Is Google Becoming Too Powerful?

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The Chapter 4 Interactive Session on Organizations discusses Google’s online desktop productivity tools (Google Apps for Your Domain and Google Apps Premier Edition) as free or low-cost alternatives to Microsoft Office. How far Google can eat into Microsoft’s software franchise is uncertain. But Microsoft fears Google’s Web-based computing model could make it possible for computer users to bypass its products entirely. Google is constantly looking for new ways to grow. Its AdSense program scans Web pages for target words and displays appropriate advertisements, enabling Web site operators to generate revenue from their sites. As with AdWords, Google only charges advertisers when their ads are clicked, so the advertisers spend far less than they would for ads in traditional media while reaching a global audience. As a result of AdSense, Google quickly became an industry leader in targeted advertising. The company leveraged its strength in this area to expand ad sales to newspapers, magazines, radio, and television. Traditional advertising agencies fear that large corporations will soon give all of their advertising business to Google. In April 2007 Google, in its largest acquisition deal ever, agreed to purchase the online advertising company DoubleClick for $3.1 billion. DoubleClick specializes in software for the placement of display ads and is the top ad server on the Web. Up until then, Google had earned most of its ad revenue from text ads generated by Web searches. DoubleClick added strength in banner and video ads as well as strong relationships with Web publishers, advertisers, and ad agencies. The acquisition cemented Google as a major advertising force. In May 2007, Microsoft, having lost out on DoubleClick, announced that it would purchase the online advertising firm aQuantive for $6 billion. Google’s moves into media and digital content have resulted in lawsuits. Google had already dealt with questions of copyright infringement in relation to its Google Library and Google News services. But when You Tube became the property of Google in 2006, for the price of $1 billion, most of the world’s largest media conglomerates began jockeying for control of digital content on the Web. Viacom filed a suit against Google for damages along with an injunction to halt the activities of YouTube that represent copyright infringements. (See the Chapter 3 ending case study.) At issue are theinnumerable video clips that users upload to YouTube featuring content from popular television shows, movies, and music videos that YouTube has not licensed. NBC Universal and News Corporation have teamed up to launch their own video Web site, which will run television show clips and full-length movies on Yahoo, AOL, MSN, MySpace, and other partner sites. Part of Google’s success in launching new products is the frequency with which it does so. Marissa Mayer, the company’s vice president of search products and user experience, confirms that Google expects to discard many of the products it develops. She says, “We should be able to put products out there and, without a lot of promotion, a good product will grow.” The strategy suggests that as long as Google unleashes enough products, enough products will be successful. However, not all of Google’s ventures have been successful. Google’s initiatives in print and radio ads have not had much impact. But to justify its high stock price, Google must continue to grow by expanding into other markets when online advertising matures. Google has been pleased with the growth of its Gmail e-mail service, but raised the ire of privacy advocates because it uses the same technology as AdSense to place advertisements alongside messages. The selection of ads is based on the actual text of the messages, meaning that every Gmail message is read by an automated scanner. Google is at a crossroads. Once the quirky startup that represented the public’s hopes and dreams for the Internet, some now view the company as an arrogant, power-hungry behemoth. Google faces the same criticism of trying to stifle the competition that Microsoft faced at the zenith of its success. Google attributes its success to the fact that users simply like its products and services, and to say that the company is too powerful suggests that these users are making their choices incorrectly. And Google continues to innovate. Its latest ventures include a telephone voice search, Google Voice Local Search, which enables users to dial an 800 number using speech recognition technology to answer queries about local businesses. Google also launched its Universal Search service, which combines the results from its Web,

news, video, image, and other search services on one results page, with links to the separate services available at the top of every page.

Sources: Rob Hof, “Is Google Too Powerful?” Business Week, April 9, 2007; Kevin J. Delaney and Matthew Karnitschnig, “Viacom v. Google Could Shape Digital Future,” The Wall Street Journal, March 14, 2007; Richard Siklos, “Push Comes to Shove for Control of Web Video,” The New York Times, April 1, 2007; Randall Stross, “If at First You Don’t Succeed, Write a Check,” The New York Times, April 1, 2007; Louise Story and Miguel Helft, “Google Buys an Online Ad Firm for $3.1 Billion,” The New York Times, April 14, 2007; “Inside Google’s New-Product Process,” Business Week, June 30, 2006; “Google Unifies Search Results,” CNN.com, May 17, 2007; Ben Worthen, “The Enterprise Gets Googled,” CIO Magazine, May 1, 2006; Steve Lohr and Saul Hansell, “Microsoft and Google Set to Wage Arms Race,” The New York Times, May 2, 2006; David F. Carr, “How Google Works,” Baseline, July, 2006; and Kevin J. Delaney, Hoping to Overtake Its Rivals, Yahoo Stocks Up on Academics” The Wall Street Journal, August 25,