Conflict of Interest

Senate Homeland Security Chairman Joe Lieberman "Monday called on Google to remove Internet video content produced by terrorist organizations such as Al-Qaeda. The videos – readily available on YouTube –show assassinations, deaths of U.S. soldiers and civilians, weapons training, incendiary speeches by al-Qaeda leadership, and other material intended to encourage violence against the West."

• This link includes the Chairman's press release and the Committee's Monday letter to Google CEO Eric Schmidt.
  • (An interesting historical sub-text to this letter, that is worth mentioning, is that in 2000, Senator Lieberman was the Vice Presidential running mate of current Google Senior Advisor Al Gore, a former Vice President of the U.S.)

I link to this Senator Lieberman announcement because it will be telling how Google responds to this reasonable request from Homeland Security oversight authorities, given that Google is the funding patron and well recognized corporate leader of the "net neutrality" movement that has branded net neutrality as the "First Amendment of the Internet." (Never mind that the Internet has never had a constitution to amend.)

The new 2008 Internet Advertising Revenue report just came out from the Interactive Advertising Bureau.

It has U.S. Internet advertising revenues for 2007 at $21.2b, up an impressive 26% from 2006 revenues of $16.9b, but nowhere near as impressive as Google's 56% overall revenue growth in 2007. 

With the pending Google-Yahoo outsourcing pact reportedly being negotiated, I thought it might be iluminating or instructive to see what share of U.S. Internet advertising revenues Google and Yahoo each have, and what they would have on a combined basis. 

• Given that Google's 2007 U.S. revenues were ~$8.9b that would be about 42% of all U.S. advertising of $21.2b.
• Given that Yahoo's 2007 U.S. revenues were ~$4.7b that would be about 22% of all U.S. advertising revenues of $21.2b.
• That would put Google and Yahoo's combined Internet advertising revenue shares at 64% that the "partnership" would collectively control. 

At a minimum, the domination of these two players in the U.S. Internet advertising market, combined with Google's incredible momentum in taking share from all its competitors signalling powerful network effects, must concern both the DOJ and FTC.

If Google and Yahoo partner to not compete as fully as they did before... where is competition going to come from? 

With respect and affection to the memory of the late great Dr. Seuss.... 

Googlehoo mocks all the boo hoos over their ballyhooed Googlehoo coup.

Get a clue.

Googlehoo pooh-poohs a collusive coup between their crews.

It's no glue to screw you.

But, who knew it would be true, that Googlehoo would rue, that Justice could see through, Googlehoo's collusion boo-boo, and eventually sue?

Can we construe Mr. Icahn's Yahoo debut, and shareholder kung fu, as a rejection of the Googlehoo view?

Will Yahoo bid Googlehoo adieu, overcome the Microsoft taboo, and renew the review of the Microsoft view?

I had to grin when I saw that two of net neutrality top supporters of net neutrality, eBay and Craig Newmark of Craig's list are reportedly in an legal fight and Craigslist is actually accusing eBay of anti-competitive behavior. 

I have to point out two ironies here:

First, eBay has 95% share of the online auction market. Yep, like Google in Europe, eBay is well past the unofficial maarket share level of what it takes to be declared a monopoly.

• It seems as if online unofficial monopolies like eBay are not above leveraging their market power in one market,online auctions, into an adjacent market like the classified ad market.

Second, it is both Craigslist and eBay, who are eviserating one side of the newspaper industry's two-sided business model (ads and subscriptions), while at the same time promoting net neutrality, which is a clever scheme by online monopolies like Google and eBay to effectively prevent broadband companies from evolving into a two-sided marketplace with  both subscriptions and advertising.

 Bottom line: It seems as if eBay defines anti-competitive as what others might do to eBay, not what eBay actually does to others. Ask Craig.    

The USA Today's business section cover story is on George Soros, who is notable here as probably the second biggest funder of net neutrality/information commons causes after Google.

The appropriately skeptical article, by David Lynch, has a second page-headline that sums up George Soros' government-first, economic point-of-view: "Traditional free market theory flawed."

