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Googlephobia? Small firms fear search giant's algorithm power

Steve Lohr and Claire Cain Miller  New York, November 04, 2012
First Published: 22:36 IST(4/11/2012) | Last Updated: 22:39 IST(4/11/2012)

Starting in February, Jeffrey G Katz grew increasingly anxious as he watched the steady decline of online traffic to his company's comparison-shopping Website, Nextag, from Google's search engine.


Nextag's response? It doubled its spending on Google paid search advertising in the last five months.

The move was costly but necessary to retain shoppers, says Katz, because an estimated 60% of Nextag's traffic comes from Google, both from free search and paid search ads - ads that are related to search results and appear next to them.

"We had to do it," says Katz, chief executive of Wize Commerce, owner of Nextag. "We're living in Google's world."

So, what is it like to live this way, in a giant's shadow?

The relationship between Google and Websites, publishers and advertisers is lopsided. Google's ecosystem generates $80 billion a year in revenue for 1.8 million businesses in the US alone.

But still, Google has drawn the attention of antitrust officials. The antitrust issue is whether Google uses its search engine to favour its offerings like Google Shopping and Google Plus Local over rivals.

For policy makers, Google is a tough call.

"What to do with an attractive monopolist, like Google, is a really challenging issue for antitrust," says Tim Wu, a professor at Columbia Law School.

Larry Page, Google's co-founder and chief executive, recently said he understood the government scrutiny of his company, given Google's size and reach. "There's very many decisions we make that really impact a lot of people," he acknowledged.

The main reason is that Google is continually adjusting its search algorithm - the smart software that determines the relevance, ranking and presentation of search results, typically links to other Web sites.

However, the algorithm is secret, and changes can leave Websites scrambling.

Consider, a non-profit group started in 2003. It provides online information for voters to avoid the frustration of arriving at a polling booth and barely recognising half the names on the ballot.

In the 2004 and 2006 elections, users created tens of thousands of sample ballots. By 2008, traffic had fallen sharply, says Ron Kahlow, who runs, because "we dropped off the face of the map on Google."

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