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Internet Histories

Digital Technology, Culture and Society
Volume 5, 2021 - Issue 2
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Research Article

Google’s Post-IPO Development: risks, rewards, and shareholder value

ORCID Icon &
Pages 171-189
Received 05 Aug 2020
Accepted 11 Dec 2020
Published online: 06 Jan 2021


Internet history shows that states, military, universities and other public institutions were essential drivers of innovation in the early stages of network development. However, once risky stages pass, commercialisation starts and investors often reap disproportionate rewards from technological innovation. In this paper, we use the risk-reward nexus (RRN) approach (Lazonick & Mazzucato, 2013; Mazzucato, 2013, 2018; Mazzucato & Shipman, 2014) to understand the imbalance between risky public investment and private allocation of rewards regulated by financial markets. We analyse risk reporting in Form 10-K market reports submitted to the Securities and Exchange Commission (SEC) by Google Inc. (Alphabet Inc.) for the period between 2005 and 2019. We detected 58 organisational, marketing and advertising, technological, legal, competitive, and macroeconomic risks. Based on changes in risk reporting three stages of Google’s development can be discerned: post-IPO growth and expansion (2005-2008), growth management and investment diversification (2009-2013), legal struggles and regulatory scrutiny (2014-2019). Reported risks are primarily directed at shareholders, omitting risks relating to internet users, courts, regulators, and nation states. Such an approach is historically rooted in the construction of financial regulation in the name of public interests and markets, with public interests largely interpreted as a proxy for investors’ interests.


There is no single or unified history of the internet (Abbate, 2017; Driscoll & Paloque-Berges, 2017). Instead, there are many global and local histories as well as technological, social, political, cultural, and economic histories. There are widely cited analyses of the early days of computing (Abbate,1999; Leslie, 2000) explaining the crucial role of the state, universities, and the military. On the other hand, popular and managerial histories of commercial internet usually celebrate the inventive brilliance and entrepreneurial spirit of corporate founders (Battelle, 2005; Lacy, 2008). Yet as Lee (2019, p. 7) points out, popular histories regularly fail to emphasise how companies capitalise on infrastructures, web developers and content producers that precede them. Balanced economic histories of commercialisation and privatisation look at the trial and error process of creative destruction (Greenstein, 2015). Some point to the importance of pre-initial public offering (IPO) corporate development for solidifying business models and creating initial trust for shareholders (Dror, 2015; Elmer, 2017). Others look at corporate power to unpack market consolidation (Birkinbine et al., 2016) and oligopolistic conditions in which companies control internet functions (Smyrnaios, 2018). However, most histories focus either on early public funding, or on commercial success of individual companies in the later period of internet development. Two process were essential for commercialisation and privatisation: venture capital financialisation (Kenney, 2000; Zook, 2005) and advertising industry development (Spurgeon, 2017; Turow, 2011).

Understanding the economic history of the internet, and its biggest companies, becomes highly important in conditions of market consolidation and monopoly power, challenged in recent years by the European Union, United States and other countries worldwide. Companies such as Google, Facebook and Apple have found themselves under multi-billion dollar fines and investigations in areas ranging from anti-trust and tax avoidance to privacy abuse and surveillance. In this paper, we do not see the history of the internet as a discontinuous process between public funding and commercial uptake. Instead, we understand the history of the internet as a succession of developments of key internet technologies that benefit societies, and certain social groups, in different ways. To understand the balance between public investments and private rewards, we utilise the risk-reward nexus (RRN) approach (Lazonick & Mazzucato, 2013; Mazzucato, 2013, 2018; Mazzucato & Shipman, 2014). The crux of the argument is that risky, long-term innovation usually happens within the public sector since the public is able to absorb losses and failures that often occur in early stages of technological development. However, once the risky innovation stage passes, commercialisation starts with institutional investors reaping disproportionate rewards if new business models prove successful.

We analyse 15 Form 10-K market reports submitted by Google Inc. (Alphabet Inc.) for the fiscal period between 2005 and 2019. Most researchers use such reports to obtain information on operational results and financial data, very rarely focusing on the narrative risk segment in financial reports (for exceptions, see Deumes, 2008; Doran & Quinn, 2008; Dyer et al., 2017). In this paper, the focus is precisely on the narrative segment of 10-K reports titled “Item 1 A: Risk Factors.” The U.S. federal securities laws require companies to disclose information about their business and the risks they face in annual market reports. The diachronic change of reported risk assessments provides an example of how companies manage investor trust and create value to meet shareholder needs. On the other hand, references to risks related to public institutions and internet users are absent from Google’s 10-K filings. It is not an indication of Google’s improper approach to risk reporting, but rather an expression of the different treatment of public and private investments and associated risks and rewards sanctioned by the regulatory framework. Post IPO corporate development simply institutionalises business support and results in unique allocation and distribution of rewards from technological innovation, skewed towards shareholders.

