A Monthlong Magnification of Google: the Company, the Technologies, and the Extracurricular Activities

It’s the last day of April, and that means this is the conclusion of our monthlong magnification of the world’s most popular search engine company.

As a recap, I’m going to run through the top 7 reasons we all need to stay aware of Google’s growth in the search market and, more importantly, elsewhere.

1. Yahoo is Testing Google Search Ads

Earlier this month, Yahoo performed a two week test that integrated Google’s PPC ads into Yahoo’s paid search results. While the test was considered by many to be an effort by Yahoo to discourage Microsoft’s buyout bid, the U.S. Justice Department decided to investigate possible antitrust implications. If Google was given 100% of the paid search real estate on Yahoo, a serious PPC monopoly would arise.

2. The Google Voice: Free Speech in Search

With Google’s search market share hovering near 70% in the U.S. (1), a sudden drop in search positions on Google can devastate a company that relies on Google traffic. All in all, this post is a friendly neighborhood reminder to diversify your company’s sources for incoming clientele.

3. Google’s Win in the FCC 700-megahertz Auction

As a result of its influence on the Federal Communications Commission Auction of 700-megahertz radio frequencies earlier this year, Google helped get new policies put into place – policies that allow for “open networks” where consumers can use a wider variety of devices and applications. As our blog post points out, a 2006 Google patent application describes a method for collecting mobile user data, which would be possible via the new consumer-friendly, mobile network environment.

4. Google Knows More about You than Your Spouse Does

After seeing how Google learns more about “Bob” in one evening than his spouse knows, we invite you to ask the question, “What does Google know about me?”

5. Google’s Users are the Real Commodities

Over the course of this 3-part series-within-a-series, we discover what kind of personal information Google can collect about its users, through name-brand products such as Google Checkout, Google Talk and Gmail, in addition to Google-owned sites like YouTube, Picasa and Orkut. It’s a bit of an eye-opener knowing that one of the largest potentials for future revenue is the sale of Google’s user data.

6. Google’s Stake in 23andMe and Google’s Plans for Your Medical Records

Both of these blog posts examine how our personal health records could soon become part of Google’s enormous collection of data.

7. Google Goes To Washington

To advocate on issues that concern Google, the company has hired some of the top lobbyists in the country to pound the pavement on Capitol Hill. We all know that Washington needs an education in online commerce, but should it come from one of the web’s largest advertisers?

In Conclusion

As I stated at the beginning of this series, I both respect and fear Google. I use Google’s services countless times every day in both my professional and personal life.

Our goal with this monthlong magnification was to make sure people are aware of Google’s grasp on personal data and grip within the search industry.

Now, get back to work.

Image: b_d_solis

1. Hitwise US – Leading Search Engines, March, 2008.

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A Monthlong Magnification of Google: the Company, the Technologies, and the Extracurricular Activities

“There is no human involvement or manipulation of results, which is why users have come to trust Google as a source of objective information untainted by paid placement.” (1) This is what Google’s Technology Overview page used to say. Now, this phrase is noticeably missing. (2) Human involvement or not, Google’s search results have been recognized as having what seems like a very human right – freedom of speech.

From the beginning, Google founders recognized that their search engine was a business and not merely a resource. Google founders Larry Page and Sergey Brin wrote a paper about the creation of Google as Ph.D. candidates at Stanford. In that paper they stated, “we expect that advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers.” (3) Today, 99% of Google’s revenue comes from ads. (4) Brin and Page’s early acknowledgement that search results would likely be biased toward advertisers, combined with Google’s search results being considered protected free speech, could change the way users view Google’s search results. But how did Google’s search results become recognized as protected free speech? It started with one company: Search King. (5)

Search King

Google’s Page Rank is a system developed to determine a page’s “value” and assign the web page a rank. That rank is essentially what determines where a page will appear in Google’s search results page for a relevant query. (6) Search King (7) was a company selling online advertising space on sites that were highly ranked on Google’s Page Rank system and would pay the websites based in part on their Google Page Rank. (8) Search King’s page rank suddenly dropped, along with the Page Rank of some of its affiliates. This downgrade meant that Search King’s position in natural results dropped dramatically. Search King sued Google arguing that the Page Rank had been intentionally and maliciously downgraded. (9)

Google admitted to intentionally downgrading Search King’s site and some of its affiliate sites, but stated that Google has “no obligation to rank Search King’s site at its desired level, or to include Search King’s web site on its search engine.” Google argued that its Page Rank is protected free speech and protected by the first amendment. (10) The court found in favor of Google, saying that “it could be argued that Google acted maliciously and wrongfully”, but Google’s actions were privileged free speech. Also, the court stated that no website can demand to be accessible via Google. (11) The end result here – Google’s search results can rank and position sites however they choose. No need to rely on relevancy or algorithms if they choose not to.