George Soros is really the poster child for net-neutrality-ish thinking, which is that the few, the truly wise, like Mr. Soros, know what is truly best for everyone else -- and that the whole free market concept of accumulating all the actions of all market actors through supply and demand to determine prices or market equilibrium -- is all wrong and a waste of time -- according to Mr. Soros.

• Why include all this riff-raff -- like consumers and businesses -- be free to make constant decisions and adjustments, when the brilliant elite thinkers like Mr. Soros can cut through all the free-market mumbo jumbo and simply tell people what the right economic answers should be to any economic question?  

Just like the Google/Soros astroturf net neutrality army who think they can rename an issue and demagogue it into the mainstream popularity, Mr. Soros now has his very own theory of economics, which he calls "reflexivity" (think knee-jerk-ivity), that Mr. Soros proposes replace current free-market theory and thinking.

Garett Rogers of ZDnet has a good post on how "Gmail can be used as a "Spam Bazooka""

This real and increasing Google security problem provides even more evidence to my recent posts of why Google is increasingly being targeted and leveraged by spammers and scammers to get access to unsuspecting Google users -- and why Google won't warn its users that they are at serious risk -- (Google does not work for users but for advertisers and publishers.)  

Found a smoking gun on how Google's conflict of interests actually hurts Google users, which I explain later in this post.

• As I have blogged several times of late, here, here, here, here, and here, Google works for advertisers and publishers not users/consumers; and Google's undisclosed conflict of interest, lulls Google's users into a false sense of security that Google is looking out for users' best interests -- and safety -- when they clearly are not.
• I have found specific evidence below that Google is not looking out for its users' best interests or safety. 

Google knows there are "potentially harmful sites that make Google users more vulnerable to spammers or scammers. I have suggested before that they could easily warn users of the danger from specific results with warnings on search result pages.

A consistent theme in my ongoing analysis of Google, has been Google's corporate refusal to overtly disclose the fundamental financial conflict of interest inherent in their business model, i.e that Google does not work for users like they routinely claim, but for advertisers and publishers. 

• The best example of the serious risks to users of this undisclosed conflict of interest has been how Google has reacted since early April to the dramatic increase in risk to its users of indentity theft and fraud by cyber-criminals exploiting security weaknesses in Google's search results.
  • I have blogged on that serious breach of consumer protection here, here, here, here, and here .  
• I personally have seen the consumer devastation that undisclosed conflicts of interest can cause.
  • After the collapse of Enron, I was asked to testify in the Senate on how conflicts of interests were integral to Enron's fraud.
  • I was also asked to testify on the dangers of undisclosed conflicts of interest in the House during the tech meltdown.

Interestingly, it appears I am not the only one concerned that Google's advertising-based search model has a serious inherent conflict of interest.

Interested observers in the Microsoft-Yahoo-Google-AOL-Ask.com-MySpace incestuous soap opera called search advertising, would be wise to bone up on the fine line between acceptable industry collaboration and illegal collusion, if recent reports prove true.

• The Wall Street Journal reports that Yahoo may be days away from announcing "an agreement to carry search advertisements from Google.." and that Google feels "that the upside is much greater than the potential downside" from the arrangement."  
• The Financial Times broke the story that the Department of Justice was investigating Google's interaction with Yahoo and that "the prosecution of collusion is a top priority."     

The fine line between collaboration and collusion. 

First, while many may be aware that a Google-Yahoo outsourcing deal "would likely attract intense antitrust scrutiny" there is precious little analysis on this linchpin issue -- hence the genesis of this piece.

I believe the pattern of Google becoming the outsourced search engine for most all of the Internet -- save for a few properties -- is one of the most important and least understood competitive Internet issues.  

Google deserves some bona fide kudos from me for blogging yesterday with some very sound and practical advice about how their users or anyone who reads their blog - could avoid getting hooked/scammed by fraudsters.

• As a consumer, I learned a couple of new tips to better protect myself from phishing fraud.
• The advice was clear, practical, informative and useful.

However, I was surprised that they did not choose to link to other sites in and out of government that could also be useful to consumers looking to protect themselves better.

I was also surprised it took a month for Google to say anything about how users could better protect themselves from new fraud scams that were exploiting weaknesses in Google's search engine protections so that Google was unwittingly offering up scam pages as part of their search results.