Is Google facing an existential threat?

The internet giant may lose the ‘social’ e-war it is waging, especially as it faces anti-trust suits on many fronts.

Google was charged by the FCC with deliberately impeding an investigation into allegations that their Street View service vehicles were collecting personal information from home wireless networks [AP]
Google was charged by the FCC with deliberately impeding an investigation into allegations that their Street View service vehicles were collecting personal information from home wireless networks [AP]

New York, NY – 
Is internet titan Google facing an existential threat? Is it in danger of fading from prominence and becoming, essentially, the “next Microsoft”? With government regulators nipping at its heels, Facebook leading in the race for attention and prestige, and “social” beginning to replace “search” as a focus of online activity, the company that revolutionised our means of finding information just a decade ago now finds itself under siege.

Google – a company that boasts of its informal motto “Don’t Be Evil” – stands accused of being just that. The phenomenally successful and profitable internet firm is being newly scrutinised, both domestically and on the international front, by consumers, competitors, regulators and elected officials alike, all concerned about basic issues of privacy, trust – and anti-trust.

It was bad enough in 2010 when Buzz, Google’s “antisocial social network”, deceptively breached online consumer privacy and trust, leading to a class action lawsuit and US Federal Trade Commission (FTC) investigation. Buzz, which company founders had crowed “would reinvent social networking” in much the same way the company had reinvented search, instead soon flopped.

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Stifling the competition

Then, European Union antitrust officials decided to go after the search giant following a chorus of complaints from competitors, ranging from Microsoft all the way to small internet companies, all claiming Google’s search engine unfairly promoted its own products over rival offerings. The complaints were now part of a wide-ranging antitrust investigation of Google begun last year and led by Europe’s competition commissioner, which includes allegations of anticompetitive practices by Google in search, online advertising and smartphone software.

Microsoft says Google unfairly hinders the ability of search competitors – Microsoft’s Bing search engine is second to Google but trailing badly – from examining and indexing information that Google controls, such as YouTube. Such restraints, Microsoft contends, undermine competition – and thus pose a threat to consumer choice and better prices for online advertisers. In an interview with the New York Times, Bradford L Smith, Microsoft’s general counsel, cited Google’s stated mission to “organise the world’s information and make it universally accessible and useful”, but added that “it appears Google’s practice is to prevent others from doing the same thing. That is unlawful and it raises serious anti-trust issues”.

Next, the company was charged by another US agency, the Federal Communications Commission (FEC), with deliberately impeding and delaying an investigation into allegations that automobiles it was using to map streets were also collecting sensitive personal information from wireless home networks. European and Canadian regulators who have examined the data Google collected in the project in their own countries found that it included complete email messages, instant messages, chat sessions, conversations between lovers, and web addresses revealing sexual orientation – all information that could be linked to specific street addresses. Google called the data collection a “mistake”. Whereas earlier controversies generally focused on information that users chose to provide, with its Street View project, Google took data from people who did not even know it.

Breaching internet privacy

Privacy advocates say the FCC investigation should only be the start of a broader inquiry. “The much bigger problem is the pervasive and covert surveillance of internet users that Google undertook over a three-year period,” Marc Rotenberg, executive director of the Electronic Privacy Information Centre, told the Times, adding that he would ask the Justice Department to investigate Google over wiretapping.

Meanwhile in Europe, although some government regulators have already settled their disputes with the company, two proceedings are ongoing in Germany, where Google’s collection of personal data was first uncovered by a regulator in Hamburg. The prosecutor’s office there is still pursuing a criminal investigation, which it opened in May 2010, into whether Google broke German law by illegally intercepting private data through electronic means.

While Google’s original intentions and actions with the Street View project remain murky, the FCC report has amplified previous public concerns over internet privacy. since the more companies such as Google know about their users, the more attractive they become to advertisers, leading to greater income and profit. Now the US government has just escalated its case against Google, hiring a prominent litigator to send a signal that officials are prepared to take the company to court.

As the New York Times reported: “The Federal Trade Commission is examining Google’s immensely powerful and lucrative search technology, which directs users to hundreds of millions of online and offline destinations every day. The case has the potential to be the biggest showdown between regulators and Silicon Valley since the government took on Microsoft 14 years ago. Then as now, the core question is whether power was abused.”

