For Some Web Sites, Life in Google's World Can Be a Perilous Experience

Article excerpt

For Web sites that believe the Internet giant is favoring its own products in search results, there are few other options for making their businesses grow.

Starting in February, Jeffrey G. Katz grew increasingly anxious as he watched the steady decline of online traffic sent to his company's comparison-shopping Web site, Nextag, from Google's search engine.

In a geeky fire drill, engineers and consultants at Nextag scrambled to see whether the problem was the site's own fault. Maybe some inadvertent change had prompted Google's algorithm to demote Nextag when a person typed in shopping-related search terms like "kitchen table" or "lawn mower."

But no, the engineers determined. And traffic from Google's search engine continued to decline, eventually by half.

Nextag's response? It doubled the amount it paid Google to feature its services in search results.

The decision was costly but necessary to retain shoppers, Mr. Katz said, because an estimated 60 percent of Nextag's traffic comes from Google, from both free search and paid search advertisements -- ads related to search results and appearing next to them.

"We had to do it," said Mr. Katz, chief executive of Wize Commerce, Nextag's owner. "We're living in Google's world."

Regulators in the United States and Europe are conducting sweeping inquiries of Google, the dominant Internet search and advertising company. Google rose by technological innovation and business acumen; in the United States, it has 67 percent of the search market and collects 75 percent of search advertising dollars.

Being big is no crime, but a company's use of market muscle to stifle competition is an antitrust violation.

So the inquiries are focusing on life in Google's world for the sprawling economic ecosystem of Web sites that depend on their rankings in search results.

What is it like to live this way, in a giant's shadow? The experience of its inhabitants is nuanced and complex, a blend of admiration and fear.

The relationship between Google and Web sites, publishers and advertisers often seems lopsided, if not unfair. Yet Google has also provided and nurtured a landscape of opportunity. Its ecosystem generates $80 billion a year in revenue for 1.8 million businesses, Web sites and nonprofit organizations in the United States alone, it estimates.

In the United States, the staff of the Federal Trade Commission has recommended preparing an antitrust suit against Google, according to people briefed on the inquiry, who spoke on condition that they not be identified. But a vote by commissioners is required before it proceeds. Even if commissioners vote to go ahead, the case could be settled.

Google has drawn the attention of antitrust officials as it has moved aggressively beyond its dominant product -- search and search advertising -- into fields like online commerce and local reviews. The antitrust issue is whether Google uses its search engine to favor offerings like Google Shopping and Google Places, over offerings of rivals. For policy makers, Google is a tough call.

"What to do with an attractive monopolist, like Google, is a really challenging issue for antitrust," said Tim Wu, a professor at Columbia Law School and a former senior adviser to the F.T.C. "The goal is to encourage them to stay in power by continuing to innovate instead of excluding competitors."

Speaking at a Google Zeitgeist conference in Arizona last month, Larry Page, the company's co-founder and chief executive, said he understood the scrutiny of his company, given its size and reach. "There's very many decisions we make that really impact a lot of people," he acknowledged.

The main reason is that Google continually adjusts its search algorithm -- the smart software that determines the relevance, ranking and presentation of search results, which are typically links to other Web sites.

Google says it makes the changes to improve its service and that its algorithm weeds out low-quality sites and shows the most useful results, whether or not they link to Google products. …