When companies set up a lobbying presence in Washington, they tend to stay under the radar. There's much to learn there. But when Google arrived four years ago, it threw itself a debutante's ball at its hip D.C. digs—serving "YouTubes" (vodka cranberry shooters) to Washington's power set. The company was signaling that it planned to handle Washington on its own terms, something then-CEO Eric Schmidt reinforced on the interview circuit. His team would win on the strength of ideas, he said, and not the Rolodexes of Washington lobbyists.
But in a few years' time, Google fell in the sights of a congressional antitrust probe. Soon it was hiring a dozen lobbying firms, running inside-the-Beltway advertising, targeting key lawmakers in their home states, and hiring a former Republican congresswoman to head its lobbying shop—all moves ripped straight from the D.C. playbook. Google had gone native.
This is becoming a common story. Many tech companies were slow to the D.C. market. Partly, that was on purpose. For years, Valley players saw Washington as anathema to innovation, a place they were dragged unwillingly. (See United States v. Microsoft.) But eventually the garage startups that once worried about survival grew into multinational corporations concerned with regulation and taxes. And they grudgingly began making their way east.
Some arrived on the USS Know-It-All and proceeded to hand out their wisdom to the doddering old Luddites on Capitol Hill. The sooner they could explain this crazy Internet thing to the senior citizens who run the government, the sooner they could get back to improving the world with whiz-bang innovation. Or at least, that was the perception among some Washington veterans—on the Hill and K Street alike—who would privately grumble about the new kids' arrogance. To be fair, on tech issues many lawmakers ran closer to dial-up than broadband speed. Still, they had the power to essentially regulate the tech wunderkinds out of existence, and that reality seemed to be lost on many of the Valley kids.
The year 2012 may have begun differently—with a show of force among tech companies that effectively killed the online privacy legislation known as PIPA and SOPA—but the quieter months that followed are what truly define this new relationship. For as much of a watershed as the victory was, it belies an industry still struggling to find its footing in Washington. Companies are learning, as Google did, that everyone plays by Washington's rules, not the other way around. It's a particularly difficult, and frustrating, lesson for innovators accustomed to transforming industries. But now they've accepted the rules of the game. In September, Google, Amazon, eBay, and Facebook officially launched The Internet Association, a trade group aimed at becoming the "voice of the Internet" in Washington. Other companies are mulling over whether to merge their Washington trade associations so they might speak with a stronger, more unified voice. Honing that voice isn't easy: These are companies with disparate and competing interests. And even those tech outfits joining together are seeking lobbyists to represent their corporate interests.
Now policy makers are delving into issues, such as wireless spectrum and privacy, that will profoundly shape the industry's future—and the once-irritating D.C. noobs are getting real. That's why Facebook, for example, recently increased its Washington wattage, hiring former Clinton, Bush, and Obama White House aides and a former spokesman from Senator John McCain's presidential campaign. Earlier this year, Facebook and Google dumped record amounts of cash on their Washington lobbying operations. Between April and June, Facebook spent almost $1 million. And Google bested its second-quarter record by spending $3.9 million—a sum that catapulted it to the top ranks of influence.
As the following pages show in more detail, this is the movement that 2012 will really be remembered for, once the glow of the SOPA-PIPA victory wears off: The Valley found it has the power to influence policy, but it also learned it must pass the next big test—not just killing someone else's proposal but also passing an agenda of its own.
A version of this article appeared in the November 2012 issue of Fast Company magazine.