    Thank you for sharing this perspective. From a consumer standpoint Google does a great job with convenance and selling the idea of security. I use an android phone, had a Gmail account since 2004 and all my data (documents, media) is on the Google cloud. I have yet to delete an email and pay $12 a year for all my cloud storage which is a bit like IBM bundling it’s operating system back in the day.
    A less obvious action taken by Google recently was to merge Google Map Ops (Geo) with Waze. This took out 500 independent (that said tongue in cheek) employees that operated a stand alone product into the belly of one and the sameness (consolidation) at the sake of user experience, the very culture that Google flaunts as it’s focus for all its products.
    What’s the solution? You talk about something that is clearly been happening for decades now. Human beings have short attention spans and are well, human with all our glorious faults while corporations are lifeless entities with ever growing resources including time, something we clearly have an interference about. Hardly fair isn’t it?

  20. Sheila Cameron says:

    This subject needed a critique and analysis. We need another Teddy Roosevelt! Thank you for doing this!

  21. Moises P Ramirez says:

    Illuminating!! Thank you Scott. If one parallels market economy to football (soccer), there is no limit to the goals one can score, but there are rules to be followed: the other team has to be allowed to play as free as you do and a FairPlay must be enforced for all. That depends on the arbiter (the government) not directly on players self-imposed behaviors. As you’ve said, an antitrust intervention can be seen as a praise, a proof that one has been a heck of a player.

  22. allan kass says:

    Scott…when you spoke early on about invasive species suffocating our ecosystem I had thought you were referring to DC, our political class and government agencies.

  23. Kyle K says:

    I think this all went off the rails when the government agencies began reviewing action and allowing mergers with the view of “increase or decreased cost to the public consumer.” I really think “owned market share” should be limited to no more than 40% or so for a single company. I would have to do more research, but I would be very comfortable with an FAANGM breakup using that criteria.

  24. Susan Kovinsky says:

    In 2008 I was using GOOGLE to search for grants for my public schools. I stumbled upon the millions in Microsoft vouchers that LAUSD had been sitting on for over 2 years not knowing what to do with them. I mobilized other parents and we got the district to use the vouchers to put computers in classrooms. It took over a year but we did it.

    An email from a technology teacher I received in 2009:
    “Both the tech labs at John Burroughs MS have been partially upgraded with the vouchers. We purchased 34 new I Macs and HP desktops. This goes part of the way towards modernizing what was becoming an archaic an untenable classroom.

    $22,000,000.00 dollars are still unspent and it was rumored at the CUE conference that the wonks at LAUSD hierarchy are planning to spend the money on a fancy database to disseminate student achievement data. Is there any clarification out there? I think the lawsuit terms are pretty specific that the rest of the settlement should be used for software that students can use, and for professional development to train teachers to use technology tools effectively. I am wary of the district’s competence as exemplified by the as their recent history with the payroll snafu.”

    I agree google is too big but without google – none of this MS money gets found and used by the district correctly…

  25. Michael Weaver says:

    The airline industry is expected to make a net profit of $9.8 billion in 2023, which is the first profit since COVID-19. However, the average profit per passenger is only $2.25, which is less than the price of a cup of coffee or a subway ticket. This profit margin of 1.2% is considered very weak and is not sustainable.

  26. Kirk Klasson says:

    Great! Now take it from the top and every time you cite Google change it to climate change and watch Germany strip every tree that it owns.

  27. Jim Good says:

    Beautiful article! Monopoly is killing American prosperity. While there are no silver bullets, restoring competition to the sectors Scott listed (and many others not) would help address so many issues like massive income disparities, regional income disparities and the economic distortions they cause (housing for example), poor quality, poor customer service and other issues too.

  28. tony says:

    The Boomer gerontocracy is killing this country. And its negative impact is everywhere- housing, tax policy, fiscal policy, political office, corporate America.

  29. Lucy says:

    Biden administration is following the legal/Econ policies of TR and FDR in the face of the most dangerous RW movement since the Confederacy.
    Thanks for the summary, and I wish Apple had won its intellectual property case against MS, would have emboldened others to resist.

  30. Michael Provence says:

    Mr. Galloway’s weekly email is nearly always opened as soon as I receive it. Such fine writing!

    • Doug Champagne says:

      I could not agree more. One of my few weekly highlights!!

      • Jennifer Villalobos says:

        I worked at Google from 2006 to 2017 before joining the Singapore Government between 2018 and 2020. Then I came to Thailand and worked for a British in market Insurance company to finally join the wealthiest billionaire family in Thailand.
        From insurgent to incumbent to insurgent to incumbent… Something I lived relates well to what you say!
        There is so much opportunity for growth and innovation for the younger generation to join forces traditional legacy business and drive disruption within but they seem to just want to be the unicorn before the age of 30 and that’s a problem. I hope the US can decouple yr and search but I feel that ant trust regulations alone won’t do much unless the future generations doesn’t get over their bias of Working in old school companies that actually require their muscle and intelligence for change and innovation

    • Jana Visco says:

      I agree that we have lost our way. I think we could learn a lot from our Indigenous American citizens. Living together more as a community and less as competitors. I’m not against capitalism but we have a wolf guarding the sheep and we all know it. Americans aren’t stupid. We know our system is broken. Extreme wealth and extreme poverty are corrosive. We must have effective checks and balances. There was a time when I felt that our country looked out for us but I don’t feel that way anymore. We need to look out for each other, especially our young people. Thanks for your enlightening insights. It truly gives me hope.

  31. Richard says:

    Thanks for the excellent piece. In DOJ v. Google – as in any action against a mega-mega, it’s a fait accompli for the defendant.

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