Risk as a socioeconomic relation and its role in economic development

Risk is highly difficult to quantify, predict, and measure since it is a future-oriented assessment. Financial investments can be improved by having access to information that minimises the risk of entering market transactions. For technology companies, this holds additional weight due to the uncertainty of the innovation process. Lazonick and Mazzucato (2013) argued that the risk–reward nexus (RRN) in developed capitalist economies creates inequalities between public actors who take the risks of inventing and those who reap disproportionate benefits of innovation. This particularly relates to financial market transactions of publicly traded companies such as Google. By buying and selling shares, shareholders do not necessarily invest in the innovation process. Shareholders often buy shares from companies as a broader investment portfolio strategy: “they can liquidate these portfolio investments, and as a result bear little if any risk of success or failure of an innovative investment strategy” (Lazonick & Mazzucato, 2013, p. 1102).

Advanced technology depends on scientific research, especially on basic research which provides the foundation for further refining and application in the form of new technologies and ultimately new commercial products (Burlamaqui et al., 2012, p. XX). The required investment, substantial even for the largest corporations, has to be strategically planned. Since the 1980s it is increasingly the recipients of public funding that have produced the majority of award-winning innovations, with the portion of awards going to Fortune 500 firms rapidly declining to the point of nearly disappearing (Block & Keller, 2012). As Mazzucato (2013) demonstrated, innovations that provided key iPhone features have been developed by strategic public investments in technologies such as the internet, GPS, touch-screen display, and even voice activated personal assistants. The entrepreneurial character of the public sector, Mazzucato claims, is an aspect of economic development that is poorly recognised in mainstream economic thinking with its strong influence on academia, as well as on how legal and regulatory interventions are made and implemented. The private sector and commercialisation are equated with technological innovation, wrongfully disregarding the long-term historical role of the public sector in the cumulative process of societal innovation (Mazzucato, 2018).

In one of the most comprehensive studies of the role of public funds in economic development, Ruttan concludes that, taken together, military- and defence-related research and development and procurement “has been a major source of technology development across a broad spectrum of industries that account for an important share of U.S. industrial production” (Ruttan, 2006, p. 5). Public investments have been particularly pronounced in the development of computing, with the Internet and the World Wide Web being the most visible elements of a vast array of technologies under development for over half a century (Abbate, 1999; National Research Council U.S., 1999). The rise of nanotechnology is another example of strategic public investment where the U.S. government has constructed and funded an entire new field for innovation, becoming the world leader and largest investor in the field (Motoyama et al., 2011). More than 60 countries have since established similar national research and development programs (Roco, 2011, p. 428). In many other ground-breaking areas, such as genomics (Pohlhaus & Cook-Deegan, 2008) green energy (National Research Council, 2001; Rodrik, 2014, p. 480) and artificial intelligence (National Research Council U.S., 1999, pp. 7–8), it was often the long-term public investment that led the way, until private sector was able to see the returns through commercialisation.

All of this points to how the socialisation of risks through government run activities and by the use of public funds raises the issue of an adequate distribution of rewards, an adequate portion of value created going back to public finances (Block & Keller, 2012, p. 98; Mazzucato & Shipman, 2014). As Lazonick (2011) argued, while markets are an essential and crucial part of our economies, the role of public investment fits a different role. Innovation in many cases cannot be a market process, since “the market cannot demand products that do not yet exist.” The RRN approach has been applied to a range of issues where initial public funding and risky innovation were captured by commercial interests. Examples include industries such as pharmaceutical and software production (Mazzucato, 2018; Wimmer & Keestra, 2020), geoengineering (Faran & Olsson, 2018), national innovation policies (Laplane, 2019), and financial market manipulations (Lazonick, 2014; Lazonick et al., 2013). These different approaches outline the importance of public innovation, which, once privatised and commercialised, results in negative public consequences such as income inequality, carbon emissions, and expensive pharmaceutical products. To this list, we can add issues stemming from various business models depending on the internet and dominance by some of the biggest companies, which include privacy breaches, disinformation, and surveillance.

