This week the European Union’s competition commissioner announced it had taken the first steps toward fining Google for abusing its dominant position in search.
Specifically the EU Commission believes the company has abused its dominant position in the markets for general internet search services by systematically favouring its own shopping comparison product in its general search results pages.
Not only could Google face a fine of up to $7 billion it could also have to change the way it displays search results to ensure it does not favour its own products over those of competitors.
This is bad news for Google shareholders who could be reminded of Microsoft’s lost decade of share price appreciation due to the impact of its antitrust probe.
The results for Google could be much worse.
Google has spent the last 5+ years building its ‘vertical search’ business, where it shows what people are looking for vs links to sites that have what people are looking for.
It’s made acquisitions in restaurant reviews, travel and product search while building weather, FX calculators and numerous other ‘answer engines’ on its own. This has been a major focus within the company and is a key part of its strategy moving forward.
The EU has just signalled that this strategy will need a major rethink, with the distinct possibility that the company cannot display its ‘answers’ results above those of the competition. This could represent a staggeringly large amount of wasted resources should the EU prevail.
But it gets worse for Google.
While announcing the results of their probe and decision to move forward to penalize Google, the EU also opened another probe into Google’s abuse of dominant position related to its Android operating system.
Android represents another key pillar of Google’s strategy and is key to the company’s future. It’s strategy is to give the operating system, which powers over 1.6 billion phones worldwide and controls over 60% of the market, and in return earn money from the use of its search engine.
The company has engineered the product to be extremely difficult for rival search engines – Yahoo to Duckduckgo and notably 3rd party toolbar providers – to gain a foothold.
Specifically Google disallows the automatic removal of Google search by an app – users must go through a variety of tedious settings to make the changes and even then can only choose from a pre-approved list of search providers (some of which are Google partners and effectively Google search!).
The only companies in a position to modify the search function of Android in an economically viable way are mega corporations like Samsung and Google gives them considerable incentive not to do so using both carrot (big money kickbacks) and stick (lack of support for hardware).
It is likely that the EU’s android probe will result in the same outcome as its probe of search.
This should terrify Google shareholders.