Google, Trust and the Marketplace

Joe Nocera tells a cautionary tale in yesterday’s NY Times about Google’s (GOOG) power in advertising. The man who runs SourceTool.com complained to the Justice Department after Google found that his site didn’t live up to its standards and raised the rates on him (Google’s way of shooing away sites it doesn’t approve of). The implication is that Google can wield too much power as a monopoly.

But in the Google age, nothing is as it seems.

I don’t want to be accused of being an apologist for Google (which will happen anyway because my book is admiring) but I can see its stance on SourceTool. It’s not a splog — the owner puts effort into building a useful directory, Nocera says — but it does look and act like one.

Google is trying to protect us from sites — even paying advertisers — that detour and delay us from getting the answer to our question. If I ask for earthmoving machinery, I’d like to get the link straight from my first search (on Google) rather than being directed to SourceTool, where I’ll take five more links to get a not-very-satisfying list of companies. Google says it always focuses on the end-user.

Nocera and SourceTool point out, though, that Google holds the power to raise prices and disadvantage sites without explanation or appeal. That raises fears that it can and will act as a monopoly.

Except, the issue isn’t that Google is a monopoly. It’s that Google has become the marketplace. It's where we all go for information. It’s where advertisers go for us.

It’s no different from a newspaper. Even when there were two papers in towns, one of them was the marketplace for homes, cars and jobs. That allowed the paper to set rates as high as the market could bear, which was very high. Google would say the difference is that it doesn’t set rates, the market does — in auctions for keywords. Except in this case, by punishing SourceTool, Google did set the rate. And it has the power to do that.

craigslist is no different, except that Craig Newmark set most rates at zero. He’s the marketplace now and now that he has us by the neck, he could raise rates — as eBay (EBAY) did once it dominated the marketplace it created (though that invited competition from Amazon, Etsy, et al).

What it comes down to is trust. Once a service becomes the marketplace, do we trust them not to use that position to gouge us? There really is no alternative. The closest was Yahoo (YHOO) and now even it is coming to Google to sell ads because that will be far more profitable — that is what the Justice Department antitrust division is investigating now.

But if the Feds rule against the Yahoo  deal, it is in essence stealing hundreds of millions of dollars not from Google but from Yahoo. It is restricting Yahoo’s access to the marketplace. That would be as unfair as Google unfairly punishing a site that doesn’t meet its standards.

The first obvious solution is transparency. If we all knew Google’s standards and trusted that they were, indeed, looking out for the end-user and if SourceTool knew Google’s standards and was willing to abide by them, that would blunt SourceTool’s complaint.

Indeed, part of its complaint is that it can’t find out the standards. But then here comes the Google-age wrinkle: If Google revealed its standards, it would only be feeding the needs of evil spammers, giving them the manual to game the system.

Still, the bigger Google gets, the more trust will become an issue. I think they need to look at alternatives. Why not, for example, establish an appeals panel made up of advertisers and users to adjudicate issues such as SourceTool's? This would require Google to hand down its laws — or more to the point to draft its constitution: the definitions for good sites rather than spam, not in algorithm-busting detail but as high-level goals.

But another Google era wrinkle appears: scale. When the web is developing by the minute, it’s impossible — and potentially limiting and dangerous — to write even the broadest definition of what’s good. And your good is not necessarily mine.

It’s all about trust. The question will be whether I trust Google or the government or the market more. I’ll take the market first, Google second, government third. If Google uses its power monopolistically and maliciously, I believe it would hurt Google’s business as some painful proportion — not all — of its audience and advertisers look for alternatives, and then again as entrepreneurs and competitors see the opportunity to meet that need.

The government didn’t need to go after Microsoft (MSFT). Google has. That is to say, the market created an opening Google is now trying to fill with Docs and Chrome. The irony here is that Microsoft, so long burned by antitrust harassment, is not empathetic to Google’s possible plight at the hands of the same tormentors, rather it wants to join in the tormenting. But that’s a different drama.

I’m not sure whether Google was unfair to SourceTool or not. I don’t think it’s a very good service; I see it as a delay and detour, though not a malicious one. Nocera is sympathetic to Google’s view: “Listening to Google executives explain how the company’s algorithm works, I came away largely convinced that Google was operating in good faith.” But then, we need to ask whether Google used its power well in this matter.

Larry Lessig famously wrote that code is law. Today, Google is law. It is up to Google to convince us — the market — that its law, and enforcement of it, is just. To do that, it must be as consistent — which gets harder the bigger you are — and open as it can be.

Disclosure: None

Comments

[nmw:]

see also www.buzzmachine.com/20... (for comments)

2008 Sep 14 04:02 PM

[Rokjok777:]

Is this some kind of joke?
"Code is law..."? No, law is law and if/when it isn't we are in real trouble. Ooh let's "trust" some mega-corporation to do the right thing and take care of OUR interests because, after all, they said "don't be evil"...Reminds me of the way we let the foxes guard the henhouse in the US financial markets. That's working out really well, don't you think?

"Google is trying to protect us from sites..." Take off your fan-boy hat for a moment and think about what that really means. Sorry, I don't want anybody for any reason "protecting" me from sites. Not the Great Firewall of China, not the CIA, and certainly not some opaque mega-corporation with no accountability.
The web is rapidly becoming the central nervous system of mankind. Would you want your central nervous system controlled for the exclusive benefit of a small group of shareholders?

2008 Sep 14 05:46 PM

[mcafeejs:]

Rokjok, Your comment implies that you have a right to search Google, that Google some how owes you unfettered access. If anyone doesn't like the results of their Google search and they don't trust Google then they are free to take their searches elsewhere. I for one trust the marketplace enough to know that so far Google does damn good getting me the information I want faster than any other search out there and that if it didn't I'd go elsewhere. I am extremely grateful for the services google provides...free---so they can control that info all they want--I will react accordingly.

2008 Sep 14 06:54 PM

[GoogleDoubter:]

The problem with search is that Google owns the ecosystem and nobody outside of Google has a say in what happens within that ecosytem. Evil?, maybe...maybe not!

2008 Sep 14 10:11 PM