Less David vs Goliath, more Goliath vs Goliath

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The latest round of the ongoing battle between the might of NewsCorp and the power of Google is not merely about a clash of two heavyweights in the media landscape. It stems from a much wider question – Does Google favour its own listings in the search rankings?

This question came to prominence earlier in the year when it was suggested that Google used its dominance of the search market in Europe to push its own agenda, particularly around Google+. A case was put forward that this was in breach of the EU’s competition laws, with Tom Watson MPwriting to the EU Commission and newspapers in Germany threatening legal action against Google.

The EU Commission duly launched an investigation into Google’s search practices, concluding that they “may have abused its market dominance and penalised smaller companies” resulting in Google bringing in changes to the way search results are displayed. With the latest round of changes from Google due to go live in October the issue has raised its head again, with Newscorp at the forefront of the complaints that certain websites are penalised (namely the ones they own!) in the search rankings in favour of Google’s own content. Two major factors are at work here which are causing this clash of heads:

  1. Google has massive market dominance – over 90% of searches in the EU go through Google.
  2. The Google algorithm that determines search listings is a closely guarded secret.

The first point causes obvious problems. I can’t think of many other markets where one company dominates to such an extent. Essentially Google is a victim of its own success. With no other serious competitors it was only a matter of time before someone took a shot at the giant.

The second point is also a problem for Google. The ‘magic formula’ which governs which listings appear against which search queries and in what order is key to their entire search business model. Some sources suggest that as much as 85% of Google’s revenue is from paid search advertising, around $50 billion, so it is clearly key to their balance sheet as well. Google needs to have control of the formula to natural search listings in order to ensure that its core business, namely paid search advertising, continues to bring in those huge revenues. Any changes Google is forced to make to the way natural search listings are displayed could impact the profitability of the paid for advertising.

The other problem Google faces is proving that the changes it has made will have an impact and appease the EU Commission and detractors such as NewsCorp. Previous changes Google have undertaken have always been made with their mantra to make the search results “better for users”. However, we have been reliant on what Google views as “better for users”, whilst we also have a limited view of the base these changes are being made from. This throws up more questions than answers. How exactly did Google calculate search rankings previously? What changes has it made? What impact will the changes have? Will those changes deliver fairer search results? Who are the changes fairer for, big corporations or smaller businesses and individuals?

Without giving away the family silver Google may struggle to convince the EU Commission and other powerful interest groups that it is delivering the best and fairest results for the billions of searches carried out each day. As a result I can only see this issue rumbling on and on.