Can Google overcome antitrust scrutiny to maintain mobile search dominance?
With Microsoft Corp. pressing European Union regulators to investigate Google Inc. for antitrust violations and rumors swirling that the United States government may pursue an inquiry, Google must worry about more than just innovation to maintain its dominant market position in mobile search.
The E.U. investigation of Google is in the preliminary stages, and the search giant will be able to offer a defense to the E.U. Competition Commission. The Bush Administration and, at least up until now, the Obama Administration have declined to pursue an antitrust investigation of Google, but the FTC and the Department of Justice are getting repeated complaints from competitors.
?The opponents of Google have been pressing the FTC and the Department of Justice to pursue a monopolization investigation, alleging that Google unlawfully monopolizes search by taking actions that are anti-competitive and exclusionary, rather than simply building a better search engine,? said Glenn Manishin, partner at Duane Morris LLP, Washington.
?What is illegal is a company that monopolizes the market through bad actions,? he said. ?Big is not necessarily bad?bad is bad.?
Mr. Manishin does not represent Google, nor does his firm.
Competitive or anti-competitive?
By some accounts, Google controls about 80 percent of the global search market share. Its search market share in the E.U. hovers around 90 percent, according to reports.
Google?s biggest competitors are undoubtedly Microsoft?s Bing and its frenemy Yahoo, as well as Ask.com.
Before Microsoft and Yahoo announced a search agreement last year, a potential Google-Yahoo deal was scrapped due to antitrust scrutiny.
In addition to the biggest competitors, there are a host of smaller players that specialize in specific areas of mobile search.
For example, Poynt is a mobile application for various operating systems that specializes in local search.
The U.S. government is currently investigating Google?s proposed acquisition of travel industry software company ITA.
This week, Google decided to bid for Nortel?s patent portfolio in the company?s bankruptcy auction.
Kent Walker, senior vice president and general counsel at Google, said in a blog post that the company hopes this portfolio will not only create a disincentive for others to sue Google, but also help it, its partners and the open-source community?which is integrally involved in projects such as Android and Chrome?continue to innovate.
Rumors recently surfaced that the FTC may launch a broader antitrust investigation of Google.
A complaint from smaller players alleged that Google acts unlawfully by not offering ?neutral? search results.
?These competitors proposed the concept of ?search neutrality,? which is a ludicrous proposition, and I do not believe it will hold water in U.S. or Europe,? Mr. Manishin said. ?Search requires someone to judge the quality of results and order them based on predictions of how the user wants to consume information.
?Search inherently involves a judgment?there is no such thing as fair, objective search,? he said. ?These companies went so far as to say that sponsored search results should be considered to be illegal?of course, they only want to make it illegal for Google, not for them, because they say Google is too big.
?Google invented [sponsored search results] and everyone in the industry has followed along that same path, so how can it be uncompetitive?? he said. ?That?s why we as users get to search for free, because of the ads.?
Mr. Manishin said that the pressure on U.S. government agencies and the E.U. from large and small members of both the Internet economy and the bricks-and-mortar travel economy has been mounting steadily and will be very difficult for politicians to resist. He said that it is an open question to what extent U.S. agencies and European bodies are subject to influence by political pressure.
?Google is clearly on the defensive, even though I believe from a legal perspective their position is very strong,? Mr. Manishin said. ?Google is not forcing people to use their products?there are 16,000 search competitors, including competing ad networks.
?The complaints say that Google controls 80 percent of the revenues from search advertising?sure they do, but that is only one small part of a much bigger market that also includes online display advertising and mobile advertising,? he said.
Some estimates of Google?s market share are lower than 80 percent. However, it undoubtedly has at least two-thirds of the market worldwide.
Search is increasingly migrating to mobile devices, and no one knows that better than Google and Microsoft, both of which have invested heavily in an attempt to dominate the mobile search space.
While the ripple effects of antitrust inquiries by the U.S. and E.U. will definitely be felt in the mobile search space, the industry as a whole will benefit if the majority of the market share war is fought based on innovation and meeting consumer needs, not on court battles.
?The Department of Justice and the FTC are playing a big game of catch-up with their European counterparts in merely considering opening an antitrust investigation into Google's search business at this stage,? said Ross Buntrock, partner at Arent Fox LLP, Washington.
?Google obviously has a huge amount of impact on the mobile search business given that they control approximately 65 percent of the total search market,? he said. ?The fact that the majority of Internet searching will take place on mobile devices means that no matter what the outcome of the investigation, the mobile search market will feel the effects.
?But I expect that Google will put up a major fight and this could be the next Microsoft-style throw-down.?
Dan Butcher, associate editor, Mobile Marketer