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In Antitrust Battle Against Google, Smaller Rivals Say Web Giant Is 'Trying To Kill Them'

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Yelp, which has long dominated Google search results, has a new competitor that it's taking very seriously: Google itself.

The prime territory at the top of Google search results that Yelp could once lay claim to is now frequently taken over by Google's own listings. A search for "Los Angeles restaurants" turns up a link to Yelp -- but it's buried halfway down the page below Google Places, a feature that showcases business listings together with reviews, maps and prices.

As federal authorities ratchet up their scrutiny of Google’s practices, accusing the company of antitrust violations, at the center of the action is the company's use of its dominant position as a search engine to steer users to Google-owned sites. A growing group of critics and competitors assert that Google now uses search to bring traffic to its new sites in travel, shopping and dining that are playing a significant role in Google’s overall business.

“Google is not just competing in these verticals, but cheating. They are manipulating the search results,” said Gary Reback, a Silicon Valley antitrust lawyer who was an advocate for the antitrust suit against Microsoft in the 1990s and is now representing several companies, including ShopCity and Foundem, that claim to be affected by Google’s policies.

Google maintains on its blog that it does not have a policy of promoting its own content in search results, but strives to “deliver the best answers to users” and “never [takes] actions to hurt specific websites for competitive reasons.” It also notes that it takes only one click for consumers to switch to a competing search engine.

"We rank search results to deliver the best answers to users, and that is the only consideration -– not political viewpoints, and not advertising dollars," a Google spokesman told the Huffington Post. "Every search engine has shifted away from 'ten blue links' to embedding answers and different types of information directly in the search results, which helps give consumers the answers they’re looking for."

The valuable real estate Google is handing over to its own products -- and the fact that it powers two-thirds of all searches in the U.S. and claims three-quarters of all search ad revenues -- has prompted the Federal Trade Commission to investigate whether the company unfairly promotes its own offerings or manipulates ads to the disadvantage of other businesses. In addition to the ongoing FTC probe, a Senate panel has convened a Sept. 21 antitrust hearing called “The Power of Google: Serving Consumers or Threatening Competition?” at which former Google CEO Eric Schmidt will testify.

The Internet companies that now vie with Google’s own offerings on its site accuse the company of using backhanded tactics to crush rivals and have lawyered up to oppose what they see as anticompetitive behavior.

Reback said sites like Nextag, a price comparison site, and Yelp pose “a threat to Google” by competing for users and ad dollars, and accused Google of “trying to kill them” by promoting its own services in search.

Travel and review sites such as Kayak, TripAdvisor and Yelp have argued publicly that by putting its own results ahead of others, Google stands to squelch the competition by making it more unlikely that users will have reason to visit these third-party sites. A group of tech companies, including Microsoft, TripAdvisor, Travelocity, Kayak, Hotwire and Expedia formed an advocacy group called FairSearch.org, with the mission to raise awareness about “how Google threatens competition and consumer choice” and to protest using “dominance to foreclose competitors from the search marketplace,” according to the group’s website.

“The concern is that Google is in many ways the main street of the Internet,” said Robert Birge, Kayak's chief marketing officer. “They’ve taken all of the real estate that anyone will ever click on and put a Google product there.”

Though many companies do not publicly disclose what share of their web traffic comes from Google, data available from third-party research firms indicate the search engine drives a vital number of users to its competitors -- which means they have much to lose if Google bumps them down the page of search results, where the likelihood of getting clicks decreases dramatically.

“The whole promise of the web was that you could be a little guy and be the best and people could find you and would find you,” Reback said. “It’s great to get merchants on the Internet, but if no one can find them, they won’t go very far.”

In a call with investors earlier this year, Expedia CEO Dara Khosrowshahi described Google as a “big traffic generator for us and something that we always watch.” During the first nine months of 2010, 15 percent of Kayak’s ad revenues and 8 percent of its total revenues came from Google, according to the company’s filing with the Securities and Exchange Commission. Google maintains that it generates no more than 8 percent of search engine traffic to the top 10 online travel sites. But opponents of Google’s acquisition of ITA Software, a flight information company, claimed that Google sends around 30 percent of all search traffic to travel websites -- and could end up directing that traffic internally.

Though many competitors may not take issue with the search engine’s policies, some companies allege there is a reluctance to speak out against Google for fear of reprisal. Keeping quiet, they may figure, will keep their Google ranking from going down.

“Kayak was initially reluctant ever to speak out against Google because we did not want retaliation by such a formidable company,” Birge said. “They control the algorithm in terms of where we show up on the page and where we show up in paid search ads. They’re very influential in the market.”

Yet smaller tech startups expressed few concerns with Google’s search practices, and actually welcomed Google as a rival.

Several entrepreneurs said they stood to benefit from Google launching products that would compete with their own. Steve Huffman, the co-founder and CTO of flight and hotel search site Hipmunk, said the debut of Google Flight Search brought considerable media attention and record-setting traffic to his website.

“We should be so fortunate that Google launches Flight Search every week,” Huffman said. “We had our best traffic day since we launched on the day that they launched. We got mentioned in almost every story on Google Flight Search. It was a great opportunity for us to grab a lot of users.”

For a startup, having Google as a competitor could increase the possibility that it becomes an attractive acquisition target, either for Google or one of its rivals, entrepreneurs say.

“I think Google entering your space is viewed as an opportunity for a lot of people to be very successful,” said Justin Kan, the founder of Justin.tv, a kind of YouTube for live streaming video, and Kiko, an online calendar app that went out of business following the launch of Google Calendar. “If your company beats Google, it becomes potentially a very interesting acquisition for Google and for other companies in the Internet space.”

While regulators worry that Google’s growth could lead to anticompetitive behavior, these startup CEOs say Google’s enormity actually gives them an advantage and argue that their smaller staff and narrow focus allows them to be more nimble than the 20,000-person Mountain View, Calif., corporation.

“We are ten people competing against multiple thousands of people and that’s to our advantage,” Huffman said. “We are smaller and so we’re more agile when it comes to being able to innovate and change direction.”

This article has been updated to include a comment from Google.

UPDATE: Former Google CEO Eric Schmidt, along with other members of the tech industry including Yelp CEO Jeremy Stoppelman and Nextag CEO Jeff Katz, testified Wednesday at a hearing held by a U.S. Senate antitrust subcommittee that probed Google's search practices.

During the hearing, titled "The Power of Google: Serving Consumers or Threatening Competition?”, Katz asserted that Google "doesn't play fair," while Senator Mike Lee maintained that Google "cooked" its search results so that its own listings were "always third," according to the Wall Street Journal.

Schmidt countered, "Senator, may I simply say that I can assure you we've not cooked anything."

Schmidt also referenced Microsoft's own antitrust battles a decade before.

"We get it," he said. "By that I mean, we get the lessons of our corporate predecessors."

You can access the witness testimony here on the U.S. Senate's website, or read more about the hearing on HuffPost here.

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