NYT: How Google Squelches Competition

A long-form piece in the New York Times Magazine highlights how Google is under increasing scrutiny for anticompetitive practices and how it may lead to government regulation.

The piece, published in the New York Times Magazine, discusses how Google has treated companies that could pose a threat to them. One company was studied by the New York Times in particular, a price-comparison and product searching website called Foundem.com. The website aimed to use an advanced search engine to track down the lowest prices for clothes, technology and a whole variety of other products for users. The search engine’s technology was quite versatile and was even adopted by a number of other sites including a flight search comparison website.

At first, Foundem seemed to be doing quite well, and the developers were happy with the site’s growth until suddenly their traffic dropped. They immediately began running diagnostics on their website in an attempt to solve the issue, when they suddenly discovered that their website was appearing far lower in Google’s search rankings than it had in the first 48 hours. It dropped in some cases to page 170 of Google’s results. Foundem still ranked quite highly on other search engines such as MSN Search and Yahoo, but suddenly the website had been dropped very far down Google’s search ranking.

The couple behind the site immediately began to reach out to Google in an attempt to discover why their site wasn’t appearing higher in search rankings, assuming that there must be some sort of error resulting in their sudden drop in popularity amongst Google’s search ranking. Despite their extensive Silicon Valley connections due to their time working at various tech companies, the couple was unable to receive any direct response as to why their website had suddenly been ranked so low by Google. In internal documents from 2005 later shared with the Federal Trade Commission, Google’s silence surrounding Foundem suddenly becomes more clear.

The majority of Google’s ad revenue comes from advertisements, particularly those displayed via their search engines. Vertical-search engines like Foundem posed a huge threat to Google’s business and the company planned to do something about it. “What is the real threat if we don’t execute on verticals?” said one Google executive in an internal message, answering his own question, he stated, “Loss of traffic from Google.com because folks search elsewhere for some queries.” He continued, “If one of our big competitors builds a constellation of high-quality verticals, we are hurt badly.” Another executive commented saying  “Google’s core business is monetizing commercial queries. If users go to competitors such as Amazon to do product queries, long-term revenue will suffer.”

Not long after Foundem went live, one executive ordered that Google’s own price-comparison results should appear at the top of Google searches for products, even if that meant disregarding the natural results of Google’s own search engine algorithm. “Long term, I think we need to commit to a more aggressive path,” said a high-ranking Google employee in a memo to colleagues. Eventually, the company’s chief executive Larry Page issued a decree “Larry thought product should get more exposure,” stated an employee.

In 2006, Google issued the “Big Daddy” update which penalized the ranking of websites that featured a large number of subpages with few inbound links — such as product search websites like Foundem. A later updated called “Panda” further penalized sites that copied texts from other sites. Google explained their reasoning behind these updates saying that it was to prevent “individuals or systems seeking to ‘game’ our systems in order to appear higher in search results — using low-quality ‘content farms,’ hidden text and other deceptive practices.”

Foundem began searching for other businesses that felt they had been treated unfairly by Google, and they found a few companies that seemed to provide solid proof of Google’s bias against them. One such company, Skyhook Wireless, entered into a legal battle with Google over the company’s GPS system. Skyhook Wireless had signed deals with major smartphone manufacturers Samsung and Motorola to use their advanced positioning system. According to court documents obtained during Skyhook’s trial against Google, one Google manager stated that Skyhook’s GPS system “is better than ours.” According to the lawsuit, shortly after this note was written, Google pressured Samsung and Motorola to drop their contracts with Skyhook and implied that if they did not, Google would make sure their new smartphones did not ship on time. Samsung and Motorola both soon severed their ties with Skyhook.

One of Skyhook’s cases against Google was dismissed, but eventually, Google was forced to pay $90 million to settle a patent-infringement claim. At this stage, however, Skyhook’s founders had been forced to sell their company at a huge loss. Websites such as Yelp, TripAdvisor, and Citysearch have also experienced Google’s own particular form of blacklisting. Yelp was particularly popular on the Google search engine and appeared at the top of the majority of search results relating to restaurants, Google saw this as an opportunity and attempted to purchase the company in 2009. However, Yelp wouldn’t sell and so Google did the next best thing to buying the company — scraping Yelp’s search results and displaying them directly on Google.

Yelp complained to both Google and the FTC, but Google stated that the only recourse Yelp had was to remove themselves entirely from their search engine. Luther Lowe, a vice president at Yelp, stated “We still exist, but Google did everything it could to ensure that we’d never present a threat to them. It’s bullying, but they’re the 800-pound gorilla.” These are just a few examples of how Google has used bullying and underhanded tactics to gain an advantage on smaller tech businesses, in some cases killing them by cutting off their ad revenue, destroying their exposure by deranking them in search listings, or just copying their content directly onto Google’s own search engine.

The full long-form piece can be read in the New York Times here.