Virulent Word of Mouse

September 26, 2011

Should Google go Back to Only Organic?

Filed under: Internet economics and communications policy — Shane Greenstein @ 10:10 pm
Tags: , ,

If you have a couple hours to burn on some political theater, go a watch the Senate hearings about Google. Here is a link.

Actually, as someone who foresaw the inevitability of this event, I was rather disappointed. This hearing was pretty anti-climactic. To find this interesting you have to be a serious junkie of antitrust policy in innovative industries.

There just were not many moments of drama. Rather, the hearing resembled the verbal equivalent of a tennis match that rarely left the baseline, volleying back and forth. There were long stretches between the high points, and those stretches did not contain much tension. Nothing kept an audience glued to their seat, as if they were concerned about missing some important moment.

Except once. But that moment came so unexpectedly, and after such a long stretch of nothing.

Actually, upon reflection, that moment illustrated what was wrong with the hearing. The hearing focused on the wrong issues. That is the point of this post.

It went like this. Eric Schmidt spent most of the hearings listening to accusations that Google faces a conflict of interest. These accusations had some face-validity to them. After all, Google owns the most widely used search engine (by a long shot), and increasingly it owns at least one of the destinations to which the search engine points. It is no secret that in some circumstances Google also puts its option at the top, like a map, which sure looks like favoritism.

Schmidt did his homework, and was prepared for these questions. Schmidt spent most of the evening saying a couple straightforward things in response. He would say sensible things like (I am paraphrasing):

* “Users want more than just the organic listings, and we want to make it easy for them to find an answer.”

* “If users do not like what we put at the top they can just go to the next lines.”

* “Google is not interested in angering users because we want them to come back, which is what advertisers pay us for.”

* “We tested this extensively before deploying it.”

* “Our competitors are deploying similar designs and features.”

Those answers diffused most of the questions. To be sure, it did not deter Senators from continuing to furrow their brows, as if they were ready to scold a four year old who made a mess in the family room by not picking up the blocks. Furrowing seems to be a bi-partisan activity. So the verbal volleys from the baseline went on and on.

Numbing boredom, therefore, is the only explanation I have for why Schmidt failed to take advantage of the best opportunity thrown to him. It happened when Al Franken actually threw a verbal lob in Schmidt’s direction. Schmidt failed to smash back.

In particular, after Franken continued to ask Schmidt about the conflicts of interest, and he continued and continued. Near the end, he seemed to run out of questions, and seemed to be grasping for a way to sum it up. Then he said…”What are you going to do about it?” Schmidt sat there, just a little dumbfounded (I believe), before saying something inoffensive and forgettable.

A much better answer would have been this: “Senator, starting tomorrow Google will unbundle its search engine from its applications, just as the European Union made Microsoft unbundle its music player from its operating system. From now on, we will give users one more option, ORGANIC ONLY. We will strip away all the advances we have made in search design over the last decade, and let users go to only organic. If they really do not trust us, but do not want to go to a competitor, this surely will satisfy the true skeptic.”

Of course, he did not say that.

I wish he had. It would have pointed out the fruitlessness of this line of question.

Here is what I mean. Even if the Senators thought favoritism was a problem, what would they do about it? In the language of antitrust, what remedy would they propose? The questions were phrased in such a way so that the logical answer was nonsense — it was the equivalent of asking Google to give users to ability to ask for a list of only the organic listings. But, for one, most users do not want that.  For two, those who do already can get something pretty close, like looking down the page.

The real problem was with the thrust of the line of questioning, and Schmidt was probably happy the conversation stayed in this area. The deeper policy issues are not between Google and its users. Google had learned one of the key lessons of the prior antitrust case involving Microsoft. It is ok for the dominant firm to restricts user choice for reasons that plausible benefit users, but when in doubt, give users the option to make another choice. As long as those options remain, it is hard to accuse the dominant firm of manipulating design for anti-competitive purposes.

Let me say that another way. The real action is somewhere else, not in the design of the search engine that users see.

The deeper questions are between Google and application providers — both in the contracting and non-contracting aspects of these relationships. Google is a multi-sided platform, with an attractive platform for users. Google can use that market power to shape what its partners and non-partners do, namely, other web sites and advertisers. Some of those actions might shape the competitive process, which is what antitrust hearings should be focused on.

Are there serious issues in the relationships between Google and other firms? Maybe or maybe not. But I could not tell from this hearing. I concluded that some firms are unhappy with this situation. That seemed likely even before the hearing, so I did not learn much that surprised me. Whether the whining of many other firms rises to the level of a grand antitrust issue, on that I am not yet sure. The question still seems open.

4 Comments »

  1. I think you’re a bit confused. They are attacking not just Google ads but the organic results as well. For instance, if I type “GOOG” into Google, the first link is for Google finance, which is part of the organic results…this is part of what competitors are complaining about. So if Schmidt had given the answer you proposed, it would have been nonsensical.

    Comment by Jon — September 27, 2011 @ 9:59 am | Reply

    • You are right. Good observation. Then Schmidt should have proposed to have a set of results that are “Organic sans Google.” Of course, that is not a realistic antitrust remedy, which is my point. A more fruitful line of inquiry lies elsewhere, if there is anywhere to go.

      Comment by Shane Greenstein — September 27, 2011 @ 10:13 am | Reply

  2. I think the big test will come when someone develops an app that uses Google’s search results but reorders and reprioritizes it according to suit a particular market. There used to be a number of products that did this e.g. Sherlock and Watson. If Google pulls the API or starts bitching about violations of terms of service and the like, then we’ll see antitrust sparks. Right now, Google does a very good job from the customer’s point of view, but my guess is that this is where the wedge may come from.

    Comment by Kaleberg — September 27, 2011 @ 1:48 pm | Reply


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