Google has a near-monopoly on search in the U.S. It uses that dominant position to boost its other businesses at the expense of competitors. We’ve got a problem here.
The Wall Street Journal takes a look at that this morning, pointing out how the search giant is able to dominate —or at least gain a significant position in—other aspects of the Web by using search results to point to its own services.
This isn’t exactly news: It’s something that competitors have been carping about for a while now and the EU is also investigating Google for possible antitrust violations. But it’s good that the Journal takes a look. It’s an important issue.
Here’s how it describes the issue:
Google Inc. increasingly is promoting some of its own content over that of rival websites when users perform an online search, prompting competing sites to cry foul.
The Internet giant is displaying links to its own services—such as local-business information or its Google Health service—above the links to other, non-Google content found by its search engine.
Think about what Google’s business is: To return the best results for a user’s request for information on the Internet (and to sell ads off those results, naturally). Being that gatekeeper is an extraordinarily powerful position.
The obvious analogy, which the Journal doesn’t make, is to the emblematic tech company of the 1990s: Microsoft, which had a monopoly on the desktop. When it sensed a competitive threat from Netscape’s browser, Microsoft bundled its own Internet Explorer on everyone’s computer. Microsoft almost got split up by the government for its abuses. Too late for Netscape: It kicked the bucket (its corporate parent later won $750 million from Microsoft).
Google got to its dominant position on the Web by creating what is by far the best search product and online-ad platform. But it knows the half-life of tech dominance is awfully short. So it acquires or tries to acquire the likes of Kayak and Groupon to cement its position. So far this year, it’s spent at least $1.6 billion buying twenty-five companies, according to this Wikipedia count.
And it can hurt or cripple other companies by manipulating search results to put its offerings up top. Like this:
Google’s expansion into local information has been a particular source of friction. This fall, Google made its links to its millions of Place pages even more prominent on the first search results page, pushing sites such as TripAdvisor.com farther down the page for searches on “Berlin hotels,” for instance. Place pages for businesses give basic information such as location and hours as well as a summary of user-generated reviews from sites like Citysearch and Yelp.
Related, the Journal appears to have a scooplet here:
Google plans to use similar methods to steer search-engine traffic to two services begun last month, company representatives said.
The first, Hotpot, lets people rate businesses, museums or public places and share those ratings with friends, similar to Yelp and other such sites. The second service, Boutiques.com, is aimed at online shoppers of apparel and accessories.
Yelp is unhappy, needless to say, and it would have helped here if the Journal had noted that Yelp spurned Google’s $550 million offer last year. Here you have a company that refuses to sell to Google,, so the monopoly creates a similar service and plans to automatically bring it to No. 1 in the all-important local search results. How is that not anticompetitive behavior?
The fact that Google named it Hotpot and it will probably suck like many of its in-house creations won’t prevent it from instantly becoming one of the most-used services on the Web. Would it even get off the ground if it were forced to compete on its own?
Which brings me to Groupon. A couple of weeks ago I asked why it wouldn’t be bad for competition if Google were allowed to buy Groupon. Fortunately, Groupon turned that deal down (which probably set Google working to create a competitor named HipClip or something). If it hadn’t, it would presumably have gotten the Google top o’ the page treatment, too—hurting competitors and helping Google lock up a good chunk of the local ad market.
It’s unclear to me why it’s a good thing for market competition when a $191 billion company like Google buys a $6 billion startup like Groupon or any other major company now, really. Especially since it’s increasingly taking advantage of its market dominance to push its own businesses.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.