Experts Say ECs Case Is a Hard Sell

 
 
By Clint Boulton  |  Posted 2010-11-30
 
 
 

EU Burdened with Proving Google Antitrust Claim


Legal experts, search gurus and financial analysts don't believe Google should sweat the European Commission's formal investigation into it allegedly boosting its search results over smaller rivals.

That's because Europe's antitrust watchdog is saddled with the burden of proving that Google fiddled with the math that drives its complex search algorithm, which leverages hundreds of signals to place search results on Google.com.  

The European Union said Nov. 30 its antitrust watchdog will scrutinize Google based on allegations from Foundem, eJustice and Microsoft's Ciao that the search engine surfaces links for its own Web services over those of the smaller comparison-shopping engines on Google.com.

The Commission will further look into allegations that Google lowered the quality score for sponsored links from competing search services and consider whether Google prevented ad partners from placing competing ads from some vendors on their Web sites.

The complaints were initially broached to the Commission last February. Google said that its machine-based search algorithm is designed to provide the best results possible for users in an unbiased fashion.

"Not every Website can come out on top, or even appear on the first page of our results, so there will almost always be Website owners who are unhappy about their rankings," Google said in a blog post Nov. 30.

The Commission, therefore, has the burden of proving that Google deliberately toyed with the search algorithm to push Foundem, Ciao and eJustice lower in its search results, said Brett Gordon, marketing professor at Columbia Business School.

Gordon explained that Google's search result rankings, or PageRank, naturally change over time based on users' queries, browsing behavior, and the structure of links across pages.

"The EC would have to show that Google unfairly tampered with their algorithm to disadvantage other search services," Gordon said in an e-mail sent to eWEEK.

Moreover, sponsored-links ranking depends on how advertisers bid for particular keywords, as well as their respective quality scores.

"The EC will have to show that any apparent drop in a sponsored advertisers' ad rank was the result of a specific action by Google to limit competition and not the natural outcome of competition in the marketplace," Gordon added.

Experts Say ECs Case Is a Hard Sell


 

Search Engine Land's Danny Sullivan published this trenchant post, providing valid points that skewer the concerns the Commission is fielding from shopping sites.

"A search engine's job is to point you to destination sites that have the information you are seeking, not to send you to other search engines," Sullivan wrote. "Getting upset that Google doesn't point to other search engines is like getting upset that The New York Times doesn't simply have headlines followed by a single paragraph of text that says,  -read about this story in The Wall Street Journal.'"

Google also pointed out in its blog post that a lot of the antitrust allegations and investigations the company faces are steeped in the fact that the company has grown so large.

The search engine controls 66 percent of U.S. search (more overseas), employs almost 24,000 people and is expanding its search ad purview into mobile sectors.

Indeed, Susquehanna Research analyst Marianne Wolk said Google's lion's share of global search queries and search ads have meant it has faced significant regulatory scrutiny for some time and is likely to continue to do so.

"In this sense, today's announcement is not -new news' to most investors," Wolk wrote in a research note Nov. 30.

But size alone does not make one a monopoly; it is the action an entity takes to get there. Google has tried to be cautious in this regard, even as it has misstepped in matters of privacy with Google Buzz and Google Street View.

However, there has been no incontrovertible proof that Google has done the competition wring. Such a finding of guilt by the EC would be incredibly damaging for Google, costing it search partnerships and money.

The Commission-which has fined Intel and Microsoft more than $2 billion for abusing their positions in their respective markets-reserves the right to fine companies up to 10 percent of annual revenues for abusing their market power.  

Wolk noted that fining Google 10 percent of global sales could cost the company $2.8 billion, based on the last 12 months of gross GAAP revenue of $28 billion.

This is a pittance of Google's $34 billion in available cash; the harm to Google's reputation would be much worse.  


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