Regulating the internet
The search giant’s antitrust headache gets bigger
Jun 30th 2011 | SAN FRANCISCO | from the print edition
SINCE the start of this year, Google’s share price has fallen steadily as investors have begun to fret about its longer-term prospects. Now they have another reason to worry. On June 24th the company revealed that America’s Federal Trade Commission (FTC) had opened a broad investigation into its online-search and online-advertising businesses to see if it has abused its dominant position. Some pundits predict that the trustbusters’ tussle with Google could turn as bloody as their battle with Microsoft in the 1990s.
The regulators’ move comes at an awkward time for Google, which faces a growing threat from Facebook, the world’s biggest social network. Facebook aims to supplant Google as the main conduit via which people access the web. On June 28th Google hit back, unveiling Google+, a social-network platform to rival Facebook.
Google’s new offering, which is still in trial form, boasts some handy features. It makes it easy to set up separate groups, thus sparing your boss from seeing your semi-clothed and inebriated party snaps. It also lets up to ten people hold a video chat together. But this will probably not be enough to get people to abandon Facebook, which benefits from a powerful network effect: people join it because most of their friends already have.
Still, Google’s determination to keep innovating has served it well in its core business of search, where it commands nearly two-thirds of the market in America and an even higher share elsewhere (see chart). It is this dominance that has attracted regulators’ attention in America and abroad. Last November the European Commission announced a similarly sweeping review of Google’s operations.