One of the pitfalls of having to operate a major corporate entity in this country is the need to buddy-up to the Beltway. The practice known as lobbying is a multi-billion dollar business, employing tens of thousands of individuals whose basic job is to get the attention of your elected officials on behalf of their clients. This “attention” can take many forms: explaining to a Congressman why a particular bill that benefits their clients also benefits their constituents, knowing which elected official to talk to regarding a particular government issue facing a client, and explaining to the client how the machinery on Capitol Hill works so they can navigate it more effectively. One could make an argument, based on the amount of money spent, that the greater the distance between the perceived public good and the client’s need, the more lobbying is required. If you look at a list of top lobbying interests, you’ll see a number of major trade unions represented, unions that represent only a fraction of the population. Lobbyists representing the gaming industry are another example. “The perceived public interest” is not necessarily a pejorative statement, however. The pharmaceutical industry, for example, is the top lobbying spender, having invested over $2.3 billion since 1998. Bringing a drug to market is a time-consuming, expensive process, requiring several stages of approval. Drugs are also potentially dangerous substances that aren’t easily explained to the layperson. Laying the groundwork for approvals by the various government entities that a prospective drug will pass through requires a significant amount of care and feeding.
The technology sector is another bloc that sees its share of lobbying investment. If you think about it, this makes sense: the average elected official’s grasp of technology is about as firm as the average neckbeard’s grasp of politics. Then there are the dicier issues, such as those currently being faced by Google.
There’s a dark governmental cloud forming over Mountain View and it’s been a couple of years in the making. Google’s business model is complex and involves peoples’ personal information. Google also has a virtual monopoly on Internet search. Combine these things and its an environment ripe for talk of antitrust litigation – the kind of talk that earned Microsoft several swift kicks in the ass in the 90s. Hell, Microsoft can’t even talk about giving their Windows 8 implementation of Internet Explorer more access priviledges without someone crying “antitrust!” about 5 seconds later. Unfortunately for Microsoft, without a monopolistic bully pulpit, the company isn’t very good at making things people want to use, which would explain their awful consumer electronics adoption and their OS install base still being skewed towards the decade-old Windows XP. But Microsoft did learn something being bent over Uncle Sam’s knee: you need to invest in lobbying to know where you stand, which is why the company has spent an average of $8 million for lobbying services every year since 2002.
Google’s current challenges are based mostly on its search dominance. The EU has already found that Google’s ranking of search results are anti-competitive and has offered Google the chance to recommend changes themselves before resorting to more formal antitrust action. Now U.S. regulators are sighting in their scopes for what will likely be a similar indictment of Google’s business model. But Google has not been content to simply read Microsoft’s history; it’s going to great lengths to act on it. I imagine much of the credit goes to Eric Schmidt, who is decidedly more politically-attuned than anyone else in Google’s senior ranks. Schmidt was a fixture in Obama’s election campaign, having served as an advisor and a member of his transition advisory board and more recently the President’s Council of Advisors on Science and Technology. For Google, Schmidt is the guy that reps the company in its dealings with the government. You can see from his testimony before the U.S. Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights that he knows how to dance, speaking in non-commital platitudes to people who don’t understand how Google makes money. And Schmidt is probably instrumental in getting Google to invest in its Beltway relationships. With government intervention brewing, Google has ramped up its lobbying activity significantly and this year leads all techonolgy companies with over $5 million spent this year alone. That’s coming off of a 2011 spend of almost $10 million – or four times what Apple spent. In addition to the money spent by Google itself, over $1.2 million has been spent this year via the 22 lobbying firms that make up Google’s governmental arsenal. On top of that, Google’s contributions to Policital Action Committees (PACs), entities organized to raise and spend money to elect and defeat candidates, totaled almost half a million dollars. In contrast, Apple spent only $500,000 total this year, retains 3 lobbying firms and doesn’t spend money on PACs.
One could argue that Google must spend this kind of money to make sure that its voice is heard in Washington, but with its spending now exceeding the former whipping boys from Redmond, one has to wonder what this money is buying. Apple, a company that is has over twice Google’s market cap and is 10 times more profitable, only spends 1/10 as much. I guess when you’re the target of success that no one can understand, you have to spend a ton more scratch explaining it.
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