In Google We (Anti)Trust

Today the FTC launched an antitrust inquiry into Google’s core search business. This is a departure from the past, in that it’s not an analysis of their acquisitions as an indicator of trust formation, but rather taking a look at their main business.  Coverage on TechCrunch and WSJ.

Naturally, many Google competitors have called for such an investigation in the past. What’s monumental about this inquiry is that it’s happening now, a leading indicator that Google has almost reached the height of its market power as it stands today.  It has 2/3 of search share in the US and over 80% in Europe.

While many of us trust fully in Google having good intentions and doing no evil as a firm, I’ve been wary of their strategies for a while.  In an OPIM class taught by professor Clemons in spring 2010, we heard him discuss his theories about Google with a representative of the Google Legal team. Needless to say, they didn’t reach agreement.

Prof. Clemons wrote about what an antitrust case against Google would look like, back in March 2009 (on TechCrunch).  It was controversial, as was his later post that Google’s search results often qualify as misdirection.

For anyone who doesn’t feel like reading his posts (which are excellent by the way for anyone interested in the dynamics at play here), I’ll summarize.  It’s notable that, while Prof. Clemons focused on Google’s use of market power to send searchers to other companies’ websites, the new case might focus on Google sending searchers to its own web properties.  Both are damaging, but in different ways.

Search is an essential facility

The first part of Prof. Clemons’ argument is that search is an essential facility on the internet for companies to reach customers.  Search engines have become our default behavior online — we search even for things we know the URL for.  So the geometry of the web looks something like this:

This means that if a company’s page is not carried by a search engine, or is not given its due exposure, it can be basically ‘killed’ by being denied access to the way customers usually use the Internet.  Even if the customers still have a (less lazy) option for typing the site’s URL directly.

Google’s search function is not contestable

Next, we notice that Google is able to use its product in one market (search advertising) to completely subsidize its entry into other markets (like document editing and email).  The use of one market to subsidize another is a failure of the contestability test and often an indicator of abuse of market power.

Is there consumer harm?

This will be difficult to prove and hinges on one of a few arguments. One possible path is to charge Google with setting the prices of sponsored search too high, which limits the results that people see and causing them to go to web properties they didn’t intend. Another path is that Google is unfairly setting the organic search location of its own YouTube and Places properties to an artifically high rank.

Overall, while this particular inquiry may turn up fruitless (Google has undoubtedly learned from the Microsoft case), it’s certainly food for thought as we consider our own search behavior.  Ask yourself this — do you rely on Google’s answers too much when you search?  I’d be willing to bet that most people can count the monthly times they’ve clicked page 2 in a search result on one hand.

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