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Summary:

The European Union is broadening an investigation into Google that was originally launched following complaints the web giant was giving its own assets preferential treatment in search results. Google has also been coming under increasing pressure in the U.S. as a result of similar allegations.

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The European Union, which has been investigating Google’s dominance in web search as a result of complaints from several competitors, is broadening that investigation to include other aspects of the company’s business, EU officials announced today. The EU opened the original case last month, and has now added two German complaints to it — one made by a group of media outlets and one by a mapping company, both of whom claim Google is favoring its own properties unfairly, and also has refused to compensate publishers for their content.

The original case was opened last month by EU competition commissioner Joaquin Almunia, and an official statement from the commission said investigators would be looking at “complaints by search service providers about unfavourable treatment of their services in Google’s unpaid and sponsored search results, coupled with an alleged preferential placement of Google’s own services.”

It isn’t only the EU that has raised concerns about Google treating its own assets and services differently in search results; in a recent Wall Street Journal story on the same issue, a number of competitors in a variety of markets — including TripAdvisor, WebMD and CitySearch — complained about this preferential treatment by the web giant, saying it was hurting their online businesses by decreasing the amount of traffic they received from the search engine. Google responded with a blog post saying it was concerned only about producing the best results for users, regardless of whose service was being presented in those results.

Although competition laws are somewhat different in Europe than they are in the United States — where antitrust investigators have to show consumers have been harmed by an abuse of monopoly power, not just that competitors have been harmed — the EU investigation is sure to increase the heat on the web giant. Iit comes at an especially inopportune time, since Google is trying to get federal approval for its purchase of travel-information service ITA. Competitors have complained that if Google buys the company, it will be incorporated into travel-related search results in an unfair way.

Washington Post columnist Steve Pearlstein raised similar concerns about Google’s growing dominance in a recent piece, arguing the company should be prevented from buying major players in other markets because it’s so dominant in web search. Google responded by arguing it competes with plenty of other companies when it comes to acquisitions, and there has been no evidence shown that consumers have been harmed by its growth (I think Pearlstein’s argument is flawed, as I tried to point out in this blog post). Pearlstein has since responded to Google here.

There seems to be a growing attempt to pin Google down based in part on the concept of “search neutrality:”- the idea that the web giant should be agnostic when it comes to search results, in the same way network neutrality is designed to keep carriers from penalizing competitors. Should search be considered a utility in that sense? That’s a tough question. In many ways, the complaints from mapping companies and others seem to be driven in part by sour grapes over Google’s success and their own inability to take advantage of the web properly, as Om argues in a recent GigaOM Pro report (sub. req’d).

Related GigaOM Pro content (sub req’d):

Post and thumbnail photo courtesy of Flickr user Mark Strozier

  1. The real question is whether or not Google has hit critical mass and Google services always being near the top in the search results. It is possible, but what is the alternative, Google penalizes it’s own sites and degrades search result quality by boosting competitors result higher up when they don’t really deserve it? Does that help the consumer? If Google is putting its own services first (bypassing the search algorithms), then that is a legitimate concern.

    I remember search results before Google, it was a cesspool of porn, product spam, ad spam, scams, pop ups, etc. Google cleaned up the search business and gain market share because of it. Competitors cleaned up their act in response, but they never really differentiated themselves, they were mostly just me-too.

    In closing, how can there be search neutrality since the very act of ranking the results is subjective. The lower ranked website will always complain.

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  2. Matthew,
    Re your question: “Should search be considered a utility in that sense?”

    The answer is yes, even according to Google. Search is just enhanced DNS and Google established this by merging the address bar & the search bar on its Chrome browser.

    In essence Google charges 12.5cents per DNS lookup in the US. Do you think that’s a reasonable fee?

    This “Google tax” simply increases the cost of everything online for consumers. Therefore it needs to regulated.

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    1. There is no such thing as a free lunch. None of the search companies offer their services free. There can either be a subscription cost to use a search engine, or else advertising. That Google Tax is just the cost of product advertising with Google. Just like there is a Bing Tax for advertising on Bing. Products always have a % of their unit cost associated with advertising/marketing.

