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Google Antitrust Hearing: 5 Takeaways

While yesterday's Senate antitrust hearing on Google practices may have been more about spectacle than action, it was an opportunity to gain insights into the mindset of Google and the government officials that may seek to intervene in their operations.  To anyone that follows the search industry, most of the questions and answers went about as one would expect, but there were a handful of interesting bits that emerged. This is no doubt a murky and multifaceted issue, but there were a few specific points I wanted to touch on: Little Discussion of Advertising Regular readers of this blog are probably most concerned about potential changes to Google's AdWords system.  To the credit of the Senators on the subcommittee, there was little in the way of conspiracy theorizing around paid listings influencing organic rankings.  In fact, there seemed to be little concern at all about how Google handles the display of ads, as the focus was clearly on whether or not Google shows bias towards its own products in the organic listings. Ultimately though, Google earns nearly all of its revenue through advertising so it's a bit odd that it wasn't directly addressed much by any party involved in the hearing.  Google Chairman Eric Schmidt could have made a stronger argument that Google actually sacrifices short term revenue potential by delivering the types of more definite answers that some seized upon as favoring secondary Google products.  In this category would be Google's shopping results, which are unpaid and, when clicked, feature fewer ads than the standard search result.  In the long term, Google clearly expects that delivering the best results for users will lead to greater loyalty, share and thus ad clicks (but Google need not dwell on that angle.) In the search advertising space it's hard to imagine how Google could gain much more power over advertisers than it has now for any particular auction and that may be why the focus of the hearing was elsewhere.  Whether Google controls 100% of search or 10%, that traffic will have a certain value to each advertiser.  In the auction system in place on both Google and Bing, we bid based on our estimation of that value and aim to drive as much traffic as we can afford. In some cases we end up paying less than we'd be willing to, while in others we pay our max CPC.  A 10% share Google could just as easily tweak their revenue dials to squeeze out every last dime advertisers can afford for that traffic as the 100% share Google could.  In either case, if Google tried to force click costs higher, they would see ad revenues start to drop. First Amendment Rights Not Invoked With the hearing focused heavily on the organic listings, neither Schmidt nor Google attorney Susan Creighton pressed the idea that Google should have editorial independence under the first amendment akin to a newspaper, an analogy Danny Sullivan has drawn. That argument would probably help stave off government oversight of Google's algorithm, which Senator Al Franken suggested as a possible check of Google's power.  At the same time though, editorial independence might not fly as cover for Google favoring its own content and secondary products in the listings without making it clear to users that they are doing so. Google in a Larger Context One of the better arguments Google made on its own behalf, was Creighton's point that Google's power needs to be considered in a larger context than pure search.  Senators frequently threw out estimates of Google's share of search traffic, search ads and mobile search traffic and debated at what point that share became monopolistic. Creighton noted that Amazon receives three times the product searches that Google does, while Facebook has shown strength in local ads and Twitter serves as yet another constraint.  This notion holds more weight than the ideas that Bing is "just a click away" or that a new search competitor could emerge and quickly usurp Google's top position in the market.  With Bing losing nearly a $1 billion a quarter, it's uncertain Microsoft can fervently compete in search indefinitely and there are major technological barriers for start-ups to handle search at Google scale. Focus on Voluntary Remedies It was interesting to see Senators from both major parties concentrate on ways Google could take voluntary action if they were found to be violating anti-trust law and harming consumers.  There is a general impression that Googlers are a more natural constituency of the Democratic party, whose Senators may be disinclined to bring the hammer down on their own.  At the same time, Republican leaders are hesitant to enact government regulations on search as it violates their free enterprise principles, a point that ranking member of the subcommittee Sen. Mike Lee of Utah drove home repeatedly. Still, it's really the Federal Trade Commission that holds the cards here and they might not care much about this hearing or the political implications of any decision they end up making.  But, if the FTC's core concerns do align closely with those expressed by the Senators, Google may be able to escape this situation relatively painlessly with a couple of changes: By clarifying their policy on the use of scraped content and giving firms like Yelp greater control over where that content is used, Google would diminish the impression they are not only bullying smaller firms, but using their dominance in one business to advance another. Google may also be wise to tag non-core search results (maps, shopping listings, etc.) with a special label that more clearly identifies them as different from the traditional "10 blue links" and ads.  It's crazy to think Google would be forced to remove these products altogether, given that Bing and Yahoo employ many of the exact same practices, so greater clarity may be all the government needs to see here. Where Were the Neutral Parties? With all of the discussion around bias, it's curious that experts with more neutral positions weren't called to the hearing to offer their opinions.  About the closest we got to that was Sen. Chuck Schumer recounting conversations he had had with leaders from small tech companies in New York, who generally offered favorable views of Google. For those looking for a less biased take, a day before the hearings, the Computer & Communications Industry Association held a panel on the search industry in the Rayburn House of Representatives office building with RKG CEO George Michie, the aforementioned Search Engine Land editor Danny Sullivan and law professor James Grimmelman.  Moderated by former Washington Post tech writer Rob Pegoraro, the panel discussed a range of topics with the goal of helping those on Capitol Hill understand a complicated and rapidly evolving industry. The audio of that discussion can be found here.
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