The Skinny On The Search Engine World

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Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT) are, for all intents and purposes, the top two companies in Internet search. Google is dominant in many countries, while Bing has taken over second place thanks not only to its own search engine but also its alliance to be the engine behind Yahoo! (NASDAQ: YHOO) Search.

First, we'll take you to Europe where several search engines are ganging up on one; then we come stateside to Washington, where all the search engines were put on notice by the federal government.

(Anti-) trust, but verify

Dateline Brussels, Belgium, where the European Union Competition Commissioner Joaquin Almunia is getting feedback on the "field test" of recommended changes by Google in regards to making its search results more balanced, instead of favoring Google and its affiliated websites at the top of results regardless of relevance to the search query. Almunia has been investigating Google for more than two years on charges of anti-trust violations regarding its search results, which has shown to push down rival or competing products and services in the results.

Google was demanded to come up with a list of remedies for this issue, and the recommendations have been put through a field market test to see how they would function. Results are not good for Google, as FairSearch—an Internet watchdog consortium of 17 companies, including Microsoft—has spoken out about the preliminary results of the field test.

"It would be better to do nothing than to accept Google's proposals," said FairSearch's Thomas Vinje. "The proposals would make things worse rather than better."

It may still be months before the European Commission makes its final decision on the case.

Warning shot?

Back in Washington, Google, Microsoft and Yahoo! are all on the same team this time, as they and nearly 20 other top search engines in the U.S. (including specialized travel and hotel search sites) all received a warning letter from the friendly folks at the Federal Trade Commission, letting them know that deceptive advertising in their search results would not be tolerated. And we mean it this time.

The FTC apparently seems ready to start enforcing some rules regarding advertisements in search results, especially those positioned at the top of the first page of results. Have you felt deceived by these ads in how they look?

The letter, addressed to Google, Microsoft and Yahoo!, advised the companies to make sure their "above-the-fold" ads on the front page of search results are very clearly distinguishable from the regular search results.

In its letter to the companies, the FTC wrote, "We have observed that search engines have reduced the font size of some text labels to identify top ads and other advertising and often locate these labels in the top right-hand corner of the shaded area ... Consumers may not as readily notice the labels when placed in the top right-hand corner, especially when the labels are presented in small print and relate to more than one result."

Final thoughts

Obviously, Google has a stranglehold on the search engine marketplace with an estimated 66.5% of all web activity, according to comScore, above Microsoft’s 17.3% and Yahoo!’s 12.0% share. Still, it’s worth realizing that all three of these Internet giants are open to regulatory risks, whether it be the aforementioned FTC request or the ongoing European Union drama. Continue reading about the EU/search engine saga here.

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This article is written by David Woodburn and Jake Mann. Insider Monkey's Editor-in-Chief is Meena Krishnamsetty. Meena has long positions in Google and Microsoft. 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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