Although FTC officials say no decision had been made about whether to bring a formal case against Google, last week’s hiring of Beth A Wilkinson, a former Justice Department prosecutor, immediately catapulted the investigation to another level. “It’s a watershed moment when you hire someone like this,” explained former FTC official David Wales. “This shows Google that if it doesn’t give you the remedy you want, you’re going to litigate.”

Replacing one giant with another

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The Microsoft case in the late 1990s transformed the entire tech industry, reining in its most powerful company and allowing for the rise of new companies – such as Google. Now Google enjoys much the same power that Microsoft did, and has come under similar scrutiny, as it has been involved in one privacy controversy after another. Google’s introduction last month of a new privacy policy, for example – one that allows more comprehensive tracking of its users’ actions – provoked still another round of criticism, at the same time that the hiring of Ms Wilkinson undercut the company’s response to the Federal Communications Commission for obstructing its investigation.

The repeated privacy controversies Google finds itself in are causing politicians to take notice. Senator Al Franken of Minnesota, for example, who is in charge of a subcommittee on privacy, said in a recent speech that companies such as Google and Facebook accumulated data on users because “it’s their whole business model. And you are not their client; you are their product”.

No wonder Google co-founder Larry Page is “paranoid“, as the Associated Press reported recently. Why? As I detail in my new book Friends, Followers and the Future: How Social Media are Changing Politics, Threatening Big Brands and Killing Traditional Media:

“For all its success, by the end of the decade the company faced a host of problems. Google’s awesome power and reach proved to be a double-edged sword; competitors and regulators alike assailed it for a series of antitrust and privacy violations and began demanding remedies. At the same time, its web supremacy came under attack by new competitors, such as Facebook and Twitter, as Google lagged behind in what was fast becoming the most engaging and potentially lucrative online phenomenon of all -social media.”

The battle for information

As the new “contextual web” takes the place of the data-driven web of the early 21st century, it will mean bad news for Google – even though the company still sold $36.5 billion in advertising last year, ten times more than Facebook. Despite the revenue gap, Facebook poses a pronounced threat to Google’s continued internet hegemony by constantly amassing vast new amounts of information valuable in targeting ads more precisely to its 850 million users. With Facebook walling off and withholding that advertiser-friendly information from search engines, Google has been forced to try to play catch-up in the ever-more competitive social network space. But as I explain in Friends, Followers and the Future, Google just may not have the necessary “corporate DNA” to succeed in social.

Leading industry analyst Om Malik of GigaOM is among those convinced that we are moving from the “sell-search-and-consume methodology that has become part of our basic internet behaviour and turned Google into a gazillion dollar company” to a new world of social search – which will shift power to individuals using social tools to express their opinions. In other words, it will democratise and humanise the search process by using “friends and followers” instead of algorithms to provide context to and filters for our ever-expanding amount of information.

“The company that is most impacted by these developments is Google, the shining example of the Data Web,” Malik has noted. “By deploying its awesome infrastructure and massive computer resources, Google has enjoyed an advantage over all its search competitors.” But that advantage is now disappearing, as the manner in which we find and use information on the web is being rapidly transformed. Despite its endless efforts to succeed at being social, Google simply may be incapable of doing so. The company “lacks the DNA that would mark it as a social entity”, says Malik, and it has never “been comfortable dealing with the ‘social’ or ‘people’ web. Look at any of their offerings – they have the warmth of a Soviet bunker”.

Couple Google’s paranoia about Facebook and evident failure with its newest social network, Google Plus, with its problems about privacy, trust and anti-trust, and it’s no surprise that executives there are feeling paranoid. After all, they are facing the very real prospect of waging a war on many fronts simultaneously. Despite its incredible reach, power and profit, it’s a war Google – the 21st century equivalent of the still-powerful but increasingly irrelevant Microsoft – may be destined to lose.

Rory O’Connor is the author of Friends, Followers and the Future: How Social Media are Changing Politics, Threatening Big Brands and Killing Traditional Media, just published by City Lights.

Follow him on Twitter: @rocglobal

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