Financial reporting in the U.S.: between markets and public interest

Mandatory annual reporting for publicly traded firms was introduced in the U.S. by the Securities Act of 1933. It followed the Great Depression as a reaction to the loss of trust in financial markets, aiming to reduce financial market abuses and uncertainty by providing regulation of any tradeable financial assets, broadly known and defined by this act as securities (Securities Act, 1933). The Securities Exchange Act of 1934 followed, introducing regulations for places and individuals that trade in securities, in order “to ensure the maintenance of fair and honest markets in such transactions” (Securities Exchange Act, 1934). Both laws were social constructs, social formations of markets and commodities, emanating from the Senate Committee on Banking and Currency investigations between March 1932 and June 1934, discussing “the failure of listed corporations to provide adequate information as well as defects in the operation of the market itself” (Loomis, 1959, p. 217). Sweeping regulations were considered to be a part of the New Deal, with public interest quoted frequently in new laws more as a rhetorical device than an actual basis for the regulations (Sylla, 1996).

Federal courts regularly interpreted the separation of commercial and investment banking as what they considered to be a matter of public interest, protecting both “depositors and the public from the hazards and financial dangers” (Orbe, 1983, p. 187). Such an understanding of public interest was not in conflict with the thinking of at least some of the creators of regulatory acts. As Loomis points out, regulation of major exchanges of securities was justified by converting them from “private clubs” to “public institutions” (1959, p. 221). This new spirit was observable in the significant number of exchanges developing “a high sense of public responsibility and a strong desire to operate in a manner which merits the confidence of the public” (1959, p. 223). One of the arguments presented for regulation was that “unhealthy prosperity of the security markets obscured for the public the growing signs of recession” (Hanna & Turlington, 1935, p. 256). The problem, noted by these early commentators, was that the phrase used throughout the acts – the scope of regulations can include what is “necessary and appropriate in the public interest or for the protection of investors” – was “a very broad provision,” allowing liberal interpretations (1935, p. 275). In the extreme, “the term ‘investors’ is broad enough to include humanity in general” (1935, p. 275). However, the key aim of President Roosevelt’s New Deal regulatory reform was that no relevant information “shall be concealed from the buying public,” which reveals the character of the concept of the public in the minds of creators of those laws (Keller & Gehlmann, 1988, p. 338).

Disclosing risk factors was introduced through a legal incentive in 1995, shielding firms from potential losses in the case of securities fraud class actions, provided their reports are accompanied by “meaningful cautionary statements” identifying potential risks of diverging from projected business results (Private Securities Litigation, 1996). The disclosure was initially voluntary, becoming mandatory with the addition of 1 A section “Risk Factors” to the 10-K form (Nelson & Pritchard, 2016, pp. 266–267). The trajectory of this rule making reveals the continuing presence of variations of what public interest implies, stating that regulation can contain what is necessary or appropriate in the public interest or for the protection of investors (SEC, 2005). In a detailed reading of the concept of public interest, Huber compares how the concept is used by a variety of actors, starting with its use in key regulatory laws (1933, 1934) and in later Congress activities, to public institutions such as the SEC and others involved in financial regulation. The author concludes that “the public interest cannot, by law, be considered without considering the market interests,” with the implication that any new rule that would claim to protect the public interest has to also promote the market system, its “efficiency, competition and capital formation” (2016, p. 419). Even the protection of investors, Huber argues, is derived from the primary purpose, which is the protection of the market and its functioning. In short, the author concludes, “what is called ‘public interest’ in regulatory documents is actually the ‘market interest’,” with the use of the term “public interest” deflecting attention away from the purpose of financial regulations (Huber, 2016, p. 420).

Google’s risk reporting and corporate development

The idea for the Google search engine was developed in the Stanford Integrated Digital Library Project at Stanford University, which started in 1994 funded by the National Science Foundation (NSF). Google was incorporated in 1998 and the company made its IPO in August 2004. It sold 19 million shares and raised $1.67 billion in capital, setting the company market value at over $20 billion. The company was restructured in 2015 as a holding company under the name Alphabet Inc. and registered in Delaware (Bogenschneider & Heilmeier, 2016) with Google representing one of the major company subsidiaries. As of August 2020, Alphabet Inc. is 68.36% owned by institutional investors, the biggest ones being Vanguard Group Inc., Blackrock Inc., Price T Rowe Associates Inc. and State Streets corp. As of December 3,12,019 Sergei Brin and Larry Page own approximately 84.3% of the outstanding Class B common stock, which represents approximately 51.2% voting power. The company is the dominant web search engine globally, holding more than 90% market share on web search across all platforms (StatCounter, 2020). Since 2017, the company was fined multiple times by the European Commission (2017, 2018, 2019) for abusing its dominant position and market power. However, despite multi-billion Euro fines and new anti-trust cases being raised in the United States, the company is still one the largest global companies with market capitalisation reaching a record 1 trillion U.S. dollar value in January 2020.


