Silicon Insider: How Google and eBay Act Like Nations

Moreover, these companies (and their peers, most notably the great social networking sites) actively enlist these multitudes of customers in the creation and management of the service itself. As such, they increasingly behave more like nations than companies, engaged in a social contract with their "citizens" and regularly dealing with matters that are akin to questions of sovereignty usually reserved for countries.

For example, what is eBay's PayPal but a kind of ersatz currency for the eBay nation? And when Google caved to China on censorship, it wasn't seen as just a business decision, but a violation of an unwritten Google Bill of Rights.

In this new corporate reality, business decisions can no longer be made simply for business reasons. Rather, the companies of this world must first understand who they really are, and then make decisions based as much upon cultural impact as the financial balance sheet.

In this case, for all of my concerns about its other recent moves, Google, I think, has done this right. Though he has seemed a bit distracted lately, CEO Eric Schmidt has always understood that Google isn't really about search, but — as the rest of the media world eventually discovered to its dismay — about advertising.

Beyond the Internet

But what most people still don't appreciate — and Schmidt understands completely — is that Google is also not about the Internet, but about cheap memory and cheap broadband. As long as he can keep the incremental cost of more memory and more bandwidth essentially zero, Schmidt is free to empower his very bright people to come up with any interesting new application they can think of — and that's been the key to Google's success.

Schmidt did that with memory by abandoning expensive and touchy servers and having Google build its own cheap, almost throwaway servers from off-the-shelf parts. By comparison, bandwidth has been, until now, cheap and plentiful. But demand is starting to catch up with supply. And this new cable to Japan is Google's insurance policy that it will have its own cheap bandwidth for years to come. And — at $300 million — it's a bargain.

By comparison, eBay seems confused as to its real business. It seems trapped in its original paradigm of being a cross between an auction house and a gigantic global flea market. But it is neither. Rather, eBay is a utility, whose business is to simply and accelerate the movement of goods from points of supply to points of demand.