Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Ribbit: Google's Never Ending European Problems...Can It Change Its Nature?

Posted by Tom Foremski - September 18, 2014

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Google's run-ins with European regulators have become a never ending marathon with no signs of an end. In the latest development, Robert Thomson, the CEO of Rupert Murdoch's News Corp., is lobbying the European Commission to hold Google accountable for abusing its dominant position in search (93% share in Europe).

The BBC reported that Thomson's "strongly worded letter" to Joaquin Almunia, Competition Commissioner, calls

...Google a "platform for piracy" whose power "increases with each passing day."

Europe is seeing a rise of nationalist groups with racist views. Thomson warns that Google's dominance will result in, "A less informed, more vexatious level of dialogue in our society."

He predicts that, "The intemperate trends we are already seeing in much of Europe will proliferate."

Mark Scott at the New York Times, reports that European media companies are concerned, too. 

“We are afraid of Google,” Mathias Döpfner, chief executive of Axel Springer, a German publishing giant, said in a letter to Google’s executive chairman, Eric Schmidt, earlier this year. “I must state this very clearly and frankly, because few of my colleagues dare do so publicly.”

Jeff Jarvis, a long-time critic of Rupert Murdoch and the author of "What would Google Do?" called the letter, "A most cynical letter from a most cynical company."

[Disclosure: I used to work with Robert Thomson when he was Editor in Chief of the US Financial Times.]

Foremski's Take: Robert Thomson is right to be concerned about Google because it is a media company: it publishes pages of content and sells advertising around it.

It prefers to be thought of as a technology company because it relies on partnering with media companies for most of its AdSense business, which represents about one-third of total revenues. Major media companies would likely balk at such partnerships if Google nailed its true colors to the mast.

Jarvis calls Thomson's letter "cynical" but what is cynical about points that are incontrovertibly true? Such as:

  • - Google's linking to piracy sites.
  • - That its own businesses are given a high rank in its index.
  • - The sudden changes that will overnight overturn the high rank of businesses.
  • - That it punishes small businesses.
  • - That it places arbitrary restrictions on other companies using its Android mobile operating system.
  • - That its actions commoditize third-party content.

All true. And it does nothing to allay the concerns Europe has with the fact that its digital economy is in the hands of a foreign company 5,500 miles away, that operates in secret, and that is constantly moving into competition with the businesses in its index.

But this is not a US versus European trade dispute. The concerns of European businesses are the same concerns US businesses have with Google. Their list is likely similar to Thomson's and that of the media industry in general. 

The sting in this tale...

The media industry was the first, but it won't be the last to understand that Google is a competitor with great disruptive powers. It can thrive on paltry margins per page published, reliant on the content produced by others, where media companies cannot thrive because creating original content has a high cost of business. 

One reason we see so many cryptic headlines, such as: You won’t believe what models do to prep for NYFW | New York Post - instead of: "Models Prepare For Fashion Week With Grueling Workouts" is that Google's aggregation of headlines often robs the news site of traffic because the headline says what's in the article. 

The crux of the matter is that Google's value is in its index, and in process of monetizing that index it ends up driving down the value of the content it links to. It's the nature of its business.

Google is the scorpion stinging the frog that's carrying it to the other side of the river. Without the frog it drowns and without content to index it has no business. But it can't not sting the frog. 

A scorpion cannot change its nature and the European Commission cannot change the fundamental functions of Google's business model. 

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The Holmes Report names Tom Foremski one of the top 25 Innovators of 2013.




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