Studying corporate histories is often hidden behind trade secrets and non-disclosure agreements making access to reliable sources difficult. To unpack the development of Google we focused on a mandatory, descriptive section within publicly available Form-K reports submitted to the Securities and Exchange Commission (SEC) in the United States. These standardised reports provide key quantitative and qualitative information to investors, shareholders, and management boards who regularly monitor the economic performance of the company, the risks it faces, and financial rewards it provides. Fifteen Form 10-K reports by Google Inc. (Alphabet Inc.) were downloaded from the EDGAR Company Filings database. Issued between 2006 and 2020, they relate to the fiscal period between 2005 and 2019, covering the period since the addition of the mandatory Item 1 A section by the U.S. regulation and since the company made its IPO. We used the so-called in vivo coding procedure often used in sociological research (Glaser & Strauss, 1967) to minimise interpretative interventions and to allow meanings to emerge from the data. Only those risks recorded under a bold risk title heading were coded as they describe succinctly what the risk relates to in the descriptive paragraph. The existing wording in the heading was used to allow the data to emerge from the documents. Some risks have been reported during the entire period. Others appear and disappear depending on the business circumstances of the period.1 Fifty-eight risks were detected (see ) in total. Six major risk categories were created to include organisational (N = 13), technological (N = 10), marketing and advertising (N = 4), competitive (N = 11), legal (N = 16), and macroeconomic risks (N = 4). Looking at the complexity of the risks as they change over the years, two basic research questions emerged: (1) what does the diachronic change in risk reporting tell us about Google’s post IPO corporate development? (2) How does the company build shareholder value by discussing these risks?

Table 1. Reported risks between 2005 and 2019.

Core business risks (2005–2019)

A significant number of risks (N = 19) have remained unchanged for the entire period despite the fact that the company developed its services, diversified its business portfolio, expanded internationally, and consolidated its global market position. These risks enable us to understand some of the core business elements for maintaining growth, operating results, and revenue streams. Organisational risks relate to acquisitions, international expansion, loss of key personnel, and retaining key employees. International expansion was clearly the corporate goal ever since the IPO, also representing one of the core business risks in 2019. The company generated 54% ($87 billion) of its 2019 revenue in markets outside of the United States. The loss of key personnel such as company founders and senior managers was presented as an ongoing risk for the execution of the business strategy. Similarly, retaining employees and maintaining the corporate culture represents a core business risk for the entire period.

Ongoing technological risks relate to the dangers imposed by ad blockers, interruption and failure of technological systems, internet service providers, and new devices for accessing the internet. The company is also heavily reliant on data centres and servers, which are vulnerable to various forms of interruption that could result in deterioration of the quality of Google’s services. Third-party systems and internet service providers are necessary for providing unimpeded access to the internet. Their inability to deliver access could result in the loss of users, advertisers, and goodwill, leading to increased costs, impairing the ability of the company to attract new users and advertisers (Alphabet Inc., 2018). The company is also aware of technological changes it does not fully control or direct. In particular, internet users access the internet through a diverse mix of devices, moving away from the traditional personal computer.

Core marketing and advertising risks relate to brand management and loss of advertisers. Brand management is negatively impacted by reputational issues, third-party content shared on Google’s platforms, data privacy issues, and product or technical performance failures (Alphabet Inc., 2018). Since advertising is the dominant source of revenue for the company (between 99 and 86% for the entire period), loss of advertisers as a business risk is not surprising. Closely connected to these risks are competitive risks such as the overall competitive environment, declining growth rates, and fluctuating operating results. Competitive risks are subject to changing technologies, shifting user needs, and frequent introduction of new products and services (Alphabet Inc., 2018). The company also expects to see declining growth rates in the future. Among the listed factors affecting the growth rate are increasing competition; changes in device and geographic mix; ongoing product and policy changes; challenges in maintaining growth rates as revenues increase to higher levels; the evolution of the online advertising market, including a variety of online platforms for advertising; and the rate of user adoption of company products, services, and technologies.

Legal risks consistently reported during the time period between 2005 and 2019 relate to intellectual property right claims against the company, protection of the company’s intellectual property rights, privacy concerns, tax liabilities, and U.S. and foreign laws. Intellectual property right claims relate to the demands for paying damages in multiple cases in which the company has been involved since its IPO. This is one of the most detailed business risks to be found in the entire period. The 2007 report relates to trademark infringement for which courts in France have held the company liable. The infringements relate to allowing advertisers to select trademark terms as keywords. There were multiple other cases in the U.S., France, Germany, Israel, Italy, Austria, and Australia (Google Inc., 2005–2016). The report for 2008 listed pending cases before the European Court of Justice and in many other countries. It also listed copyright claims regarding the infringement of rights through different services, as well as lawsuits concerning the infringement of patent rights. While often promoting flexible interpretations of intellectual property rights it (miss-) uses to improve its search engine, the company is also highly protective of its patents, trademarks, trade secrets, copyright, and brand. Different regulatory regimes in various jurisdictions worldwide are often discussed as potential business risks, while privacy concerns and tax liabilities are considered to represent core business risks for the company. U.S. and foreign laws were regularly listed as a business risk between 2005 and 2019.

