• WisBusiness

Tuesday, September 20, 2011

When is a big company too big – or just a killer business model?

By Tom Still
Google has acquired 103 companies in roughly 10 years, including three – Zave Networks, Zagat and Daily Deal – this month alone. Does that make Google a menacing threat to consumers, or a wildly successful company that knows innovation when it sees it?

That question will come into sharper focus this week when a U.S. Senate subcommittee examines complaints that Google is abusing its dominant position in online search.

With a market cap of $176.5 billion, give or take a billion bucks depending on the day, Google is one of the nation’s largest companies. That makes it a somewhat unsympathetic corporate icon in the minds of some, especially those who believe size and smarts can morph into monopolistic behavior.

A Capitol Hill hearing set for Wednesday, entitled “The Power of Google: Serving Consumers or Threatening Competition,” will consider whether Google is rigging results and crowding other online search firms out of the market – or merely providing what customers want.

The hearing will be chaired by U.S. Sen. Herb Kohl, a Wisconsin Democrat and businessman who won’t seek re-election in 2012. Along with Google’s penchant for acquiring innovative firms in travel, mobile technology and consumer products, the hearing will examine whether the Internet giant gives preference to its own websites or products in search results.

A coalition called FairSearch.org, financed primarily by Google rival Microsoft, has claimed that’s the case. But lawmakers and the Federal Trade Commission must be persuaded that Google’s search algorithms are significantly different than those used by Bing, the Microsoft search engine, Yahoo or other competitors who still hold one-third of the U.S. search market.

Google critics must also demonstrate that consumers are being hurt, which may be even tougher to prove given consumer polls such as the 2011 American Customer Satisfaction Survey, which ranked Google ahead of its competitors.

Google’s mantra is providing comprehensive search results as quickly as possible, a goal it strives to achieve through near-constant revisions to the software that drives its search engines. Sometimes, those tweaks have led to complaints from companies that found they dropped off the top of the page – and even well down the list of pages. Other times, companies have complained about dramatically higher advertising prices, but Google responds that’s often because those companies were simply re-aggregating information others had already paid to promote.

“We make hundreds of changes to our algorithms every year to improve your search experience,” wrote Google’s Amit Singhal in a blog post a few months ago. But with millions of websites competing over the Internet, not every retail or consumer site can show up on the first page of a search, he added.

Microsoft’s role in the FTC inquiry is ironic given it endured an anti-trust investigation in the 1990s, a case that some observers still believe was a blow to the company’s culture of innovation. The hearing is also a test of whether Americans instinctively believe all big companies are bad companies, a populist sentiment that some fear will be the undoing of U.S. dominance in Internet technology.

That’s where Google’s acquisition of companies such as YouTube, DoubleClick, ITA Software, Ad Mob and Motorola Mobility – which sold for a reported $12.5 billion this summer – will come into question. Are such acquisitions necessarily detrimental to consumers, senators might ask, if they speed new products and services into the marketplace?

One of two search boxes on Google’s distinctively simple home page reads, “I’m feeling lucky.” As the company’s executives prepare to testify before Kohl’s subcommittee this week, they will likely rely less on luck than laying out their case that big isn’t necessarily bad.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.


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