Politics Holding Google Growth Down

| About: Alphabet, Inc. (GOOG)
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Documents from the Sony hack reveal a political war between Google and Hollywood.

Google growth has slowed as this war has intensified.

Google will continue to suffer if it must engage in politics to grow.

The "fall of Google (NASDAQ:GOOG) (NASDAQ:GOOGL)" continues to be one of the most interesting investment stories of the year.

It's interesting because it has nothing to do with how the company operates. Google usually has a profit margin north of 20% and its top line doubled between 2010 and 2013, to $60 billion. But this year revenue should come in at about $65 billion, a definite slowdown, and margins have been going down the last several quarters, so the stock has stalled out, down about 2-3% (depending on which class you're looking at) over the last year in a rising market.

The last time I looked at the company I said it was facing a "problem of power" and this week we got some hints on that problem's dimensions, through Sony (NYSE:SNE) hack documents.

Google feels that the Motion Picture Association of America, or MPAA, which represents Sony Pictures and the other big Hollywood studios, is trying to resurrect the Stop Online Piracy Act, or SOPA, which was stopped in 2012 after a massive protest in which Google participated.

The method: lawsuits filed by state attorneys general, like Jim Hood of Mississippi, which Google charges are actually written by the MPAA. Documents obtained through the hack called this Project Goliath and Google has sued to block the resulting subpoena to the cheers of privacy advocates. Hood has backed down.

But there's another way of spinning this, as Andrew Orlowski did at The Register. In his telling this has less to do with censorship and more to do with phony drugs, which sites advertised through Google were peddling a few years ago. Orlowski charges that the Google lawsuit, the privacy groups' agitation and the resulting stories were all of a piece, a political hit on Hood aimed at keeping valid laws like those protecting the public from phony drugs from being enforced. (PC World has a relatively balanced view on all this.)

As previously noted, Google now spends more on politics, through contributions and lobbying, than any other U.S. company - including Goldman Sachs (NYSE:GS). It's not yet the "Kochtopus" - the alliance of think tanks, political action committees and friendly media created to further the interests of fossil fuels by Charles and David Koch. But it's getting there. And as the power of fossil fuels wanes, in the wake of the collapse in oil prices, the power of tech companies like Google almost has to grow.

The problem for shareholders isn't Google's stand on any of this. It's the distraction politics causes in the boardroom, and the price paid for it in growth. Google's emphasis on search is reaching its near-term limits; it needs to find other ways to grow. And until it does shareholders will continue to suffer, especially as politicians unfriendly to Google's interest rise to power, as they inevitably will in any democratic system.

Disclosure: The author is long GOOG, GOOGL.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.