      Advertising with Google can be expensive (just like Super Bowl ads and NY Times Square ads) because they provide the largest billboards to advertise on. Just because something is expensive doesn’t indicate monopoly. What is the alternative, socialized advertising where all products get equal access? No thank you.

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      1. @brianb
        “What is the alternative, socialized advertising where all products get equal access? No thank you.”

        The alternative to the “Google Tax” is regulation not socialism.

        When the energy markets were deregulated during the Enron days, prices skyrocketed. We regulate prices to prevent such. We don’t switch to candles.

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    2. If your advocating regulation, then how do you propose to do that with search advertising? Would there be a limit to the cost of ads next to search results? If prices were forced to be artificially low wouldn’t there be greater demand than supply? Would Google be required to have more screen real estate dedicated to advertisers to satisfy all the advertising demands?

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      1. @brianb
        There are different forms of regulation, price regulation is a last resort.

        A first step in regulation would be that search engines be prohibited from operating content pages. A second step would be that search engines cannot operate ad networks. The Doubleclick/Adsense network is the key reason why competitors cannot compete with Google – Google knows when a page is created even without crawling the web.

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      2. @vito leoni,
        Doubleclick/Adsense are not the reason Google’s search results are more current, but the reason Google profiles its users better than others. It is a valid point that this is potentially anticompetitive, but others have larger ad networks than Google. Advertisers are able to target potential consumers better, users see more relevant ads this way. The only one’s hurt are the search competitors that under perform Google’s execution. Saying that consumers are paying higher prices because of a Google Tax I believe is wrong, I think consumers pay more because of ineffective advertising.

        It seems that Google has out innovated its competitors and executed better along the way. Bing/Yahoo have never jumped ahead of Google in any significant way, but mostly trailed or was even with Google at best. The only way to win over/win back the consumer is to be outright better than the competition and Bing/Yahoo has never done that in my observations.

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      3. @brianb “Doubleclick/Adsense are not the reason Google’s search results are more current, but the reason Google profiles its users better than others.”

        The facts point otherwise. As does the research literature, e.g. Anatomy of the Long Tail: Ordinary People with Extraordinary Tastes by Goel, Broder, Gabrilovich & Pang. It is well understood that users stick to the search engine that give them answers on the long tail or niche content. Adsense/Doubleclick gives Google preferential visibility into the long-tail and the other engines cannot compete. In fact, Adsense has a special program for content mills such as ehow, docstoc, scribd etc, whereby Adsense revenue is automatically shared with the author of the content. The idea behind the program is to cause the proliferation of long-tail content with Google’s index having preferential access.

        Whilst it is true that Yahoo is screwed up, Google’s monopoly prevents market efficiency and needs to be addressed on its own merit.

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      4. @vito leoni,
        The long tail is beneficial for Google, but is it because Google is better at matching a user to a specific search result verses Bing/Yahoo? Granted, the quality of the results can be suspect ( ehow, docstoc, scriptd), but the fact remains that their presence is being monetized by Google. If all search engines are capable of general purpose search results, perhaps Google excels at the niche searches.

        Now if your saying that AdSense/Doubleclick websites are getting preferential ranking in Google search results, then that would be worthy of investigation and subsequent regulation. A “pay to play” scheme between Google and its ad partners would not only be surprising, but extraordinary evil. If it were true then I fear it would lead to a bursting of an ad bubble with the appearance of a pyramid scheme. I have yet to see good evidence indicating collusion.

        The barriers to entry into the web search market is sufficiently high now that new competitors will be few for Google going forward. No matter how neutral Google search results are, government scrutiny is inevitable and any business relationships (AdSense/Doubleclick network partnerships) will add to the suspicion.

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      5. @brianb “The long tail is beneficial for Google, but is it because Google is better at matching a user to a specific search result verses Bing/Yahoo?”

        please compare search results on google with and without browser cookies. you will see that profiling is not material.

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