Google’s search formula faces scrutiny

This article originally appeared on Star Tribune and written by Jim Spencer on 9/18/2011 photo is taken by Renee Jones Schnieder

“The more we can look at things like this as an industry the more we can pass on savings to consumers from everything to shipping cost, product cost, and customer support. We truly believe the internet and provides a great medium for starting entrepreneurs to large corporations. We just think that if anything the medium stays competitive for all and not have inflated pricing that the online marketplace stays competitive for the right reasons.” — Jeff and Jay

There’s a long-running gag about people so self-absorbed that they frequently run Google searches on themselves. Jay and Jeff Backer admit that they regularly check their company’s status on the world’s most dominant Internet search engine.

For the twin brothers, it’s neither narcissistic nor laughable. When you sell above-ground pools and other recreational products based out of Browns Valley, Minn. (population 589), you better have a reach beyond the city limits.

That means your business better appear on the first screen of a Google search.

The Backer brothers say their online business, B. W. Inc., wouldn’t last long if it appeared way down the list of a Google search. “If you’re not on the first page,” said Jay Backer, “you can see 50 to 60 percent drops in business.”

As Google continually tweaks its ranking formula, the Backers find themselves up and down the company’s search results. It’s a common frustration among many small business owners, as the Internet company makes unannounced changes, cloaked in secrecy. “We’re guessing on a moving target,” Jeff Backer said.

Google so thoroughly dominates the search-engine market that businesses that rely on Internet commerce say their fates can rest on a single change to a complicated process that Google won’t explain. The Antitrust Subcommittee of the Senate Judiciary Committee will seek explanation this week in testimony from Google CEO Eric Schmidt.

No one disputes that Google dominates other search engines such as Yahoo or Microsoft’s Bing. Google handles 65 percent of all Internet search requests in the United States and 80 percent of searches in Europe, according to surveys. That gives the company a stranglehold not only on online searches, but also on online advertising for search engines.

The question is whether Google unfairly uses its dominance to gain an advantage for its own services and advertising clients. The U.S. Federal Trade Commission and the Department of Justice are examining whether the company has become an anti-competitive monopoly that requires federal intervention.

Minnesota Sens. Amy Klobuchar and Al Franken, who sit on the Antitrust Subcommittee, are expected to question Schmidt about ranking formulas, as well as placement of paid advertising and links to Google products that might confuse customers who think they are looking at unbiased rankings.

“There is no question that Google is the leader in search,” Franken said. “It is important to understand how Google uses its algorithms to prioritize search results.”

Ever-changing formula

In Minnesota and across the country, Google rankings are the Holy Grail of online commerce. “If you’re not in the first three to five listings, it’s very rare that people are going to click on you,” said Ann Treacy, a search-engine consultant from St. Paul.

The three major Google ranking criteria are key words, fresh content and how many other sites link to yours, Treacy said. But it’s more complicated than that.

About 200 different measures go into determining Google search rankings, and the company said it changed its formula about 500 times in 2010. To protect its strategic interests, Google rarely announces changes to its ranking process and never discusses the fine points of those changes. The company insists it uses the adjustments only to make rankings more user-friendly.

“We can’t divulge the actual ranking signals or details about each change we make because we don’t want to give people a way to game our search results and worsen the experience for all users,” said a Google official who did not want to be named. “We built Google for consumers, not websites. Not every website can come out on top, or even appear on the first page of our results, so there will almost always be website owners who are unhappy about their rankings. The most important thing is that we satisfy our users.”

Financial experts say Google has every right to protect the trade secrets that produced its dominance in online searches.

“They’re not obligated to reveal changes,” said Tom Cotter, an antitrust and intellectual property expert at the University of Minnesota Law School. “Normally, it’s not in your interest to reveal.”

Many executives believe they must buy advertisements that appear on the first page of Google’s website as a hedge against a possible loss of standing in Google’s rankings. The advertisers pay a small fee each time a customer clicks on their ad.

Google says the purchase of advertising does not improve a company’s ranking.

Even if Google doesn’t change its rankings because of ad purchases, critics charge that the company’s placement of ads and its products near top-ranked companies can confuse users. They may click on the sites of paid advertisers or Google products rather than companies ranked by merit.

To understand how often that can happen, the Backers said they paid Google $43,278 for a July 2011 ad that garnered 105,612 clicks.

Suspicions linger

Google is increasingly offering its own products to compete directly with the companies Google ranks on its search engine, said Robert Birge, chief marketing officer at the travel site

“Google search is the Main Street of Internet business,” Birge explained. “The question is whether they leverage their monopoly to put their own store fronts in front of others.”

When a Google product, such as Google Maps, vaults above all non-Google competitors to the top of supposedly merit-based rankings, suspicions abound, Birge said. In some ways, the “firewall” between Google’s ranking formula and its paid ads and products is “irrelevant,” said Tom Barnett, an assistant attorney general for antitrust issues during the George W. Bush administration.

When online businesses have no viable option besides Google for search engine rankings or advertising, anti-competitive issues arise, Barnett said. Now a lawyer in private practice, Barnett is advising TripAdvisor, a website of travel reviews that, among other things, claims that Google has used portions of its reviews on the Google Places website in such a way that people don’t go to TripAdvisor.

“Google is no longer just a search company,” Barnett said in an interview. “It has economic incentives to steer you to its own [products and ads].”

Government investigators must determine whether Google is using any “improper means” to promote its advertisers and products, Barnett said. Like Google’s Schmidt, he will testify before the Senate Antitrust Subcommittee this week.

To prove that Google is improperly limiting competition, the government must demonstrate that the company’s business practices serve primarily to downgrade competitors and mislead consumers, said Cotter of the University of Minnesota. Being dominant, alone, doesn’t warrant federal intervention.

In essence, Cotter said, “it is not a violation of the law to be a monopoly.”

Jim Spencer • 202-408-2752