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Google Fights the Law and the...
Google’s (GOOG) outside legal counsel must be racking up the billable hours these days, what with the barrage of lawsuits and formal complaints brought against the search engine powerhouse over the past few weeks. While Google has always had its detractors, most of the ones surrounding these new claims have deep pockets, wide influence, and a reasonable shot at taking the company down a peg or two.
In late February, the European Commission revealed that it asked Google to respond to some complaints regarding manipulation of search results. However, the EC made clear that it was not yet opening a formal investigation.
The finger pointing came from Foundem.co.uk, a UK price comparison site that receives funding from Microsoft (MSFT), a French legal search engine called ejustice.fr, and another price comparison site called Caio from Bing that’s owned by Microsoft.
Specific details about the complaints have been sparse. Julia Holtz, Google’s senior competition counsel, said Foundem claims “our algorithms demote their site… because they are a direct competitor to Google.” She went on to say that ejustice.fr had a similar concern and briefly mentioned that Caio’s complaint involved Google’s “standard terms and conditions”.
While the EC doesn’t release the details of its inquiries, Foundem has made public comments about Google that could possibly shed some light on the matter. Recently, the FCC asked Foundem if it believes new rules should be established to ensure a free and open Internet. Foundem had this to say, “Google determines the exact placement of its own services independently of the ranking algorithms it uses to determine the relative placement of all other results. The degree of favoritism—whether they appear first or third, for example—is therefore entirely at Google’s discretion.”
An example of this would be if a user searched for a certain cellphone model and the results included links to Google’s news and price comparison sites ahead of the algorithm results.
Ms. Holtz of Google seems to believe that Microsoft is the one truly raising antitrust concerns to the EC, saying, “Microsoft is our competitor, and that explains many actions” during a recent conference call. Microsoft responded with the following, “As you might expect many concerned companies have come to us and asked us for our reaction and even for advice. When their antitrust concerns appear to be substantial, we suggest that firms talk to the competition law agencies.”
Microsoft admitted that during talks with the Department of Justice and the EC over its forthcoming search partnership with Yahoo! (YHOO) it voiced some concerns over Google’s practices. A Microsoft legal representative said this in a recent blog post, “Our concerns relate only to Google practices that tend to lock in business partners and content (like Google Books) and exclude competitors, thereby undermining competition more broadly.” He went on to explain the gripe with Google Books (a service that scans out-of print books and puts them into a database) saying “(Google) is helping itself to essentially exclusive rights to tens of millions of books—effectively locking out everyone else.”
Microsoft clearly knows a thing or two about monopolies, and it seems dead set on using that knowledge against Google in any way possible. But whispering into regulators’ ears is just one part of its strategy to grab some of Google’s 65% U.S. search market share (comScore). It’s an uphill battle for sure, but with the help of Yahoo! and possibly the EC, Microsoft has a fighting chance of making a dent in Google’s armor.
The Wrath of Apple
Not too long ago Google and Apple (AAPL) had a pristine business relationship, teaming up in a variety of ways to combat Microsoft and routinely voicing their fondness for each other to the press. All that changed when Google decided to start competing head-on with Apple, first with its mobile operating system Android, and later with the Nexus One, a handset that Google paid high-end smartphone maker HTC to design and manufacture.
In a new lawsuit, Apple is claiming that a group of HTC phones, including the Nexus One, violate 20 of its patents related to the iPhone’s user interface, underlying architecture and hardware. In a press release, Apple’s CEO Steve Jobs said, “We can sit by and watch competitors steal our patented inventions, or we can do something about it. We’ve decided to do something about it.”
The lawsuit does not name Google, specifically, but it does seek to ban the importation of the Nexus One, and a myriad of other Android devices to the U.S. Although the suit is more likely to be settled out of court if not thrown away entirely, it has real potential to further strain Apple/Google relations.
Despite all the media hype about the Apple/Google rivalry, some semblance of a symbiotic relationship still exists between the two companies. Just look at the Google site that showcases its cellphone services for proof. On it, there is a big picture of Apple’s iPhone 3GS right next to an image of the Nexus One. The reason why Google is promoting a rival phone is simple, more iPhone users means more mobile searching and thus, ad revenues.
Also, Google recently purchased the mobile advertising firm AdMob which imbeds banners in mobile Websites and applications. (Google is currently awaiting FTC approval to finalize the acquisition). According to AdMob, 36% of fourth quarter 2009 “ad-clicks” were done on Apple’s devices, more than any other manufacturer.
So what does Apple get out of this? Well, as of now, iPhones are “Google friendly” i.e. they have permanent YouTube and Google Maps applications and it is easy for users to sync their Gmail accounts. All of this helps sell iPhones because people want easy accesses to their favorite Google services.
Recently, there have been rumors that Apple will drop Google as the default search engine on the iPhone and team up with its long-time nemesis Microsoft to use its search engine Bing instead. Google’s head of Mobile engineering, Vic Gundotra responded to the speculation by saying “Apple is a very close and valuable partner and we’re very excited about the relationship we have with them today. We have no reason to believe that’s going to change.”
Mr. Gundotra may have spoken too soon, however, since the Apple HTC lawsuit was revealed shortly after he made said comments. No drastic moves have been made yet, but how many more of Apple’s markets can Google possibly encroach on before this friendly relationship no longer makes sense?
In early February, Google launched Buzz, a new social networking and messaging service for its Gmail users. Buzz lets you post short messages about your current status and share links, photos and videos with your email contacts. Most of these features are already available on the popular social networking site Facebook and microblogging site Twitter.
Shortly after the service was launched, an onslaught of privacy complaints began showing up on blogs. Many people were angry that Buzz automatically made a list of a user’s most emailed contacts, and then made that information available to everyone on that list. One blogger received a lot of attention after writing about how her abusive ex-husband could see comments she made on Google Reader regarding her new location and workplace.
After receiving so much negative feedback, Google changed the way buzz is set up and apologized for the privacy gaffe on its blogs. It now lets users choose who can see which posts, and has easier-to-manage privacy settings. However, this hasn’t stopped multiple parties from filling class-action lawsuits against the company, as they claim that the damage has already been done.