A couple of years after the Search King case, a similar case came along with similar results. Kinderstart (12) had their Page Rank drastically reduced in March 2005 and immediately lost 70% of their traffic. (13) As a result, KinderStart and other plaintiffs tried, unsuccessfully, to form a class action lawsuit to recover damages from Google for the downgrades in Page Rank. (14) The case was eventually dismissed and Google’s freedom of speech remained intact.

Food For Thought

With a search market share at almost 67%, (15) a sudden and dramatic drop in search position on Google could be devastating to a company. And, if a company has no control in improving or rebuilding their search position, there may be no way to recover.

(1) Google Corporate Information, Technology Overview, last visited January 15, 2008.
(2) Google Corporate Information, Technology Overview, last visited April 24, 2008.
(3) Sergey Brin and Lawrence Page, The Anatomy of a Large-Scale Hypertextual Web Search Engine, Appendix B, Computer Science Department, Stanford University, 1998.
(4) Google 10-K, Annual Report (filed 2/15/2008).
(5) Search King v. Google, Inc., CV-02-1457 2003 WL 21464568 (W.D. Okla. May 27, 2003).
(6) Google Corporate Information, Technology Overview, last visited April 24, 2008.
(7) Search King.
(8) Search King; Complaint, Search King v. Google (filed 10/17/2002).
(9) Search King.
(10) Search King at 2.
(11) Search King at 11-12.
(12) KinderStart.com LLC v. Google, Inc., C 06-2057 JF (N.D. Cal. March 16, 2007).
(13) KinderStart.com LLC at 4.
(14) KinderStart.com LLC.
(15) Hitwise, March 2008, based on volume of searches.

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A Monthlong Magnification of Google: the Company, the Technologies, and the Extracurricular Activities

We’ve been talking about Google, their business, their practices and products, and their future, but what we haven’t talked about is who is making the big decisions.

Google is a multi-billion dollar corporation with thousands of employees, executives, directors and corporate officers – this can’t be a three man show. As a publicly traded company, stockholders would expect to have some influence in major business decisions.

Taking a look at Google’s stock structure and considering all of the questions that our Google series has raised, it seems that, whatever the future intentions and direction of Google, there may not be an effective way to change the direction of their business.

When you buy stock in a company, whether it is one share or thousands, you want to make sure your investment is protected and managed appropriately. Typically, companies issue voting rights to stockholders so that each stockholder has a say in how the company acts, who runs the company, and/or how the company handles major decisions. And, companies will often share profits with shareholders by issuing dividends for each share of stock.

Google has two classes of stock; Class A common stock and Class B common stock. Google’s Class A stock is what is traded on the NASDAQ under the “GOOG” symbol. If you own Google stock, you own Class A stock. Google’s Class B stock is held primarily by Google’s executive officers, directors, management and employees and the rights given to Class B stockholders are very different from that of Class A common stock.*

Class A:*
* 1 vote per share
* Publicly traded
* 2,776+ stockholders of record
* No dividends

Class B:*
* 10 votes per share
* Not publicly listed or traded
* 111 shareholders of record
* All held by founders, directors and executives

How does the Class A and B common structure and rights affect Google Class A stockholders? The Company?

The founders, executive officers and directors of Google together owned shares of Google’s Class A and B stock that represents around 70% of the stockholder voting power. And, of that 70%, Eric Schmidt, Larry Page and Sergey Brin own both Class A and B common stock representing about 67% of the voting power as of December 31, 2007 – leaving about 3% of the voting power for the rest of the directors and executive officers to share.

This means that whether stockholders are voting on major corporate transactions, mergers, the sale of assets or the election of directors of the company, it would be almost impossible for other stockholders to influence a vote where Schmidt, Page and Brin were voting together. *

Food For Thought

Google is aware that Class A stockholders won’t necessarily be happy if Google uses the voting power they have with the Class B shares to take actions that the Class A stockholders do not agree with. In their 2007 Annual Report, Google describes how the stocks work and concludes that if they took this type of action, “the price of Class A common stock could be adversely affected.”* Google has gone further to keep stockholders from influencing certain business decisions. The board of directors fills vacancies on the board in many circumstances – stockholders cannot vote to elect those members.*

* December 31, 2007 Google Annual Report (Filed 02/15/08).

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