Post IPO growth and expansion (2005–2008)

In addition to the risks that remained mostly unchanged, a number of individual risks appeared at specific periods and then disappeared from the reports. The first period (2005–2008) is post-IPO growth and expansion. Organisational risks from this period relate to operational expenses and new service-level agreements for processing payments and transactions between Google, its advertisers, partners, and employees. One of the main risks was managing relations with so-called Google Network Members, or third-party websites, across the internet that use Google’s advertising programs to deliver relevant ads that generate revenue for themselves and for Google.2 In addition to managing relations with new business partners, the company also incurred new legal, accounting, and corporate governance costs from being a publicly traded company.

Technological risks during this period include combating spam and malicious third-party applications that tamper with Google’s web search results and deliver user experiences not intended by the company. After 2008 and 2009, these risks disappear from market reports. Google’s services rely on the existing and developing internet infrastructure for providing high-speed internet access without interruption. These risks relate mostly to outside providers and businesses, including infrastructure providers such as bandwidth providers and data centres. Failure in third-party technical systems was perceived to have a negative effect on the reputation of Google. The same can be said for the development of the internet infrastructure in general. In addition to outside network providers, Google was scaling its own technical infrastructure to handle the growing international business and traffic (Google Inc., 2009).

Marketing and advertising risks unique to this period are click fraud and the loss of Google Network members. Google’s business model is premised on displaying relevant advertisements along with relevant content that internet users search. Unlike with traditional media, advertising only generates revenue if the users actually click on the ad, thus giving a signal that the users are potentially interested in purchasing advertised products and services. Click fraud relates to clicks that are not intended by the user to link to the underlying content. The advertising strategy also relies on Google Network members. The loss of participants from the network would represent a risk to the company, as it generated 44% of its 2005 revenue from ads displayed on Google Network members’ websites. This risk appeared between 2005 and 2009. As the company consolidated its market position, it became less reliant on revenues generated from Google Network members’ sites. In 2019, these revenues accounted for only 13.25% of the total revenue (Alphabet Inc., 2020). The remaining advertising revenue comes from advertising directly on Google products and services.

With regard to competitive risks in the immediate post-IPO period, the company was voicing concerns about risks imposed by competition from international web search, advertising services, and other internet companies. Moreover, the company was concerned about the loss of investors and keeping up with technological change in the report for 2005. Risks stemming from a potentially harmful lack of innovation appeared between 2005 and 2010. The main competition to Google’s business model were two companies explicitly mentioned in the reports between 2005 and 2008: Microsoft and Yahoo. The reports lamented their better financial and engineering resources, higher numbers of employees, greater cash resources, and other factors. As Google gained a competitive advantage in advertising markets, these companies were no longer explicitly mentioned as individual risks after 2008. Instead, they were lumped under a broader category of general competition for the company. Similarly, Google listed competition with traditional media as a business risk only in reports for 2005, 2006 and 2007.3

Unique legal risks in this period include changes in accounting rules, commercial disputes, insurance risks, and proprietary document formats. Changes in accounting rules appeared in 2005 and the company was obligated to report stock-based compensation as expenses in the statement of income. This compensation is an important segment in attracting, retaining, and motivating the workforce. Reporting such compensation as expenses leads to potentially negative earnings per share and decline in future stock prices (Google Inc., 2006). Commercial disputes and insurance risks were listed as a concern and a “distraction” for management due to potentially high costs of settlement. The company expressed concern between 2005 and 2008 about the legal status of proprietary document formats that might prove inaccessible to the web search technology. Finally, there were two macroeconomic risks discussed in this period: currency exchange rates and the effects of the global economic crisis. As Google expanded its international operations, it received payments in many different currencies making its operating income exposed to exchange rate fluctuations. For this purpose, Google implemented different hedging strategies such as forward contracts, options, and foreign exchange swaps to mitigate risk.

Growth management and investment diversification (2009–2013)

The second period (2009–2013) relates to the growth management, consolidation of the market position, and investment diversification. The total number of risks unique to this period is much lower compared to the first period. Major organisational risks were the acquisition of Motorola and growth management. Motorola remains one of the biggest acquisitions by Google, purchased in 2011 for a reported $12.5 billion. It helped the company expand into the rising mobile phone market by obtaining a number of intellectual property rights as well as highly skilled workers.4 Growth management risks appeared already in 2005, continuing until 2011:

Our expansion and growth in international markets heighten these risks as a result of the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal systems, alternative dispute resolution systems, regulatory systems, and commercial infrastructures (Google Inc., 2012).

