Google Is a Necessary Evil
The growing European backlash against Google, reflected in the European Commission's rejection of the search giant's antitrust settlement and a German minister's request for it to reveal its search algorithms, suggests it's hard to regulate Google in a way that increases, rather than reduces, its usefulness.
Here's why Google is evil, according to its European detractors:
- Its search results display its own price comparison services, maps and YouTube videos more prominently than competitors' offerings. It also copies competitors' user reviews to use in its own comparison services. These claims form the basis for the antitrust probe.
- Google accumulates too much user data. As Mathias Doepfner, chief executive of German publisher Axel Springer, put it, "Google is sitting on the entire current data trove of humanity like the giant Fafner in The Ring of the Nibelung: "Here I lie and here I hold."
- It plays too little in taxes to European governments. "In the digital economy we have to ensure that the site where added value is generated again corresponds to the site of taxation," German economy minister Sigmar Gabriel wrote.
- It is, according to a freshly revealed letter from News Corp. to European competition commissioner Joaquin Almunia, "a platform for piracy". Its "egregious aggregation" undermines the uniqueness of news sites and other content creators and their business models because advertising is cheaper on Google than on these sites.
- It is big, rich, loud -- between August, 2013 and July, 2014, it spent $60.6 million on advertising in the U.K. alone -- and American. That last adjective is perhaps the most important one, given the political fallout of National Security Agency leaker Edward Snowden's revelations. No responsible politician would echo WikiLeaks founder Julian Assange's description of Google as "Washington's geopolitical visionary" doing "back-channel diplomacy," but Gabriel did call the company a threat to European democracy.
At the same time, companies such as Axel Springer and News Corp. have no alternative to using Google. The latter's founder, Rupert Murdoch, promised loudly in 2010 that he would "stop Google taking our news for nothing." More than four years later, the Wall Street Journal, owned by News Corp., still has a paywall exception for Google. You cannot read many stories on the Journal's website unless you are a paid subscriber. If, however, you copy their headlines into a Google search window, the stories arrive free of charge. It works with other search engines, too, but in Europe, only Google matters because of its more than 90 percent market share in search.
The hole in the paywall would be easy to close -- indeed, Journal competitor the Financial Times has done so. Website administrators can easily keep Google from indexing a page. News Corp., however, doesn't because it needs the traffic.
One argument is that complaints from the creators of price comparison, mapping, weather and other services should shut up about Google's data priorities because consumers aren't complaining. As Google's executive chairman Eric Schmidt wrote in a recent letter to Financial Times: "To date, no regulator has objected to Google giving people direct answers to their questions for the simple reason that it is better for users."
German Justice Minister Heiko Maas's suggestion that Google should make its search algorithms more transparent would make things worse for users. Companies would be better able to game the algorithms to rank higher in search results; users would more often get what's pushed at them rather than what they actually want.
The European Commission will eventually strike a deal with Google, aiding the 36 percent of userswho can't currently distinguish paid results from paid-for pages. The risk is that it stops Google from providing simple answers about the weather or directions right on the search results page.
European authorities could try to restrict Google's use of personal data, particularly sharing with U.S. authorities; it's not clear how Google could be expected to reconcile those restrictions with its conflicting obligations under U.S. law.
Regulators should concentrate on increasing user awareness of the Google practices it considers unfair. If users then switch from Google to lesser-known alternatives -- and a small number are already doing so, deeming privacy more important than convenience -- Internet entrepreneurs will inevitably see a chance to challenge Google dominance. After all, Google's U.S. market share is lower than in Europe, with Microsoft's Bing and Yahoo!'s search engine used for about 29 percent of all searches.
Challengers, however, will need a business model different to Google's to avoid becoming its equally evil clones. Until then, however, there's no point politicians' messing with Google: its dominance is the result of Darwinism, not mendacity.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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Leonid Bershidsky at email@example.com