Beware the Game of Search Engine Blackmail

Dana is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Everybody loves Google (NASDAQ: GOOG) these days. I own some shares and they're one of the best performers in my portfolio.

But when something becomes important, and powerful, it follows as night follows day that shakedowns are coming. And Google is proving pretty easy to shake down.

It pretends that's not what is happening. When Google was forced to pay $90 million to French publishers in order to keep indexing their products, the press release said the company was creating “a digital publishing innovation fund to support transformative French publishing initiatives.”

Uh, no. It was paying blackmail.

Or consider the $50 million it just “invested” in Vevo, the Vivendi-Sony music video “service.” Google gets less than 10% of the company, which is valued at $500 million.  But how is this not pay-off to keep popular music videos on YouTube?

Governments and industries impacted by Google's success are going to see such moves as proof that, regardless of what Google says, it can be shaken down, in creative ways. And once you pay a blackmailer, it never stops. Once the blackmailer's union finds they have a sucker, they're all going to be on you.

Don't believe me? Look at Germany's proposal for a new copyright bill. It would let publishers charge search engines for accessing more than the location of their content. Will Google pay? Stay tuned.

Microsoft Takes Advantage

While Google pays blackmail to stay in markets, rivals Yahoo (NASDAQ: YHOO) and Microsoft (NASDAQ: MSFT) are partnering, although it may amount to the same thing. Take this move, by Yahoo, to have the French Yellow Pages serve local business listings through its engine.  It basically copies an arrangement Microsoft already had. Giving local businesses control over local data makes great sense in the short run, but you're really building your competitor, and hiving off a market you now won't be able to enter.

Microsoft is also not averse to using blackmail against Google. A Microsoft-funded lobbying group called ICOMP is now urging European regulators to crack down on Google search, aiming to increase Microsoft's share.

Pay for Yahoo to Find You

Money can go both ways, as Yahoo Search Marketing, formerly Overture, proves. Charging companies to be included in search results, or for better placement in those search results, is a growing business for Yahoo but could also become a way for government to get its hooks into Yahoo revenues going forward.

What's clear from all this is that technology alone is not what will determine search share, or profits from search, going forward. Lobbying, catering to local prejudices, and outright payoffs to sites that want to be found, or don't want to be found, or only want to be found in certain circumstances, is going to increase. And the value of search to the search engines may well be hit as a result.

 


DanaFBlankenhorn owns shares of Google, Microsoft, and Yahoo!. The Motley Fool recommends Google. The Motley Fool owns shares of Google and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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