Technological risks of this period are scarce. Only the risks relating to web spam and content farms were reported in this period. It appeared first in 2010 and continued until 2019. New competitive risks do not feature prominently in this period. A unique risk with regard to investments in new business strategies appeared in 2010 and continued until 2019. It can be closely connected to the mergers and acquisitions and the development of new products and services. Legal risks include legal proceedings that appeared in 2010 and 2011 regarding the Federal Trade Commission investigations in the U.S. and investigations by the European Commission concerning antitrust legislation. In addition, Google was involved in proceedings related to intellectual property, privacy, tax, labour and employment, commercial disputes, content generated by Google’s users, goods and services offered by advertisers or publishers using Google platforms, among others. As the report for 2011 stated, “Regardless of the outcome, such legal proceedings can have an adverse impact on us because of legal costs, diversion of management resources, and other factors” (Google Inc., 2012). Legal risk regarding security measures appeared between 2009 and 2016. Since the company stores and transmits users and customers’ data, security breaches expose it to litigation and legal liability.

Legal struggles and regulatory scrutiny (2014–2019)

The third period is one of increasing legal struggles and regulatory scrutiny (2014–2019). Organisational risks relate to the reorganisation towards Alphabet Inc., the holding company in which Google is one of the main subsidiaries. Another organisational risk involves manufacturing and supply chain risks. This appears between 2013 and 2019 and concerns third party suppliers, mostly of components and parts in hardware development. Unique risks in this period are mostly legal risks such as claims and governmental investigations, legal liability, new and existing laws, regulation, and the U.S. tax act. Risks relating to claims, suits, and government investigations appeared between 2012 and 2019. Similarly, legal liability appears between 2011 and 2019. It involves claims of defamation, negligence, breaches of contract, copyright or trademark infringement, unfair competition, unlawful activity, tort, including personal injury, fraud, or other theories based on the nature and content of information that Google publishes or to which it provides links, or that may be posted online or generated by Google or by third parties, including Google’s users (Alphabet Inc., 2018).

Risks regarding new and existing laws appear in 2016 and 2019 and offer a detailed breakdown of the main laws that could potentially affect Google’s business model. A broad set of legal concerns includes U.S. and European patent laws, European copyright laws, and so on. Regulation is another unique legal risk, which appears between 2014 and 2019. As the company grew in international markets, it simultaneously became the subject of an increasing number of investigations and regulatory processes: “changes in social, political, and regulatory conditions or in laws and policies governing a wide range of topics may disrupt our business practices. These changes could negatively impact our business and results of operations in material ways” (Alphabet Inc., 2018).

Discussion of results and theoretical interpretation

The bulk of Google’s revenue comes from advertisements placed on the company’s web search and other services. As we noted in the discussion about core business risks, the loss of advertisers, brand value, and IPR protection are continuously reported between 2005 and 2019 and can be seen as main corporate risks. The company dominates the online advertising market5 and is still one of the most trusted global brands.6 At the same time, it is obligated to return value to its shareholders. One of the ways in which companies increase their share prices and create value is through stock buybacks. Companies buy their own stock to reduce supply and create demand for their securities in financial markets. The U.S. regulation does not require companies to announce the exact timing of the buyback program, which means that it is only known to corporate insiders and other beneficiaries who benefit from such repurchases (Lazonick, 2014).7 At the same time as legal risks and regulatory scrutiny ramp up against Google worldwide, the company started an aggressive buyback strategy. It repurchased $1.78 billion of its shares in 2015, $3.69 in 2016, $4.04 in 2017, $8.12 in 2018, and $18.17 billion worth of its shares in 2019. Instead of investing corporate capital into technological innovation, the repurchasing program created an artificial increase of the average earning per share and channelled rewards to investors.

By examining the implicit and explicit social relations that the Item 1 A risk sections explain, we can draw certain conclusions on how risk and trust are distributed among different groups. The first group consists of the actors deriving income and rewards generated by the performance of Google’s stock prices, such as company owners, senior managers, stock-compensated employees, and institutional investors. They are the primary audience reading 10-K reports and their risk section. Serving their needs, risk sections are a reminder of the uncertainty of business, aiming to contextualise risks induced by markets and economic activities in general. The second group comprises those whose income is directly affected by Google’s products and business model, but without additional income from Google’s stock price, such as advertisers, internet content providers, and Google Network members. The risks born by the second group are presented in the 10-K reports only to degree to which they distract management and affect Google’s operating results. Finally, the third group consists of those affected by Google’s products without necessarily deriving income from it. Aside from internet users who also belong here, institutional actors such as transnational entities, nation states, and regulators are at the centre of this group. They are under pressure to interpret, re-interpret, and/or create new legislative systems that could deal with Google’s business model and act in the name of protecting internet users, citizens, and smaller businesses.

