Google’s $2.7B EU fine: Why Main St. in America ‘gets it’
(This post originally appeared on Fox Business)
The European Union came down hard this week on Alphabet-owned Google (GOOGL), fining the tech giant about $2.7 billion for “[abusing] its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors,” said EU antitrust chief Margrethe Vestager. Google said it “respectfully disagreed” with the ruling.
The backlash, particularly in the American online business community, was swift. The EU’s actions were “anti-American” some commenters said, citing other recent actions against U.S. tech companies like Apple (AAPL) and Facebook (FB). Others accused the EU of “shaking down” rich companies for money to make up for their community’s own lack of innovation.
But perhaps it is just that the rich companies face the biggest headline-grabbing fines, as they are based on a percentage of revenue (up to 10%). The EU’s fine, as disagreeable as it may seem to some, is but a blip on this giant company’s P&L and will have little impact on Google’s continuing ability to innovate. The company’s market cap is nearing $700 billion.
That being said, there’s no question that Google’s search capabilities are monopolistic. Do you use any other search engine? Does Bing even exist anymore? Don’t you regularly use the word “Google” in place of “research” or “encyclopedia” or “wise person” when you say to your friends “I don’t know, let’s look it up on Google” or “how fascinating that Beyonce owns a Cosmetology Center in Brooklyn, let’s Google it” or “I have no idea how much Johnny Depp spent on wine last month, let’s just ask Google.”
Of course you do. And Google always has the answers. OK – maybe they’re not always the right answers, but they’re usually much more accurate than your dad ever was.
Google owns the Internet search game because Google is excellent. It’s fast. It’s easy to use. And it’s mostly reliable. If Google wasn’t as good as it is, then – believe me – the online backlash would be ruthlessly severe and competitors would pop up everywhere. The fact is that you don’t hear that much criticism of the search giant in the Twitter-sphere because for the most part people are happy with product. Oh yeah, plus it’s free. Almost forgot that little point.
But here’s the thing: the EU has raised an issue that many, particularly those of us who run small businesses, can understand. The issue isn’t about what Google does. It’s about how Google does it. How exactly does Google do it? Ask any business owner, marketing manager or search specialist about how Google works and no one can provide you with a straight answer. It’s a giant, cash-sucking mystery. I say cash-sucking because that’s what Google does with my money the minute my company hands over our credit card. Google mysteriously sucks away our cash. And we don’t really know what we just bought.
Let me ask you: do you know how AdWords really work? When your small company’s $1,000 AdWords budget is drained by Google almost as fast as an Atlantic City roulette table — do you know why? Google will tell you it’s because of the “clicks” and the “impressions” you received. They’ll provide with you all sorts of free analytics and data about who, where and when your ad was clicked. But wait, isn’t this data all provided by…Google? It’s like asking the fox to produce evidence that there were only 10 chickens in the barn that night, not 11. “Of course there was sir,” he says licking the blood off his whiskers. “And I dare you to prove otherwise.” Foxes are known to be very polite, by the way.
We believe Google’s analytics because we have no other alternative. I’m assuming that it’s all on the up and up, but who really knows? If you’re a Fortune 500, your Google ad spend is a mere drop in your billion-dollar marketing budget. But for a small business, online advertising can have an enormous financial impact, particularly if you’re not fully aware of what you’re doing. And we’re not. For pretty much all of my clients – including me – the data behind Google AdWords remains a mystery…if not a little bit sketchy.
That’s what the EU’s getting at.
The same goes for general search. When someone is searching for your business are they finding you? Is your business ranked at the top half of the first page’s search results? Yes? Good for you – you’re probably doing something right. But you’re not entirely sure what you’re doing right and if you’ll still be in the same position tomorrow. So you hire a search engine optimization (SEO) expert who, for thousands every month, performs some kind of dark magic behind the scenes so that lo and behold, your ranking goes up. Or not. Or does for a blip and then drops.
Is this system rigged? And why do you have to keep paying these guys a monthly fee to maintain that ranking? Does your company get better search results if you advertise on Google? What about listing your company on Google My Business? Who creates these search algorithms that have such an enormous impact on your lead generation, brand awareness and professional livelihood…the masons? The illuminati? The Russians? Like Google AdWords, no one I know really knows. So business owners like me struggle to figure out how to “beat” the system like we’re counting cards in Vegas or playing a carnival game. Again…sketchy.
The EU is not just fining Google. They’re saying “hey, does anyone really understand how this all works and if not, why not?” As a business owner, I get that: they, like many of my colleagues are confused – if not just a little suspect – of the sorcery behind search and online advertising.