Google may be entering a make-or-break phase in its colorful history now that U.S. regulators have opened an investigation into whether the company has been abusing its dominance of Internet search and advertising to stifle competition.
SAN FRANCISCO — Google may be entering a make-or-break phase in its colorful history now that U.S. regulators have opened an investigation into whether the company has been abusing its dominance of Internet search and advertising to stifle competition.
The probe by the Federal Trade Commission (FTC), confirmed by the company Friday, will require Google to convince regulators that its closely guarded recipe for search results is designed to give people the best recommendations, not bury links to its rivals.
If you search for a local business, for example, Google might highlight its own listing, from a service called Google Places, instead of one on Yelp, a popular review site and Google competitor.
Requests for directions may turn up Google Maps, and queries for a video might point to the company’s own site, YouTube. Or if you type “mortgage” in Google’s main search box, the top ad might be for Google Advisor, which lists the lowest interest rates.
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The inquiry also is expected to peer into Google’s financial engine: the advertising links tied to the subject of each search request. Some of these commercial messages appear, shaded in color, at the top of the results page, while others are stacked in the right-hand column.
Even as Google has expanded into video, mobile phones and television, the text advertising that pops up alongside search results and other Web content generates most of Google’s revenue — an amount expected to exceed $35 billion this year.
In an extreme scenario, the FTC’s inquiry could be the first step in a long process that ends with Google having to spin off YouTube and some of the other pieces of the empire it has built for 13 years. Although it doesn’t have to, the FTC could hand its case off to the Justice Department, as it did in the Microsoft inquiry in the late ’90s.
“Inevitably, if we get to the point where Google is found to have abused its power, we are going to be talking about divestiture because divestitures are always a better way to go than trying to regulate something like this,” said Gary Reback, an antitrust lawyer in Silicon Valley who is representing some of the companies complaining about Google’s practices.
Other antitrust attorneys think the investigation could result in less radical solutions, such as prohibiting Google from featuring its own services at the top of its search results. Google could also agree to periodic audits of how it programs its search engine, much as did earlier this year in a settlement of an FTC investigation into its privacy practices.
Google is expected to put up a fierce fight. The investigation is aimed at the heart of its business, its formula for ranking the quality of websites and ads, which has evolved since Google co-founders Larry Page and Sergey Brin began working on it at Stanford University. The company views the recommendations that it produces as a matter of opinion protected by the First Amendment.
To prove Google abused its dominance, regulators will have to get it to turn over sensitive documents that it has resisted sharing. And Google probably won’t be shy about fighting for the right to adjust its search formula to deliver more useful results to its audience.
The company says it needs to fine-tune search results to weed out the sites that try to game its system and win a high ranking even though they have little to do with whatever a person was searching for.