Risks and rewards of public interest

When we observe the entire value chain of product innovation from risky investment in new technology, through further financial and institutional support for the development of new commercial products, to subsidies for production and, for some product types, adequate infrastructure and social arrangements required for distribution and consumption the peculiar character of web search should be noted. It is a service predominantly consumed worldwide over networks that can only function over internationally established and, to a significant extent historically publicly developed and funded telecommunication infrastructure (Abbate, 1999; Millward, 2005; Noam, 1987). Additionally, not only have breakthrough technologies such as PageRank been developed with the assistance of public funds (NSF grant), but a significant portion of important software source code and communication protocols that Google and similar products rely on has been developed internationally, and released via a variety of free-software and open-source licenses. Hence, beyond the questions of returns to public purse (Block & Keller, 2012, p. 98) and value generated from those public investments (Mazzucato & Shipman, 2014), it could be argued that it is the U.S. society at large that can be considered a key investor, as the “investing public.” Extending the argument further down the production line it could also be argued that governments and public bodies across the world, responsible for investments in internet infrastructure can be understood as an investing public, bearing rights along with those held by investors recognised by the financial regulatory framework and addressed by the SEC filings.

This kind of a broader approach to the category of the investing public characteristic of the risk-reward nexus (RRN) approach reveals risks taken by the public at large, nationally and globally, left out of the risk reporting mandated by the U.S. financial regulations. The approach reveals the social construction of financial markets through the narrow understanding of public interest by the regulators, satisfying a very specific understanding of socioeconomic progress and the rewards reaped from it, all based on the idealisation of markets. Financialisation, from the analytical perspective utilised here, turns out to be a socially constructed abstraction by which certain actors gain positions of privilege in receiving income, based on a selective approach to investments in innovation and associated risks and rewards. From such privileged positions, individuals reap financial rewards from the investments and risks undertaken through public financing of many nations, utilising large public investments that often take decades to develop. Such an imbalanced, and from this perspective unjustified combination of investments, risks, and rewards, is to a significant extent a result of the financial sector’s capture of political branches in charge of the construction and execution of regulatory frameworks (Johnson & Kwak, 2010; Palley, 2013, p. 186). This imbalance is also a major contributor to income inequality (Lazonick & Mazzucato, 2013), which is on the demand side made up for by the explosion of debt (Palley, 2013, pp. 201–202). If this is to be addressed, for the risks and rewards to be rebalanced towards such an investing public, an updated regulatory framework is required.


Google (Alphabet Inc.) engages in producing, developing and updating software for various online activities, web search being the primary one. It extracts value from advertising and user engagement, which allows it to monetise the platform. Simultaneously, being a publicly traded company since 2004 it generates enormous personal wealth to a small number of institutional investors, corporate owners, managers, and executives. Investing corporate capital into buying its own stocks artificially increase its price. Buybacks create a shortage of traded stock, increase demand, and generate more profit to shareholders. This trend in financial markets, championed by Apple (Lazonick et al., 2013), has recently become visible in Google’s capital allocation as well. In 2015, Google repurchased $1.78 billion of its shares. The annual number increased consistently as the company faced a number of legal and regulatory hurdles. It reached $18.17 billion in 2019. Investing corporate capital into stock buybacks does not lead to innovation or improvement of Google’s products. Instead, buybacks are meant to please shareholders and their uneasiness with increasing regulatory scrutiny. The total market value of the company increases at the same time as it faces anti-trust and other charges. This is a clear paradox. Value from financial markets, however, only benefits a small number of individuals, leaving the public high and dry, while stalling innovation of publicly responsible technologies at the same time.

The entire business model of extracting value from advertising and financial markets is dependent on intellectual property rights protecting software patents, and financial regulation favouring wealth creation for shareholders and investors. These legal frameworks allow Google, and other tech giants, to amass enormous wealth from providing global internet services. While there are many local histories of the internet (Abbate, 2017; Driscoll & Paloque-Berges, 2017), the global one, still dominated by U.S. companies in North and South America, and Europe, is the result of specific legislative measures and financial regulation, creating markets for the expansion of digital products and services. Within the broader context of internet history, corporate developments are usually difficult to unpack. Most popular histories focus on the innovation of visionary individuals (Battelle, 2005; Lacy, 2008). However, the history of the internet should not be viewed as a history of discontinuities. The state and public investments were key not just for developing core technologies (Abbate, 1999) before they were commercialised (Greenstein, 2015), but also for constructing markets for those technologies and setting the rules for the distribution of rewards from their commercialisation.

