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Google Shrugged

Industry giant develops product no competitor can compete with.  Product promises to put competitors out of business and play a significant role in the economy.  The government steps in to ensure everyone is given a fair slice and that the giant is made to toe the anti-trust line.

I could be describing one of the subplots of Ayn Rand’s Atlas Shrugged, in which Hank Rearden develops the strongest, most reliable metal in the world.  In turn, he is made to give up control of the patent to the government and goes into hiding with the rest of the world’s great minds…

…Or, I could be describing the recently confirmed FTC investigation into Google’s ad serving practices.

The FTC’s Motives

Greg Sterling argued in a very well written Search Engine Land article that the anti-trust investigation of Google might really just be a “do-over” of sorts for the FTC, who may be looking to retroactively limit Google after regretfully allowing so many acquisitions.  While this could very well be the case, I think the FTC realizes that limiting Google’s ability to make new acquisitions only allows them to limit Google’s growth.  On the other hand, a foothold in Google’s main revenue stream, AdWords, would give the federal government the ability to shape Google’s practices forever.  Given the key role Google is playing in e-commerce, there is certainly an incentive for the feds to give themselves some way of dictating how Google can change its results.

This is, of course, a conspiracy theory of sorts, and I’m sure many would scoff at the idea that the American government is trying to be so heavy handed, especially under the guise of an anti-trust investigation.  Still, the question has to be raised: Why Google?  Is it because they are breaking anti-trust laws to promote their own results (which if true of Google would also be true of Bing and Yahoo)?  Is it because Google is manipulating quality scores and auction position of some advertisers in an unfair way (concrete evidence of which doesn’t seem to exist)?  Or is it because they are the most powerful search engine in the world and manipulation of the ads and results can have a large impact on the economy?

WWGD?

In Atlas Shrugged, the government controls Rearden Metal by forcing Rearden to sign over the patent to ensure that it isn’t allowed to have negative impacts on the economy.  In the case of Google, the FTC may be looking to position themselves to impact Google’s choices in the future to ensure what they see as the good of the whole.  This could mean anything from regulations on how much traffic can be driven to certain sites, to auction bid caps to increase competition, to subsidized ads for small businesses, all effectively controlling Google’s algorithm, which is as valuable as any patent out there.

As Sterling mentions in his article, one of the biggest questions still up in the air is what the FTC would do to change Google’s SERP’s if they were found to have broken laws.  Taking Google’s track record as a proud company confident in both their ethics and products into account, I’d like to take that question one step further:  if the FTC interferes with how Google serves its results and ads, what will Google do?  Will they quietly abide by a ruling that they feel is unjust?  Or would they, like Hank Rearden, reject the government’s attempt to control the fruits of their labor, and walk away from paid search altogether?

Who is John Galt?

  • Andy Taylor
    Andy Taylor is a Senior Research Analyst at RKG.
  • Comments
    2 Responses to “Google Shrugged”
    1. I thought the issue wasn’t that Google have a product that no one can compete with, but that other products are unable to compete because Google promotes its own products in search.

      This would be analogous to Rearden Metal gaining a market leading position and then using it to crush/undercut slightly superior products.

    2. Andy Taylor Andy Taylor says:

      Hi Richard,

      You’re right, Google’s promotion of its own results is one of the issues cited as a reason for the investigation. But as Sterling pointed out in his article, a U.S. court has already dismissed a case against Google’s manipulation of its search index based on the protection of search engine results as opinion under the First Amendment. If Google is allowed to base its results on opinion, why wouldn’t it believe that its own products were pretty good and thus include them in the results? This leaves this leg of the investigation on pretty shaky ground. My guess is the FTC is well aware of this, and that self promoted search results are not really what they’re after.