Regulating technology's present will help to fashion its future

It has become received wisdom in Silicon Valley that antitrust enforcers cannot move as fast as the tech industry - so they compensate by slowing down dominant tech companies to their own, creeping pace.

That is the meme that has been passed around Silicon Valley in the wake of the European Commission's findings of antitrust abuse involving Google. Web search is already history, according to this industry view - there are new games in town, that even the mighty Google is powerless to dominate. Why are the regulators wasting time trying to correct something that is already passing into the mists of time?

There is some truth to the argument that regulators will always be looking in the rear view mirror. They can only act based on existing market shares, which are the product of past innovations. But that does not mean competition authorities have had no impact on the way new tech markets develop, or that they should give up and just pray that market forces will do their work for them.

Still, some continue to argue for benign regulatory neglect, and it goes something like this. In 2009, when the first complaint against Google landed on the commission's desk, Facebook had 200m users and the iPhone was only two years old. Today, the social network has 1.4bn users, there are more than 1.6bn smartphones in the world. That leaves Google, with its roots in search, struggling to show it is not on the wrong side of internet history.

What this misses, though, is what has happened to Google's business over the same period. Its net revenues were $17.5bn in 2009; they are expected to hit more than $65bn this year. Search may be less dominant than it was but is still the largest sector of the online ad market by far, accounting for around 38 per cent of digital advertising in the US, according to the Interactive Advertising Bureau.

True, Google's revenues are slowing and investors are worried that search is not translating well to mobile. Smartphone users prefer to spend their time in apps. But that does not mean regulators should let up. On the contrary: as the pressure has grown on Google to maintain its growth rate, the risks have increased.

Internal emails gathered by the US Federal Trade Commission, as part of its own investigation, showed Google executives growing anxious that specialist search services - in niche areas such as comparative shopping, travel and local search - would eat its lunch. And not just upstarts. Facebook and Twitter were among the companies Google executives were worried would come to dominate local search. And their methods for fighting off this type of competition deserve a close look.

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Critics of regulatory intervention point out that rivals such as Yelp and Expedia, which were among the companies to complain to Brussels, can reach users with own their mobile apps. That makes them less reliant on traffic via the web - including from Google.

But mobile does not pay its way. At Yelp, mobile devices already account for two-thirds of searches, but the company warns that this is still a "new and evolving market" when it comes to making money. It will not even reveal how much revenue it gets from mobile.

In time, usage and revenues may even out. In the here and now, though, revenues generated on the web, where Google still dominates, are needed by companies like Yelp to build the next big (mobile) thing.

Brussels has also put a marker down in the world of apps by launching a formal investigation of Android. This might look, once again, as though the regulators are behind the curve. It will be years before the investigation is completed and any charges have been filed, appealed and resolved.

Even so, the announcement of a new investigation has an immediate impact. Parallels with the Microsoft antitrust case show how. In that case, the EU forced Microsoft to sell a version of Windows stripped of its own media player software, to protect other providers. This put the company on notice.

None of this necessarily means that Google is in need of regulatory restraint. Now that formal charges have been lodged, it will finally get the chance to see the case against it - and may decide to fight. But it does mean that the job of regulating today's tech market, rather than trying to anticipate tomorrow's, still matters.

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