As trustbusters in Washington direct their attention to the technology industry, the crown on the head of Silicon Valley’s biggest company appears to be slipping.
Mountain View, California-based Google has seen its revenue growth slow steadily in the past five years. Amid rumblings in Washington that the Internet giant will soon come under greater antitrust scrutiny, The Wall Street Journal in September began to caution investors about purchasing Google stock.
Google ‘Under Assault’
Technology analyst and author Ralph Benko says Google is “under assault from several different directions,” and most keenly from private competition.
“Google is about to release the Chrome OS system,” Benko said. “It is not real clear if Google is going to win there.”
Meanwhile, rival Microsoft in July announced a search-engine partnership with Yahoo, which complements Microsoft’s own new and widely acclaimed search engine, Bing. Though Google is still the dominant player in search, Bing was responsible for almost 11 percent of all Web searches in August, just three months after its debut.
Growing Search Threat
Sramana Mitra, a strategy consultant based in the Silicon Valley, believes vertical search engines—which specialize in narrower topic queries—are the company’s most potent long-term threat.
“While Google has been stubbornly defending its admirably simple one-bar user interface, a host of significant Internet brands have developed [which] can deliver context-sensitive search in major vertical categories,” Mitra said. “A lot of venture money has gone into this over the past three years, and some of these ventures are starting to look sizeable.”
Ad Wars
Google-owned YouTube has been a smashing success in use and popularity, but it remains to be seen whether it can become an advertising success.
Benko says display advertising is the major battlefield, and here Google faces a serious challenge from social networking giant Facebook.
“The big war is over display advertising, and that financially eclipses classified advertising and line advertising, which Google has dominated,” Benko said. “Whoever wins display advertising wins it all, and that is the core fight.
“The real opponent to Google on this is Facebook,” Benko said. “It is not a forgone conclusion that Google is going to win this battle, and it is a very interesting question who is going to win the billions of dollars of display advertising.”
Trustbusters Are Watching
Google has drawn keen attention from government antitrust lawyers for years, a result of enjoying a nearly 80 percent market share in pay-per-click advertising, plus its dominant position in Web search. Even with recent competition from Bing, nearly 65 percent of all online searches in the United States are on Google.
The Justice Department also reportedly is looking into Google’s digital books project. The company last year signed a $125 million deal with authors’ groups for the right to digitize and sell millions of books, but the controversial deal has been tied up in federal court ever since.
Thomas Cheplick ([email protected]) writes from Cambridge, Massachusetts.
Thomas Cheplick, a freelance reporter for The Heartland Institute, writes from Cambridge, Massachusetts.
