Advertising

The Seattle Times Company

NWjobs | NWautos | NWhomes | NWsource | Free Classifieds | seattletimes.com

The Seattle Times

Business / Technology


Our network sites seattletimes.com | Advanced

Originally published September 3, 2007 at 12:00 AM | Page modified September 3, 2007 at 2:03 AM

E-mail article     Print view

Google grows into a target

Google's historic IPO took place three years ago, and the Mountain View, Calif., search giant has an anniversary present for its founders...

San Jose Mercury News

SAN JOSE, Calif. — Google's historic IPO took place three years ago, and the Mountain View, Calif., search giant has an anniversary present for its founders: Not only did Larry Page and Sergey Brin beat Bill Gates in developing a better search engine, the young technologists also can boast of bringing shareholders a bigger reward.

Since Google went public Aug. 19, 2004, at $85 a share, its market value has grown nearly 500 percent to $156 billion. In comparison, Microsoft's value had not quite quadrupled on its third anniversary way back in March 1989.

But Google's precocious performance has come at a price: Antitrust regulators in the United States are probing its proposed $3.1 billion purchase of DoubleClick, an Internet advertising company, and European regulators are poised to follow suit.

Meanwhile, open-source activists are developing alternatives to Google's popular search engine.

It's a position that Google's top rival, Microsoft, knows all too well. Less than a decade ago, the same combination of colorless bureaucrats and colorful coders helped end the software giant's spectacular growth spurt, sending its stock into a seven-year slump.

Industry experts say there are cautionary lessons to be drawn in comparing the two companies.

"There's clearly a strong parallel on the antitrust front. You can draw a line from IBM through Microsoft to Google," said Tom Eisenmann, a Harvard Business School professor who has written a case study on Google.

But Eisenmann noted that Google's market share in Internet search — about 50 percent in the United States — is significantly less than the 70 percent share of the computer mainframe market IBM enjoyed before regulators cracked down, or Microsoft's share of the personal-computer software market, which was more than 90 percent.

"I don't think that is going to be the comeuppance of Google," Eisenmann said of current antitrust review.

Others say trouble appears to be brewing.

"Just as concerns about Microsoft gradually increased until they reached critical mass, I think that is starting to happen with Google," said Lauren Weinstein, co-founder of People for Internet Responsibility. "We are starting to approach a tipping point in all this, where the risks to Google are becoming greater and greater."

Microsoft antitrust

advertising

Microsoft faced its first antitrust probe four years after it went public. That investigation ended in July 1994 after the software giant agreed it would not use its dominance in computer-operating systems to undercut competitors.

However, Microsoft's antitrust problems continued. An order from a federal judge to break up the company was replaced by a settlement in 2002. A European Commission ruling against the Redmond company is on appeal and is expected to be decided this month.

In Google's case, opponents in the United States and Europe are already citing Microsoft's dominance of office applications to bolster their arguments.

They contend Google's acquisition of DoubleClick could help it dominate the rapidly growing market for Internet advertising, combining Google's leadership in search-related ads with DoubleClick's strength in display ads.

They also warn that the vast amount of data about people's behavior on the Internet held by the combined company could threaten privacy.

Google said it is "confident that this acquisition poses no risk to competition and respects consumer privacy."

But Jeff Chester, executive director of the Center for Digital Democracy, one of several consumer groups that asked the Federal Trade Commission to review the acquisition, said it would eliminate meaningful competition, and not only because the new entity would control so much of the market.

Chester said also that publishers might fear that if they did not deal with Google, their ranking in Google's search engine might be affected, making their content harder to find.

"There's more at stake here than just control of online advertising and privacy," Chester said. "I believe the future of online content will be determined by the shape of the market" for Internet advertising.

Open-source effort

Similar concerns are driving the effort to develop an open-source search engine.

"Search should be transparent, open and participatory," said Jimmy Wales, founder of Wikipedia, the online encyclopedia written by volunteers, who is organizing the effort.

When Wales talks about Wikia Search, he consciously echoes the same concerns voiced by the developers who took on Microsoft in the 1990s as a way of rebelling against the control Microsoft was exerting over applications for personal computers.

Wales says Internet search is plagued by the same problems that bedeviled proprietary software: lack of accountability, transparency and freedom.

Top-secret formula

Google closely guards its top-secret formula for ranking Web sites, making it impossible for a publisher to know why a site might enjoy front-page ranking one day in the search results and drop to Page 100 the next.

Just as open-source developers openly published the software code behind alternatives to the Windows operating system and Microsoft's Internet Explorer, Wales' programmers will publicly disclose their algorithms for ranking results in the Wikia Search project.

Still, open-source software could be far less of a challenge for Google than it was for Microsoft.

Google already makes liberal use of open-source software, including Linux, GNU tools, OpenSSL, MySQL and computer languages like Python and C. Hundreds of Googlers have worked on improving Linux. And Google has published more than a million lines of code under open-source licenses, according to a company representative.

"Open source benefits Google in many ways and it creates commercial challenges for Google in many ways," said Paul Saffo, a respected technology forecaster.

One test could come from Openads, a London company whose free ad-server software competes with DoubleClick. Openads is headed by James Bilefield, a veteran of Skype and Yahoo, and backed by Index Ventures and Mangrove Capital Partners, which also backed Skype, as well as First Round Capital and O'Reilly AlphaTech Ventures.

Unlike DoubleClick, Openads does not collect consumer information from the publishers who use its software. While its 20,000 customers are primarily small publishers, larger players who are concerned that DoubleClick could end up sharing information with Google are looking at Openads as an alternative.

Rather than hurt Google, however, Openads' very existence could help Google persuade regulators to approve the DoubleClick merger.

Validation of defense

Microsoft's defense to regulators — that competition would inevitably emerge — has been validated, in part, by the success of open source.

"There was really a lot of justice to the complaints against Microsoft," said tech publisher Tim O'Reilly. "They did have a monopoly position and they appeared to abuse it, but they were also right in saying that the market would correct, their monopoly wouldn't be forever."

Despite widespread admiration of Google's success, O'Reilly said, there is growing animosity against the company, especially in Silicon Valley, where Google's growth has made it increasingly hard for other companies to compete for talented employees.

"They are powerful, they are arrogant, but I don't think they are winner-take-all competitors in the way Microsoft was," he said. "People got burned so bad by Microsoft they are kind of overreacting."

Copyright © 2007 The Seattle Times Company

Chase shrugs off loss of CD investors

Sunday Buzz: Expedia, Intelius, Classmates slapped by Senate report

Denny Triangle gains skyline, but tenants slow to come

UPDATE - 08:56 PM
Senate Democrats at odds over health care bill

Your Funds: Money for nothing: Some investors pay for advice they never get

Advertising

Video

LA Galaxy's David Beckham
Los Angeles Galaxy's David Beckham talks about the upcoming MLS Cup final during after a team practice.

Real Salt Lake's Kyle Beckerman
MLS trophy arrives in Seattle
Chittenden Locks Inspection
Interview with New Moon actors
Full interview with New Moon actors
Artistic Roller Skating
Girls Soccer: Mercer Island vs. Glacier Peak
Smash Putt! Miniature Golf
Opening day at Crystal Mountain

Marketplace

nwautos

2009's most fuel-efficient sedansnew
Choosing a new sedan? Weigh the impact of your choice on your wallet and on the planet.
Post a comment

Open Houses

Find this weekend's open house listings.
Or search by location:

 
Most read
Most commented
Most e-mailed
 
 
Advertising