Some of Google's aggressive gambits into new businesses have
brought angry responses from incumbents, such as Microsoft and
Apple, many of which are now allying to stop the steamroller in its
tracks. In media-land last week it was Stop Google time, as
newspaper groups began talking seriously about locking their
content away from Google's "spiders", which raid their sites many
times a day, "stealing" their copy to sell on to someone
else.
The biggest worry of all, though, was not commercial: it was the
abrupt shift in sentiment among its almost messianic customers, who
are suddenly asking awkward questions. Google, founded eight years
ago by a couple of geeks (each now worth more than $10bn), had
always presented itself as the superb search engine which
gloriously spread the internet - and free access to vast amounts of
information - across the world. It made finding information simple
for even the least computer-literate, introduced speedy access to
academic books and papers, the ability to search out the best
online bargains and a super-fast email site. And then there was
Google Maps, Google Earth, Google Book Search and Google
just-about-everything-else.
Google broke all the business rules and ignored all the textbooks.
It never spent a penny on promoting itself, but grew by word of
mouth and the joy of using its irresistible - and free - systems.
As a result, it became the epitome of corporate virtue, the good
guy prepared to take on big business, all for the greater good of
humanity. Its corporate slogan, as every schoolkid knows, is "Do No
Evil", and its concept, pursued with brilliance, captured the
world's imagination. One commentator remarked: "As far as the
internet ecosystem is concerned, Google is the weather."
But not any more - or not so much.
The
Chinese episode was in many ways the most damaging blow yet
received to its reputation for virtue, integrity and
courage. Google's PR machine could have had little idea of
the storm it was about to unleash as it made its explosive
statement: "In order to operate from China, we have removed some
content from the search results available on Google.cn in response
to local law, regulation or policy."
In other
words, Google had agreed to block anything embarrassing to the
Chinese regime. For mentions of Tiananmen Square, Tibet or
abuse of civil liberties, don't look to Google China.
To be fair, none of its critics seemed to care that Google had
actually held out longer against the Chinese than any other media
group. Microsoft and Yahoo! surrendered a year ago, CNN is often
seen as a Chinese mouthpiece and even Rupert Murdoch, in his search
to get his Star TV established in China, sold his highly profitable
South China Morning Post for fear it would anger the Chinese. (Even
then he had to throw in the towel last year after almost 20 years
of trying.)
Google's problem is that the world expects better of it.
It had stood up to the US government and
championed free speech, but now, in a single move, it has lost the
high ground. One freedom of expression advocacy group,
Reporters sans Frontières, accused Google of hypocrisy:
"They have two standards. One for the US,
where they resist government demands for personal information, and
one for China, where they are helping the authorities to block
thousands of sites." As a result of the cave-in, China now
controls the one medium that many thought would elude them. "Google
were the only ones who held out," remarked the freedom of speech
campaigner Peter Pain last week, "so the Chinese government had to
block information itself. But now Google will do it for
them."
It seems to Google-watchers that the problems "come not single
spies, but in battalions". Its very size and speed of growth
already made it a target for those who favour the underdog. The
beginnings of the backlash were apparent well before last week, but
now it has begun in earnest.
For over a year, media analysts have been warning that, left
unchecked, Google has the ability to demolish entire industries
wherever it operates: retailers, book publishers (already in dire
trouble) and, of course, newspapers and magazines. It would
positively wreck the high street as we know it. Google's ambitions,
they claimed, knew no bounds, and Google was blithely prepared to
prove them right. In recent weeks it announced deals that will
quickly grow its new media tentacles, from buying and selling
magazine and newspaper ad space to the radio and television
advertising market. It has threatened Microsoft (no one will blame
it for that), Apple, Sun Microsystems and even the big telephone
companies with rival systems and a new way to make internet calls.
Google has not yet moved into oil or farming, but other than those
no business is out of its reach.
Every company contains the seeds of its own destruction, and it may
be that even Google, the miracle of the new media age, has reached
the tipping point in the past week. Yahoo! and other rival search
engines are getting their acts together and working to out-Google
Google with new products and even better sites. From Korea comes
the news of a new rival, NHN Corp, which has profits of $86m
against Google's $1.7bn, but which has seen off Google in its local
market, delivering far more relevant search results. "NHN's
user-friendly approach outshined its rivals," said an analyst from
Samsung Securities in Seoul. Other local sites are trying to
outshine it too, pinpricks in the skin of the giant, but between
them adding up to a significant threat.