The RRN approach allows us to understand markets as socially and publicly constructed phenomena. Markets for innovative technologies are constructs benefiting from risky public investment and resulting in a skewed distribution of societal rewards from innovation. Focusing on the history of the internet, and some of its biggest companies, the RRN approach provides a pathway for connecting early public investments in internet technologies and current commercialisation and privatisation through some of its biggest companies. It is a history of continuities and different configurations of competing public and private interests and legal interventions allowing rewards from the cumulative innovation process to be distributed. By focusing on a diachronic analysis of risk factors in annual market reports, we were able to unpack some of the key turning points in Google’s post-IPO development. Only a fraction of these risks relate to technological innovation. The bulk relates to legal and regulatory risks the company faces worldwide, demonstrating the importance of social constructions of conditions in which Google’s business model thrives. This history of Google’s development is an example of how innovation is not (always) a natural outcome of individual visionaries, or the exclusive result of market forces that drive innovation through competition. Instead, technological innovation and post-IPO corporate developments are also the outcome of financial legal frameworks, regulatory and other pressures that allow value extraction to grow and reproduce itself, creating profits for shareholders as the main social and economic outcome along the way.

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No potential conflict of interest was reported by the authors.

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Notes on contributors

Paško Bilić

Dr Paško Bilić is an ethnographer, media theorist and critical sociologist. He is Research Associate at the Institute for Development and International Relations in Zagreb, Croatia. Previously, he was International Visiting Research Fellow at the Institute for Advanced Studies, University of Westminster (London, UK), short-term researcher at Istanbul Bilgi University (Turkey) and the University of Bremen (Germany), as well as Doctoral Research Fellow at the University of Alberta (Edmonton, Canada). He published in journals such as Javnost (The Public), Political Economy of Communication, triple C: Communication, Capitalism & Critique, New Media & Society, European Journal of Communication, Big Data & Society, and Interactions: Studies in Communication and Culture. He is the author of Sociology of Media: Routines, Technology, and Power (Jesenski i Turk, 2020 – in Croatian) and main editor (with Jaka Primorac and Bjarki Valtysson) of Technologies of Labour and the Politics of Contradiction (Palgrave Macmillan, 2018). Currently he is writing a monograph (with Toni Prug and Mislav Žitko) titled The Political Economy of Digital Monopolies: Contradictions and Alternatives to Data Commodification (forthcoming with Bristol University Press, 2021).

Toni Prug

Dr Toni Prug is an independent researcher based in Zagreb, Croatia. Previously, he was Teaching Assistant and guest lecturer at the School of Business and Management, Queen Mary (University of London), where he also obtained his PhD on non-market and egalitarian production in 2014. He holds a BA in Sociology (Goldsmiths, University of London) and he has been presenting regularly at heterodox economics, political economy and Marxist conferences for over a decade. He appeared as a guest lecturer at the University of Zagreb and Rijeka, faculties of Economics, Political Science, Sociology and Cultural Studies. He published on a variety of topics, including development theories, Free Software, and models of academic publishing. He has ten years of experience as a software and networks engineer in London, UK, producing both proprietary software and releasing Free and Open Source software.


1 As one head of global equity research firm stated in a CNBC interview, a company whose message is changing from year to year is never a good sign. New risk factors, for example, are a red flag. Say a big industrial company suddenly adds an environmental liability, like asbestos liability, or it could be a patent lawsuit. “If there’s a change, that’s because the lawyers told them they had to put that in there” (MacBride, 2014)

2 Between its incorporation until 2002, Google signed contracts with more than 130 companies, thus creating a vast group of Google Network Members (Greenstein, 2015).

3 Internet advertising surpassed radio advertising in 2007, daily newspapers in 2010, and television in 2016 as the main medium for advertising investments in the United States. Search advertising represents the majority of internet advertising (PricewaterhouseCoopers, 2018).

4 In 2014, Google sold Motorola to Chinese Lenovo for $2.91 billion. In the meantime, it used the acquired patents to strengthen its position in the mobile operating system market by further developing Android OS for smartphones (Su, 2014).

5 In October 2018, Google was the biggest U.S. digital media property with 245 million unique visitors on all Google sites (Neustar, 2018)

6 In 2019, Google was the world’s second most valuable brand, behind Apple, with an estimated value of 167.7 $billion (Forbes, 2019).

7 Between 2003 and 2012, 449 S&P 500 companies dispensed 54% of earnings, equal to 2.4 $trillion, buying back their own stock, mostly through open market transactions (Lazonick, 2014, p. 2).


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