Beware the Dark Side of Google!
Shine is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Every time you access the internet, knowingly or unknowingly, you end up searching something or the other on the World Wide Web. These include web pages, images, information, reviews, local search, etc. There are no points for guessing who the largest service provider for Web Search is. Google Search has not only been the most widely used search engine but has also been the Home Page for the majority of Internet users. After years of relationship, there is a special bonding between Internet users and Google Search. The users trust Google (NASDAQ: GOOG), to search and provide the very best for them, from many other similar entities on the web. But what if you are being deceived?
On October 12, Reuter reported that four, of the five, Federal Trade Commissioners (FTC) were convinced that antitrust action is warranted in the case against search giant, Google. The FTC has showed concerns over three major areas:
1) Is Google manipulating search results to give preference to its own products like Google Places and Google Shopping over other services like Yelp and NexTag?
2) Is Google AdWords discriminating against advertisers of services that compete with its shopping and review sites?
3) And finally, is Google using its smartphone patents to keep competition from advancing in that marketplace?
‘Web Search’ is provided by thousands of other service providers. It is the user’s belief in Google’s Page Rank algorithm that keeps Google at the top. Google is a verb today, a synonym for Search. This is because Google has Goodwill in the market. This is what drives users to websites that show up on search results and sponsored links. This is why, various other companies trust Google to provide a customized search box on their website. This is what drives the revenue of Google. Goodwill is a major factor for the continuous increase in Google’s share price. Investors play a safe bet when they put their money on Google.
But now there is some debate among the search industry experts that Google gives priority to its own products and services in search results, pushing its competitors down the list. There are allegations being made that Google rigs its search results pushing down its competitors’ products while promoting its own products and services.
Yelp and Nextag are two such companies that have openly complained about Google’s alleged setup in testimonies before the Senate Judiciary Committee in September of last year.
Yelp (NYSE: YELP) is a company that operates yelp.com, a social networking, user review, and local search web site. Yelp.com had more than 71 million monthly unique visitors as of January 2012. People use Yelp to search local business information. They search Yelp for everything from the city’s tastiest burger to the most renowned cardiologist. When Yelp got listed on the NYSE, the company was at a net loss of $16.7 million. Moreover there have been many criticisms of reviews and questions raised over the accuracy of reviews and ratings provided on Yelp.com. So keeping this in mind, it is highly possible that there is a serious drop in the number of users visiting yelp.com which could be the reason why they don’t appear at the top in Google’s Search results. The company may also be doing this with a hope that accusing Google would bring them in the limelight and maybe they would be able to attract more users to their website. But you never know!
Nextag is a price comparison service website. It started originally as a website where buyers and sellers could negotiate prices for computers and electronics products. The current business model with a focus on comparison shopping has existed since the year 2000. According to the New York Times article, Nextag testified to the commission that as Google began building up its shopping offerings, their traffic from Google search had dropped significantly. They have been forced to invest in additional site builds, more robust SEO technology, and spend even more on Google advertising to maintain their current rate of incoming Web traffic from search.
"Today, Google doesn't play fair. Google rigs its results, biasing in favor of Google Shopping and against competitors like us," said Nextag CEO Jeffrey Katz in his testimony. "Google says that competition is just one click away, but that's not even the question. The question is, should Google be able to use its market power to make it difficult for users to find us?"
These are some serious acquisitions. Not that Google is the first company to be accused of rigging their search results. Yahoo! (NASDAQ: YHOO), MSN and Lycos were also search engines who were accused in the past of rigging their search results. Yahoo! had been a major search service provider for a long time. However Google’s Page Rank algorithm was seemingly providing more reliable search results than that of Yahoo. Yahoo was also accused of accepting paid inclusions in the search results. Back in 2003, a Business Week investigation showed that 10 out of 20 advertisers and online marketers interviewed saw their rankings move up in searches on these sites after they paid to have their listing considered. Even back then, Google was considered to be the best search engine and were trusted by users.
If the claims of Yelp and Nextag are true, then Google should refrain from such activities. As of now Google does have an opportunity to seek settlement before a lawsuit hits the court. According to the New York Times, a number of antitrust experts indicate that this is the most likely outcome from the antitrust investigation: A settlement that likely involves Google promising to not promote its products over those of its competitors, among other conditions.
But if Google is confident that its search results are not rigged and these accusations are petty publicity stunts made by small companies to attract more users, then it should wait for the lawsuit and prove Yelp and Nextag wrong. This would not only improve Google’s Goodwill but will also be a lesson for other companies planning to take such steps.
Nevertheless, the FTC is said to be stocking up resources in preparation for a potential trial.The FTC announced in April that it had hired high-powered Washington lawyer Beth Wilkinson to lead the probe. It's allegedly building a legal team of lawyers and consultants in the background, including the recent addition of University of California, Berkeley economist Richard Gilbert as a consultant to the legal team.
What happens next? Lets wait and watch.
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