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February 26, 2010 11:34 pm
Google is to the 21st century what certain railroads were to the late 19th. It creates conditions for economic activity unthinkable before its advent. There had been no market in Paris for North Dakotan wheat until suddenly there was. Trading personal information for a free e-mail service from Gmail is not a transaction people would have understood in 1990.
Like a railroad, Google, based in California, has acquired power over those it freed. About 40 per cent of hits on most websites come from search engines, and that generally means Google. Online advertising is now a bigger market than television advertising in many countries, and Google dominates it. It accounts for 80 per cent of the online search revenues in the US and 90 per cent in Europe and the UK. A 19th-century farmer who could not use the railroads would be out of a job. So would an online business that did not show up on Google.
Three companies, all of them “vertical” (specialised) search sites, filed a complaint against Google with the European Commission this week. The French legal-research site e-Justice, UK-based Foundem, which compares prices on electronic appliances and other goods, and the German shopping site Ciao!, owned by Google’s rival Microsoft – all complained that, in one way or another, Google’s searches did not give them the respect they ought to, depriving them of exposure to their potential customer bases.
What Brussels is being asked to determine is whether Google is simply a terrific company that has been annealed in the competitive heat of the marketplace or whether, by connivance or accident, it has turned into a monopoly. The Commission issued a terse press release to the effect that it had not yet opened a formal investigation.
There is either a big problem with Google or there is none at all. If you believe that Google is engaged in open competition, many of the complaints against it look like sour grapes. The Initiative for a Competitive Online Marketplace, a Microsoft-funded study group, issued a white paper last summer on “Openness and the Internet” that, in one sense, is little more than a grab-bag of gripes. The paper notes that Google “operates in a manner that shields it from scrutiny by the other actors” (as if other businesses do not), that it is hard to gather data on Google advertising campaigns and to make them interoperable with other search engines (which is an inconvenience for Google’s advertisers but not a duty for Google), and that Google’s pricing policies are opaque (ditto). On the other hand, any of these failings under monopoly conditions would be a serious problem.
Google insists that its searches are neutral both in appearance and fact. Its “natural searches” – the ones that match up searchers with the sites they will most likely want to visit – are done through an “algorithm” that measures hundreds of variables, with no human intervention once the algorithm has been designed. But Google also carries “sponsored links” – advertisements – which appear alongside the natural-search results. Advertisers bid to be listed by Google any time a given word or phrase is searched for. And here the business gets more subjective. Google has an interest in making web-surfing pleasant and convenient. It gives “quality scores” – rankings based on attractiveness, ease of use and percentage of original content – to its bidders. So a website with a low “quality score” must bid more to be included. The nub of Foundem’s complaint is that its quality scores inexplicably fell, driving its cost per hit from 5p to £5. Was this because it is also a Google competitor?
Google’s practices are not necessarily the kind of price discrimination that falls foul of antitrust policy. They have a clear analogue in the old economy. A fashion magazine would rather advertise gold watches and single malt scotches than trusses, antacids or remedies for ringworm. It can legitimately refuse advertising space to one kind of company that it would happily sell to another. If Foundem had real alternatives to advertising with Google, there would be no problem.
But, if Foundem had alternatives, Google would not need to proclaim its search neutrality in the first place. Such neutrality can be a selling point, but it is a legal imperative only if there is no real competition. And if there is no real competition, then what would otherwise be a minor problem – Google’s increasing diversification into businesses, such as YouTube and Google News, that compete with those its search engine ranks – begins to look like a major one.
Google has cast attempts to regulate it as assaults on fundamental freedoms. Its search engineer Amit Singhal asked on the company’s blog this week “whether regulators should look into dictating how search engines like Google conduct their ranking” and discussed the unfolding debate over “government-regulated search”. Terms like “dictating” and “government-regulated” reflect a certain US provinciality, a deafness to measures of corporate responsibility other than libertarianism. Recently, Google has been wrong-footed by Germans’ reluctance to have street-level photographs of their houses and yards posted on Google’s maps. This week, Google said it was “astonished” when an Italian court ruled against its executives for not taking down quickly enough a video of an autistic child being harassed by teenagers. The US ambassador to Italy defended Google by noting that secretary of state Hillary Clinton has said that “a free internet is an inalienable human right”. Such attitudes have the ring of 1990s web utopianism to them. They are in for a re-examination.
The writer is a senior editor at The Weekly Standard
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