http://bit.ly/pysE8q DEMOfocus on Consumer Technologies, Fall 2011

Ted W. Larson, CEO & Founder, OLogic, Inc.

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Is Google evil? Members of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights tried to decide that today in a hearing on Google’s market power and whether it is beneficial for consumers or not. The end result was that the Senators requested Google make voluntary changes to its search ranking, and tried to keep Google “honest” through tough questions. But while the hearing exposed some questionable results on Google searches — notably product searches — it also exposed a lack of clarity around who Google’s customers are, and a fundamental conflict of cultures between Silicon Valley and Washington, D.C.

Consumer friend or gatekeeping monopolist?
Does Google exist to help consumers find web pages and deliver search results, or is it a monopoly gatekeeper that charges businesses to connect them with online consumers? Who would the government be protecting if it interfered with Google’s market power — and would that serve businesses or consumers? Google’s Chairman Eric Schmidt and Susan A. Creighton, a Partner Wilson Sonsini Goodrich & Rosati, went to great pains to illustrate that consumers could just move from Google to a competing search engine if they didn’t like Google’s results — meaning D.C. need not get involved.
Those who feel that Google acts as a gatekeeper between consumers and businesses on the web were represented by Jeremy Stoppelman of Yelp and Jeff Katz CEO of Nextag Inc. Each explained their firms couldn’t compete or even begin their businesses in today’s search climate because Google is making the entry of web-based companies that provide consumers information so difficult. But I’m not sure I can buy into the gatekeeper idea as a reason for Washington to intervene.
Stoppelman did a great job explaining that he began Yelp in 2004 because he saw a hole in the market. He then outlined how Google played rough with the site in terms of scraping its content after Yelp refused a deal with it. That’s a crappy thing to do, but that’s what lawsuits are for. Check out Skyhook’s lawsuit with Google over location. Yelp wasn’t having its content taken because it was a small business unable to buy lawyers — it was having its content taken because it was a company so successful that Google actually tried to buy it, and Yelp said no. Stoppelman might not see a hole in the market today, but it’s kind of ridiculous to expect any market to stay the same for seven years.

If consumers can switch easily to a new search engine, Congress getting involved makes it seem like we are in danger of becoming a nanny state to protect specific business interests. And that makes me nervous (my colleague Mathew Ingram is also skeptical about the need for an antitrust investigation of Google, arguing that technological innovation has disrupted more monopolies than any government ever has. Indeed, I found it odd watching Senator Amy Klobuchar (D-Minn.) and Senator Chuck Grassley (R-Iowa) ask Schmidt about how its algorithms affect small businesses and what might be done to protect those businesses from changes to Google’s algorithm.
Is part of the problem a clash of cultures?
Schmidt, like any computer scientist, tried to argue that the algorithms do what they are supposed to do. From a computer science view, if an algorithm is fair, then changing to protect a certain class of those affected by it makes it fundamentally unfair to others (something Congress routinely does with exceptions and carve outs when it’s making legislation). In fact, the biggest elephant in the room was a clash of cultures between the Silicon Valley culture of the free market — and using technology to create a better consumer experience — and Washington D.C.’s inherent cynicism and pandering to constituents.
Also, the senators wanted broadband. Both Senators Klobuchar and Chuck Schumer (D-NY) requested Google’s fiber to the home experiment in their states. I don’t blame them, but it was odd to hear Google be castigated for abusing its search advantage (and hearing Senators tie that advantage to its infrastructure and scale earlier in the hearing) while other members of the committee requested services that would enhance Google’s ability to create higher barriers to entry. In the binary world of Silicon Valley that may not make sense, but in D.C. it apparently does.
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