28 February 2024

Google’s Virtual Universe

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Just before Google Inc went public 10 years ago, co-founder Larry Page said he wanted to get the search engine's users out of Google and to the right place as fast as possible. Today, Mr. Page's Google often is doing the opposite: Providing as much information as possible to keep users in Google's virtual universe.

Results highlight how the world's largest search engine is transforming its core business, and the basic notion of search. Its transition promises to be a tricky one for its own business and for millions of others dependent on its search results to survive.

Advertisers will pay more than $50 billion to the search giant this year for clicks that deliver potential customers to their Web pages. By offering its own hotel listings, for example, Google may alienate advertisers such as online-travel agencies that alone pay it billions a year.

The shift has spawned antitrust investigations world-wide as some online publishers complain Google wields its extensive influence over what Internet users see to promote its own content and services, in the process helping some businesses while hurting others.

The changes risk Google's standing as a neutral arbiter of Internet content and the most widely used search engine. Today, those attributes have helped make it the third most valuable company in the U.S. behind Apple Inc. and Exxon Mobil Corp.

If Google is perceived as favoring its own content over impartial search results, it would risk losing users over time. But if users find the results more helpful, they'll keep coming to Google, forcing advertisers to stay there.

So far, the shift hasn't hurt Google's financial results. Advertising revenue rose 18% in the first six months of this year compared with a year earlier, and while the stock is up about 4% in the same period, it is up 38% over the past 12 months.

On the smaller screen of a smartphone, users spend more time in apps and less time browsing the Web that Google has organized and monetized via search-related advertising.

As smartphones proliferate, clicks on Google ads are rising. But ad prices are falling, down nearly 20% since the start of 2012 in part because clicks from a phone aren't as valuable. Buyers searching for products on a phone complete purchases roughly one-third as often as those on PCs.

Google says that when it promotes its own content, it is benefiting users. They could switch to Bing or another search engine if they don't like its results, a spokesman said. Its share of the U.S. search market has been holding steady at around 67% for the past four years.

As Google seeks to collect and display more information, it sometimes leans on other Web publishers to share content or lose prominence in its listings. Last month, Google told retail advertisers they must supply product reviews from their own sites to Google, or their ads won't include star ratings that encourage clicks.

Some of these practices have prompted complaints to antitrust regulators in the U.S. and Europe, which so far have led to few changes in Google's practices. The U.S. Federal Trade Commission closed an investigation into Google's search practices in January 2013, saying the changes it reviewed may have benefited users.

In a proposed settlement with European regulators in February, Google agreed to dedicate space for competitors atop its search results. Under pressure from Google rivals, some European commissioners want to reopen the deal and push for harsher sanctions. So far, Google's moves still require users to go elsewhere to complete a hotel rental or other transactions. But some fear that may be changing.

Click here to access the full article on The Wall Street Journal.

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