Google: Don't fear us

A delegation from Google, in town to meet with Wharton students, stopped by this morning to spread propaganda about competition, Comcast and content.

We met Adam Kovacevich, senior manager, Google public policy communications ("I lead our communications around public policy and regulatory issues. We have an increasing number of those issues"); Kevin Yingling, Google competition counsel ("I help Google in dealing with the regulatory issues we've been facing. For exampe our AdMob deal is being reviewed by the FTC"); Peter D. Greenberger, head of Google industry relations: ("I launched and led our political advertising team. We had some success in the 2008 election with Obama and others. Now I help tell our stories and strengthen relationships with ad agencies and advertisers.")

They do this a lot. It's public relations. And, whoa, self-awareness: They even flashed a slide titled "Is Google Bad?" illustrated by cartoon evil industrialist Montgomery Burns from the Simpsons... Here's what we talked about (Kovacevich was the speaker unless noted):
 
US vs Google: "It's our turn to be in the antitrust crosshairs. It's a rite of passage, particularly in information technology. Microsoft, Intel, IBM have been there.... We know there's more scrutiny on us, because we're a new type of business…"

Self-examination: "Is Google competing fair and square?" Though, after all, "how big are we?" (Not nearly as big or profitable as Microsoft, Verizon or IBM, their slide presentation pointed out).

Is Google a monopoly? "Even though Google has become synonomous with online searching, we don't think we have the market locked down," said lawyer Yingling.

Sure, Google dominates online search ads, with 72% of the sector's revenue, according to Cowen & Co. and JPMorgan data the group presented. But that's only 30% of total online ads, and 3% of all U.S. ads, the same sources claim. Americans still "use multiple search engines," plus specialized searches like Monster.com.

"We look at mobile applications as a real competitor. People download apps and they skip doing the search. Why ask an algorithm where I might have dinner this weekend? Why wouldn't I post that query to people in my social network, Facebook, Twitter?... This is a very dynamic, innovative space. Google is only 11 years old. Online searching has only been happening 15 years. Innovation is going to continue."

How Google is watching you: "Last year we did get into what we call 'behavioral advertising' for banner ads. Go to expedia.com and search for 'Caribbean vacation'. Then the next time you go to NYTimes/com, you might see banner ads for Caribbean vacation. That depends on both NYT and Expedia being partners of ours. Expedia put a cookie on your browser. NYT sees that cookie and puts the ad on your site.

"Publishers like this. (Random) display ads don't work very well today... We want to help (online publishers) charge more.

Google's ad competitors: "We're in competition with TV, print, radio, clearly newspapers. We're in competition for that department store ad. We're fighting for the same dollars."

Google's message to the Justice Department's Antitrust Division:  "One of the important features of defining an antirust field is defining the relevant market," said lawyer Yingling. "Advertisers have relevant substitutes for search.... Even if you look only at online ad revenue, we have 30 %. In an antitrust analysis that wouldn't be considered that much of a concentrated market." (That's counting only "owned and operated ads," not double-counting "partnerships.")

"The FTC in our Doubleclick acquisition, and our attempted Yahoo acquisition, stated in releases that ad search was the market," Yingling added. "They also said that in Microsoft's deal with Yahoo. But the Justice Department has not argued that in actual cases."

Image: Kovacevich: "We have limited control over how we're viewed. We have more control over our behavior.

Online ads, good and bad: "Advertisers go where the eyeballs are. We're able to generate advertisers against those numbers. But that doesn't work in the other direction. Search users aren't interested in using search engines that have a lot of advertisers. That can be a bad experience...

"It's important to remember computing capacity is becoming a commoditized product. It can be leased or acquired fairly cheaply. If you have a good idea, you can get capital to invest in computing capacity.

Google is watching, again:  "We put a cookie on every search... (We see your) IP address; searches you've done; what time and date; what browser; what operating system; that's the extent of it. IP address is not considered personally identifiable info, they are changed and shared. After 6 or 9 months we anonymize the IP addresses we've stored w the search log. That's mostly in response to regulatory concerns in Europe about Not holding onto  the IP address for too long.... Privacy norms are changing. On facebook, people volunteer information."

How big is too big? Yingling: "Being big is not unlawful. You have to have the anti-competitive conduct to go along with it."

How Google sees itself: Yingling: "Injecting competition into stagnant spaces. With Web browers, innovation slowed (until Microsoft Windows ran into competition from Mozilla's) Firefox… Now we've got Chrome; we've got Mobile Op Systems. That's why we've made Android an open system versus Apple's more controlled system w the iPhone...

Google and competition: Kovacevich: "We don't tend to see competition as a zero sum game. People talk about WalMart displacing local grocery stores. In our situation, some of the best tools we've created, Adwords and Adsense, have helped advertisers… Adwords can place ads alongside search results. Advertisers only pay for clicks. Adsense, if the NYTimes puts the code on its website, when somebody clicks on one of those ads (they get paid)... If you have a very highly trafficked youtube page you can make some money from that… Google apps lowers IT startup costs."
 
