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Spreading Freedom: Google, Microsoft And The War For The Web

Eric Schmidt

First Posted: 09/25/11 07:33 PM ET Updated: 09/26/11 05:24 PM ET

Google is an unusual entity on the corporate landscape: It gives its and sometimes other companies’ stuff away for free. Those on the receiving end love it. Google's technology is new, but its business model dates back to the early days of radio and then television, which offered a free product to the masses and then made money charging for ads on their platforms that were targeted at the masses.

And “free” puts lots of downward pressure on everybody else’s prices and profits -- leading critics to complain that Google can devalue the offerings of less well-entrenched competitors.

Microsoft, meanwhile, makes money selling software that is tethered, for the most part, to personal computers. In an era of mobility and cloud-computing however, Microsoft’s hold on consumer and corporate computer users seems much less certain. It has tried to compete with Google as an ad-generating search engine operating in the less restrictive confines of cyberspace, but so far it has failed.

So have many others. Search for “Los Angeles hotels,” or the name of a local restaurant, and you’re likely to see results from Google’s own listing service, Google Places, ahead of links from competitors like Yelp, TripAdvisor and Expedia, which have all been outspoken critics of Google’s search practices. Online travel companies even have their own coordinated lobbying enterprise: Fairsearch.org, featuring TripAdvisor, Expedia, Travelocity and others. Their only non-travel-industry partner: Microsoft. (A Microsoft spokesperson says that Bing Travel accounts for the company's membership in the group.)

These players, and others, accuse Google of using backhanded tactics to crush competitors by taking traffic from their sites. FairSearch.org was organized to oppose Google’s acquisition of ITA Software and to "prevent dominant companies from engaging in anticompetitive behavior and to protect investment and choice across the Internet ecosystem." The FairSearch.org website offers users the chance to "Learn more about how Google threatens competition and consumer choice" and showcases illustrations of Google executives paired with quotes the group says offer damning evidence that Google shouldn't be trusted. Google, on the other hand, counters that its policy is to do "what's best for the user" and that anyone who takes issue with its results can use another search engine that's "only one click away."

But Microsoft alleges that though it’s pouring billions into making Bing a credible threat to Google, Google is unfairly keeping its rivals from improving their search engines by denying them access to key content.

“Google has built its business on indexing and displaying snippets of other organizations’ Web content. It understands as well as anyone that search engines depend upon the openness of the Web in order to function properly, and it’s quick to complain when others undermine this. Unfortunately, Google has engaged in a broadening pattern of walling off access to content and data that competitors need to provide search results to consumers and to attract advertisers,” Microsoft’s general counsel Brad Smith wrote in a recent blog post that added the software giant’s support to the EU’s antitrust investigation of Google.

Microsoft, itself no stranger to bullying rivals when it sees fit, argued that Google has been "impeding competition" by keeping Bing from having full access to videos on YouTube, a Google-owned site, angling to keep Bing from searching certain online books, and restricting how YouTube functions on Microsoft’s smartphone operating system, among other practices.

At Wednesday's hearing, Yelp CEO Jeremy Stoppelman accused Google of scrubbing its content without permission and then threatening that it wouldn't appear on search results if it didn't play ball with Google Places. He said that 75 percent of Yelp's traffic comes through Google.

Competitors accuse Google of gaming its search results to favor Google products. Schmidt told the panel that he "didn't believe" that Google did so, an answer Minnesota Democrat Al Franken pounced on.

After the hearing, HuffPost asked Schmidt if Google favors Google products in it ten-link search rankings. "Again, I get that question and it's hard to explain, so let me try again. What happens with the answers we get is we've learned to generate a couple of different kinds of answers -- the internal term is called universal search. So, for example, after a few links we'll get -- we'll show a summary result of something. So that's not favoring a result, it's sort of adding value to the result. So the answer is no to the favoring, but yes to the using-every-part-of-our-computational-capability-to-produce-sophisticated answers," he said. Why does a search for email return Gmail as the first answer?

"I can assure you there's no preference for Gmail in that situation," he said.

With Bing hemorrhaging $2 billion a year and Google making tremendous inroads into the smartphone market, Microsoft has regrouped, teaming up with other corporate content kingpins on Capitol Hill to push for an extremely restrictive set of patent and copyright legislation -- an intra-business battle being fought on ideological and political grounds.

For companies like Google that make their money by conveying information -- whether they own the rights to it or not -- to consumers rather than producing it, flexible or even anarchistic intellectual property laws are ideal. No search engine wants to be held legally liable for informing Internet users about websites dedicated to illegal movie downloads, scanned books, pirated software, counterfeit handbags or generic drugs that ignore an American patent.

And Google's sheer dominance in the search engine market makes it a critical target for big film studios and major record labels that have had trouble adjusting to the digital age. For many people looking for free movies or music, a Google search is the first step in the download process.

The more severe the piracy penalties, after all, the bigger the profits for Sony, Fox and Warner Brothers. And while many Silicon Valley tech giants have frowned on government Internet restrictions, Microsoft has led the charge in allying software firms with old school content creators.

Nowhere is this more evident than the PROTECT IP Act, authored by Sen. Leahy. Loathed by open source activists, the bill would force Google to censor websites the federal government deems intellectual property abusers from its search results, and grant the Department of Justice the power to unilaterally shutdown piracy websites without judicial review -- giving the U.S. government the same power over commercial speech that the Chinese government has over political speech.

For Google, this is an English-language rerun of its four-year China nightmare. Again a powerful government wants the company to be complicit in its spying activities. And again, a government wants to dictate to Google what it can and cannot link to as a search engine. For record labels, it's a replay of the 1990s fight against music download site Napster, with the government forcibly enlisting search engine companies in its crackdown on Napster copycats.

Schmidt defended his company against charges that it directs users to piracy websites during Wednesday's hearing, couching the IP debate in terms of censorship that Chinese dissidents would understand. "We have to represent the web as it is, as opposed to the way we wish it to be. We try to avoid censoring or deleting things," he said, suggesting that a more sensible public policy would be for law enforcement to go after piracy sites directly, rather than force Google to spy on websites or block search results. "Let's say, you know, 'imastealingsite.com,' we can identify that because we can do some kind of a test for trademark violation. That company can then surface as another site ... so it's a whack-a-mole problem."

Major record labels and Hollywood movie studios have never been shy about their opposition to free downloads; software companies have been far less vocal. As the PROTECT IP bill has progressed through Congress, the formal industry letters to lawmakers announcing support for the bill have generally not included signatures from Silicon Valley heavyweights. The promise of free knowledge and private-sector innovation, after all, was what originally attracted many of the tech industry's best and brightest to the software realm. The industry is still imbued with a worldview best captured by Gilmore's Law, a maxim laid out by John Gilmore, who made a fortune as an early developer for Sun Microsystems, where Schmidt started: "The Net interprets censorship as damage and routes around it." That ethic is difficult to square with corporate lobbying for Internet censorship.

But from a reputation standpoint, Microsoft has little to lose. The company was already viewed as a tech thug for the Internet Explorer marketing that brought the company antitrust scrutiny during the Clinton years. Microsoft has thrown in its lot with the Motion Picture Association of America and the Recording Industry Association of America in supporting the PROTECT IP Act, a key umbrella group representing software providers followed suit. Microsoft has even leveraged its support into a formal position from the U.S. Chamber of Commerce -- the foremost lobbying front-group in the United States for corporate behemoths. While the secretive Chamber writes letters advocating its full-throated support for PROTECT IP, it's not clear to the public just which elements of the Chamber's membership are behind the effort.


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