Conflict of Interest

In ominous cross-pond agreement for Google, the Financial Times and the New York Times agree that Google needs more antitrust accountability:

• See the FT editorial; "Google should be watched carefully"
• The the NYT editorial: "The Google Algorithm."

Google itself has put the issue of "search neutrality" on the map with its FT op-ed and Google blog post and by saying they are for now for search bias after being against it.

Google's proposed acquisition of ITA software to beef up the Google Travel vertical, has put on everyone's radar screen the anti-competitive potential of Google continuing to extend, tie,and leverage its global search monopoly into content verticals like travel.

The FT got the concern over vertical abuse right: "...the potential for antitrust abuse through the tying of vertical services to search raises clear concerns."  

However, the NYT missed the mark on vertical abuse: "Forbidding Google to favor its own services -- such as when it offers a Google Map to queries about addresses -- might reduce the value of its searches."  

Google strongly legitimized the problem of "search neutrality" in arguing in detail in an FT op-ed today why Google's search should not be neutral. 

Skype, one of the high priests of the net neutrality movement, that preaches for Title II monopoly regulation of all the broadband providers it already rides upon for free, has been caught in the act of being blatantly unfaithful to its widely-professed net neutrality principles, by blocking interconnectivity to Fring! 

• Arstechnica and The Hill have both flagged Skype's hypocrisy and infidelity to its supposed net neutrality and openness principles in blocking mobile video calling competitor Fring from access to Skype's dominant network of a ~half-billion interconnected users.  

  Now we know that Skype's proclaimed principled stance for net neutrality and openness was really just a cynical PR and lobbying campaign of crony capitalism, and political cover for an industrial policy where the FCC picks Skype, Google Android, and Amazon Kindle as the "dumb pipe" market winners, and all broadband providers as the "dumb pipe" market losers.

  Skype's "do as I say not as I do" stance is particularly hypocritical because of Skype's dominant size relative to Fring, in that Skype has about a half billion users and is "responsible for 12% of global international calling minutes" per Skype.  

Anyone that cares about freedom generally, and freedom of the press in particular, must read PFF Adam Theirer's outstanding Big Government expose/op-ed putting the spotlight on neo-marxist "FreePress:" "How America's Hugo Chavez Fan Club Plans to 'Reform' the Media Marketplace."

• Adam's analysis and case are brilliant and dead-on; FreePress has one of the most destructive public policy agendas out there, period, full stop.
• It is frightening how much credence this Administration, FCC, FTC and Congress give to FreePress' anti-freedom-of-the-press dsytopian policy agenda.

Thanks Adam. Forewarned is forearmed.   

Today Google publicly admitted for the first time that its purported "neutral" and "unbiased" search algorithm is not completely-automated or computer-algorithmic like Google has long and consistently represented to the public. 

• In a stunning first-time disclosure in a Richard Waters FT article by "the Google engineer responsible for its ranking algorithm," Mr. Amit Singhal:   
  • "Google’s Mr Singhal calls this the problem of “brand recognition”: where companies whose standing is based on their success in one area use this to “venture out into another class of information which they may not be as rich at”. Google uses human raters to assess the quality of individual sites in order to counter this effect, he adds." [Bold added for emphasis.]

Wow. After a decade of passionate public representations that Google's vaunted search algorithm is "neutral' and unbiased, we now learn it has substantial regular human intervention to discriminate what site gets what ranking, who gets found and who does not, and who wins and who loses in the business of online content.

• From Google's website:

Serial beehive kicker Google, just kicked the wrong beehive -- IAC.

• Kudos to FT's Richard Waters for his outstanding front-page story based on an interview with Barry Diller, Chairman of IAC and Chairman of Expedia, on the implications of the Google-ITA deal and Google's lack of search neutrality.
  • Read the article and visualize the angry bee swarm, whose hive has been kicked and which is pursuing the kicker with a vengence.  

So fixated on stomping on the potential competitive threat posed by Microsoft's vertical search competitive differentiation strategy, i.e. by buying the dominant airline software supplier ITA, Google apparently did not look down to see that it was trampling on the honey pot of one Google's biggest and most important partners/allies -- IAC and Barry Diller -- in buying ITA and abruptly heralding its broader ambitions of invading and conquering the vertical space of its many online content partners.

• Google made a very big strategic mistake on this deal that will be hard for Google's legendary PR machine to cover up.  

Why will the IAC sting hurt Google more than other beehives that Google has kicked? 

In an exceptionally uncharacteristic low-key PR manner for Google, Google announced on its blog in one sentence that China renewed its license to operate in China.

• "Update July 9:
  We are very pleased that the government has renewed our ICP license and we look forward to continuing to provide web search and local products to our users in China."
  

What's the rest of the story here?

Google and China have been at loggerheads with one another in one of the highest-of-profile international standoffs between a private company and a superpower in modern history, since Google publicly accused China in January blogpost of being complicit in a hack of Google that resulted in the theft of Google's intellectual property, (which John Markoff of the New York Times reported was the extremely sensitive computer code for Google's password control system.) 

What is the quid pro quo here?

In buying travel software leader ITA, Google Inc., the self-described "biggest kingmaker on this earth," seeks to expand its ever-expanding digital information empire into the $80b online travel market and establish a dominant "Google Travel" vertical.    

What's most critical here is pattern recognition in order to get perspective on what this Google-ITA transaction means more broadly. 

Pattern 1: Extension of market power via strategic acquisition of first-mover potential competitors.

This proposed ITA acquisition is the latest example of a well-established Google monopolization strategy -- i.e. to buy the dominant or first-mover player in a strategic vertical as a platform to extend its search market power into those markets much faster than it could organically. Note the pattern in the examples below. Google's: 

In a trailblazing and ominous antitrust precedent for Google, French antitrust authorities ruled for the first time that Google is a search monopoly that anti-competitively abused its market power by capriciousy cutting off Navx, a Google competitor, from Google's search results without warning.  

• Per the WSJ, the French authority found Google's hooded anti-competitive actions against Navx lacked transparency and "resulted in discriminatory treatment."  
• Importantly, the French filed a legal injunction that forces Google to address the situation and answer to the French antitrust authority.

  It is not surprising that the French, who in the world-changing French Revolution rebelled against the absolute power of the French monarchy, are now revolting against Google, the entity that increasingly enjoys absolute power over the fate of web businesses the world over.

  The problem for Google is that in this common sense antitrust decision, the French are effectively playing the role of modern day whistleblower in the famous old fable -- by declaring that Google, the Internet's Emperor, has no clothes on to cover their bare monopoli-ness.

The evidence mounts that Google is increasingly throwing its monopoly weight around anti-competitively without much apparent fear of antitrust enforcement. This Google antitrust update will spotlight:

1. New evidence of Google's unfettered "kingmaking" power (lack of search neutrality) to anti-competitively self-deal with highest search rankings and sabotage competitors' rankings;
2. Google's latest anti-competitive pattern of behavior, i.e. Google's wholesale-retail vertical squeeze play; and
3. Why the antitrust risk Google faces comes from the EU and the DOJ, not from the FTC.   

I. Latest Evidence of Google's Anti-competitive Search Discrimination:

Google's behavior continues to raise serious antitrust concerns about whether Google's dominant search business is treating competitors neutrally as it claims, or whether it is anti-competitively picking itself and its partners as content winners and its competitors as content losers. 

• Google's website assures users: "We never manipulate rankings to put our partners higher in our search results and no one can buy better PageRank."
• Mounting evidence indicates this representation is patently false and a deceptive trade practice. 

A. Search Discrimination: