Google Ignores Its Own Negative Economic Impact
Google released its own annual economic report today, painting a pretty picture filled with success stories of local businesses who use the search engine to reach new consumers. What the report ignores is that Google’s business practices harm innovators and small businesses on the Internet, and cost consumers everywhere who pay higher prices due to inflated advertising costs. Here are some examples of Google’s economic impact that the company conveniently ignores:
- A year ago, Allen Rosenfeld’s paper, “Why Google’s Economic Impact Reports Lack Credibility and Mislead the Public, Policy Makers, and News Media: A Critical Economic Analysis,” found Google’s claims about its contribution to the U.S. economy are grossly exaggerated. Google’s overestimate was at least 100 times the value of the actual contribution of its search engine, with profits 4 and 8 times the U.S. corporate average, indicating that advertisers are paying too much.
- Last month, Nextag CEO Jeffrey Katz wrote an op-ed in The Wall Street Journal, “Google’s Monopoly and Internet Freedom.” In it, Katz details how Google has been abusing its monopoly power to charge higher prices for preferred search rankings, distorting the presentation and order of sites listed on its search results page and effectively hampering other companies’ ability to compete for eyeballs on Google sites, where the vast majority of searches occur online. Katz explained that Google’s use of its control over the top spots in search results has had a devastating effect on the online marketplace.
- Last fall, Katz, Yelp co-founder and CEO Jeremy Stoppelman, and Tom Barnett, counsel to Expedia (a FairSearch member), all testified before Congress about how Google uses its market power and control to thwart competitors. Katz and Stoppelman both testified that they would not start their businesses again today knowing what they know now about how Google abuses its monopoly power in the market.
- These abuses of monopoly power are so serious that Google has filed a proposal to the European Commission in response to Vice President Joaquín Almunia’s offer to have the company propose remedies to the four potential violations of EU antitrust and consumer protection laws that Almunia identified after an almost two-year investigation of Google’s business practices.
Don’t be fooled by Google’s economic report. The truth isn’t on this monopoly’s side and no glossy report can change that.