Google and open sourcing: "Lock-in was obviously an issue for Microsoft and its operating system in the 1990s. That makes it really hard for users to leave. We have a really strong commitment to not doing it. A lot of businesses, particularly in tech, make it difficult for people to leave their products. There is a team based in our Chicago office that took it upon themselves to create the Data Liberation Front.... to make sure exporting and importing data to competing services is as limited as possible. They're across the board using common formats.

"All of this is premised on the notion we don't trap our users into staying artificially. It would cause our deveolopers to get stagnant. Take it for granted."

Kovacevich: "Tom Krazit of CNET recently spent a week without Google." Greenberger: "We don't recommend this." Yingling: "We don't want it to catch on." (All laugh) That's why Google Chrome, Android are open source. They've applied a lot of that code to other browsers. Our goal is to make browsers better."

Greenberger: "We also linked to competitors' content. We offer links to Yahoo, Facebook, Linked In. That's not required under competition laws. We want to give users that option."

What Google charges for ads: Kovacevich: "It varies so much. Trial lawyers are paying $40 a click for hitting on 'mesothelioma' (asbestos disease). To reach member of Congress, you might spend 5 cents. Not a lot."
 
Why Google doesn't boost search ranks for ad-buyers: "If you looked at search engines pre-Google, they had paid inclusion. But our founders rejected that. … It often results in less relevant serarch results for the users." Instead, Google auctions ad space: "No duration, no contracts, no minimum budgets. We export campaigns to other platforms. It's a Dutch auction, you pay the price of the second-highest bidder," so you can't pay more than at least one competitor is willing to pay.

"The problem search engines were running into: the highest bidder is not ncecessarily the most relevant ad. Advertisers like that, but users won't click on it. It's not good for them. Not good for the user, either, all that clutter. It's nt good for us, we want to get revenue from clicks. The best way to address this, is to estimate the click-thru rate (before the ad runs)…

Since Google can't be sure of your street address via wired broadband, "advertisers love wireless. Makes it easy to geolocate."

Paying for Internet: "People, I think, understand that all these services that they are receiving for free have to be supported. Most of these services are supported by advertising. Ideally the advertising is useful to people. … We have good opt-out tools.... There are new models for privacy transparency. With Google Latitude you can opt in to see where your friends are. But what if you get your phone from your employer, and your employer opts you in? We send you frequent text messages:. 'If you don't want his you should turn it off now.' The FTC looks a lot at privacy issues.

Comcast vs FCC: "The current chair of the FCC (Jules Genachowski) wants us to codify Net Neutrality rules and make explicit that the Commission (can) act against (companies that violate the principle of) Net Neutrality. The big case is the Comcast case…If the court says the FCC had no authority to do what it did, that will set off new round of examination in Congress whether theyshould have more explicit authority."

Isn't Google a 'free rider' whose Internet use is subsidized by broadband suppliers like Comcast and Verizon?  "Not true. This is a canard that has been advanced by some of the carriers for years, that 'Google is getting a free ride on our pipes' - completely bogus. We pay millions of dollars a year in bandwidth charges. The notion there is a free ride for any site has been thoroughly debunked."

What Net Neutrality means: "The Internet has been fundamentally open. Consumers don't have to pay extra to get to certain sites. Cable companies offers tiers - 'here's a family package with 10 channels.' We don't want the internet to become like that.

"It's not good for users. It's not good for new entrants. It's very hard for a new channel to get on a cable system. By contrast, it's quite easy for a new Web site to get on the Internet... All you have to do is pay your ISP bill. And promote it. Opponents of net neutrality propose you would have to strike deals with ISPs across the country to have your site load faster. We don't think that's a good model... If an ISP wants to charge a user more for faster speeds overall or have a charge for consumption, that's fine."

Broadband competition: "There's a duopoly between the phone company and the cable company for broadband. We've tried to stimulate more competition. We think there's a lot of potential to be wireless...  This project we recently announced, we want to experience that space ourselves. 1GB/sec experimental networks."

Why Google invested, alongside Comcast, in the Clear smartphone system: "The more people have access to the Internet, the more searches there are...Why shouldn't you be able to get 3-D Blueray quality video to your home?"

If federal courts rule the FCC can't enforce network neutrality: "Google is going to be fine. We can go to every Internet Service Provider in the country and pay to have our services loaded quickly. What we're worried about, genuinely, is the upstarts. All these other companies, on the Web, will have a harder time being seen. Our founders genuinely believed they benefited from an open Internet. It should be as easy for any other company to access, as Google. A non-neutral Net increases the gap between haves and have-nots (Web sites). It will create a faster tier, and it could create slow-laning."

Google vs Comcast: "There's more common ground than people may realize. Even in the Net Neutrality debate, Vint Cerf (Google blogger) spent quite a bit of time with Comcast engineers talking to them about network management.... On the business side, I think we have a good relationship w Comcast. We're interested in having more of a relationship with the company... There's disagreements on Net Neutrality. But we did a common filing with Verizon on reasonable network management. We found common ground."

Greenberger: "We have a common goal in faster Internet for everybody... Anything that benefits the Internet ecosystem will benefit Google."