Until a few weeks ago, Google seemed on track to achieve a mission
of world dominance in areas that went way beyond the traditional
internet. Its stock market debut in 2004 was the most successful in
history and the performance since has been even more breathtaking.
Its shares started life on the Nasdaq exchange at $179 each,
valuing the company at nearly $100bn - more than the entire
American motor industry. Wise old Wall Street hands, who had seen
too many bubbles grow and burst, shook their heads in disbelief -
no company, they reckoned, could possibly sustain such a valuation
on the basis of a mere $4bn of sales. But for every soothsayer of
gloom, there were a dozen Google buffs who scrambled into the most
successful market debut the world has so far seen. The shares moved
up - and up, through $200 and $300 to an extraordinary $471. Even
then there were projections of it hitting $600, and one broker
projected a price of $1,000. He still does.
And then it stopped. The shares dropped 8.5 per cent in one day
last week, knocking $20bn off its market value, the first real
setback since the launch. Its fans say it is only a breathing space
before the next dizzy climb, and maybe it is. But there are plenty
of others who say reality is catching up, it has made too many
enemies and has simply grown too unwieldy and arrogant. In other
words, Google has experienced, in just a matter of months, the same
phenomenon that overtakes all market leaders over decades. Now it
has become the number one target for all the littler guys.
By an odd irony, on Thursday General Motors, for many years the
biggest company in the world and the symbol of American business
and capitalism, announced record losses of $8.6bn and sought relief
from a pension fund deficit that totals an unpayable $64bn. The
phrase "What's good for General Motors is good for America" has
long lost its resonance.
After GM, IBM was the big threat, its control of the emerging
computer sector giving it a power far too dangerous for one
company. The theory was that IBM engineers were developing
computers which in turn would design even bigger computers and
eventually create its own form of Big Brother. Two years ago what
remained of the IBM personal computer business was sold to the
Chinese for a pittance. Even Microsoft, the big bad bogey as
recently as two years ago, has run out of steam - and threat. It
too produced disappointing profit figures caused by glitches in the
global launch of its new Xbox 360 video game system. Bill Gates,
too, is fallible.
To Google it must seem that, after the magic honeymoon, the world
is ganging up on it. Almost every area of its business is being
challenged, every potential victim fighting back, every competitor
gearing up and new ones emerging.
The company is still a mighty force, both for good and for evil.
But the gloss is off. After last week, Google will never be the
same again.
Ivan Fallon is the Chief Executive of Independent News and Media
(UK)
How it works
1. Google is used by 82 million people a month, many of whom have
it as the internet home page on their laptop or home computer.
Keywords are typed into the Google search page: in this case, those
being sought are 'China' and 'democracy'
2. The search speeds off to the nearest Google server, which may be
in the same country or on the same continent. Google employs 4,183
people. Many of them are engineers who help to service an estimated
100,000 computers at 30 data centres around the world
3. The server sends the query - 'China' plus 'democracy' - to the
Google Index, a database containing details of all the web pages on
the company records. Instead of using huge mainframe computers,
Google stores information a fragment at a time on thousands of
linked machines, similar to ordinary PCs
4. The index identifies the pages it needs, and goes off to look
for them. Google does not search the internet. It searches one of
several copies of the internet which it makes for itself and
constantly updates. Each copy contains more than eight billion
pages and is stored, again a fragment at a time, on thousands of
linked computers
5. Google's copies of the internet are made using its web crawlers,
pieces of software that roam all over the net and send what they
find back to the company. The pages are evaluated, indexed and
ranked according to which words occur where, and how many other
sites are linked to them
6. Google generates a summary of each page. It also uses more than
100 criteria to give the page a relevance rating between one and
10. A list is produced, to which Google attaches advertisements
bought by companies that want their products to appear beside
certain key words
7. The results appear on the Google search page, back at the
original computer, usually within half a second. This one took 0.08
seconds to produce 30,600,000 results. Google keeps permanent
records of all the searches made