Barack Obama and Google CEO Eric Schmidt shake hands. Obama-Google connection scares competitors

Google CEO Eric Schmidt didn’t say anything as he flanked President-elect Barack Obama during his first post-election press conference. He didn’t have to.

The image alone of Schmidt standing elbow-to-elbow with Obama’s top economic thinkers was enough to send shivers up the spine of Google’s competitors.


“This terrifies Microsoft,” said a Democratic lobbyist familiar with the industry. “There’s a reason why people are scared to death of Google.”

Friday's press conference Friday came just two days after Google threw in the towel on an attempted Internet advertising partnership with Yahoo, the older, but struggling Web company. Google said that the prospect of an antitrust lawsuit from the Justice Department was the key deal breaker. Yahoo, which needed the deal more than Google, had said it was willing to fight the government, but Google didn’t have the stomach for a protracted legal battle.

So an open question for Google is whether the search-engine giant’s newfound closeness with the Democratic president-elect will give the company the muscle it needs to win disputes with the government over deals such as the Yahoo partnership.

Google says that Schmidt was acting on his own, and his politics don’t reflect the company’s official stance.

“Eric’s endorsement of Sen. Obama was a personal matter, and as a company Google was neutral in the campaign,” said Adam Kovacevich, Google’s senior manager of global communications and public affairs. “We look forward to working with the new administration and congressional leaders on both sides of the aisle to keep the Internet open and to promote economic growth.”

Obama’s transition team declined comment.

Some insiders, though, say Schmidt is inevitably identified with the company he leads. And they say that could benefit Google, not on the big decisions in Washington, but on the accumulation of smaller, less-visible matters. “A lot of decisions are made in the gray areas and at the low levels,’ explained the Democratic lobbyist.

“From the staff attorney all the way up the line, everybody now knows that Google is close to Obama,” the lobbyist said. And that could subtly affect the policy playing field in Google’s favor.

Beyond the perennial antitrust battles, Google has a host of other issues pending in Washington, from broadband access and net neutrality to privacy rights to patent reform and copyright policy.

And it hasn’t gone unnoticed in the lobbying community that Google has been quietly upping its participation in the Washington scene for nearly a year.

Not only was Google’s Schmidt on the campaign trail and on Obama’s economic advisory committee, but he also assumed the role of chairman of the influential New America Foundation early this year. Google didn’t donate money as a company, but Schmidt wrote a personal check of $1 million, single handedly financing a healthy portion of the foundation’s $12.9 million annual budget.

The New America Foundation, a nonprofit, nonpartisan public policy think tank, will clearly be at the center of the new administration’s thinking on economic issues: Schmidt and two other of its board members were among the 17 influential economic thinkers who stood behind Obama Friday.

“We’re looking forward to having more friends in the next administration,” said New America Foundation Vice President Rachel White. “But as an independent foundation, the chances are good that we’ll swim against the stream of some of the policies that the Obama administration puts forward.”

Anticipating the problems that can come from having prominent people with multiple agendas serving on the foundation’s board of directors, New America drew up a conflict of interest policy in June, saying, in part: “New America’s conflict of interest policy is not designed to eliminate or exclude relationships and activities that might create a duality of interest, but rather to encourage transparency and careful deliberation in those cases where conflicts or perceived conflicts may arise.”