Google could hurt small online sites

The Federal Trade Commission is still looking for charges that will stick to Google, according to Quartz. But Sunday’s New York Times had an interesting story pointing out the problems businesses can face when Google changes its search algorithm or traffic funneled from the search engine drops.

The story profiles online retailer Nextag, which earlier this year saw traffic to its site dropping. From the story:

In a geeky fire drill, engineers and outside consultants at Nextag scrambled to see if the problem was its own fault. Maybe some inadvertent change had prompted Google’s algorithm to demote Nextag when a person typed in shopping-related search terms like “kitchen table” or “lawn mower.”

But no, the engineers determined. And traffic from Google’s search engine continued to decline, by half.

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, Mr. Katz says, because an estimated 60 percent of Nextag’s traffic comes from Google, both from free search and paid search ads, which are ads that are related to search results and appear next to them. “We had to do it,” says Mr. Katz, chief executive of Wize Commerce, owner of Nextag. “We’re living in Google’s world.”

Controlling searches like these obviously has a huge impact on the bottom lines of many different businesses. The story also points out that it affects how people get information about local retailers and restaurants.

The relationship between Google and Web sites, publishers and advertisers often seems lopsided, if not unfair. Yet Google has also provided and nurtured a landscape of opportunity. Its ecosystem generates $80 billion a year in revenue for 1.8 million businesses, Web sites and nonprofit organizations in the United States alone, it estimates.

The government’s scrutiny of Google is the most exhaustive investigation of a major corporation since the pursuit of Microsoft in the late 1990s.

The staff of the Federal Trade Commission has recommended preparing an antitrust suit against Google, according to people briefed on the inquiry, who spoke on the condition they not be identified. But the commissioners must vote to proceed. Even if they do, the government and Google could settle.

Google has drawn the attention of antitrust officials as it has moved aggressively beyond its dominant product — search and search advertising — into fields like online commerce and local reviews. The antitrust issue is whether Google uses its search engine to favor its offerings like Google Shopping and Google Plus Local over rivals.

Columnist David Carr also writes about Google News and some of the issues they’re facing in various countries around content usage.

It’s a little counterintuitive, but large newspapers believed that Google was hurting them by generating a page of links — with headlines and a short summary — to articles that the newspapers had paid to create. Publishers said that what was supposed to be an index of the news had become the news, and was a disincentive for people to click through to the source.

American publishers eventually decided that the only thing worse than being aggregated by Google News was not being aggregated at all, but the fight has been joined anew in other countries by publishers who argue that the giant American search company is picking their pockets every time it links to articles.

There’s a large boycott under way in Brazil, punishing legislation is gaining momentum in Germany, and there is talk of a similar effort in France.

So, the giant on the Internet that you can’t live without has pretty steadfast rules on what they’ll pay for. And the bigger they get, the more leverage they have to promote businesses and content. As Carr points out:

There are a few reasons Google remains calm amid a storm of push back. According to Google, its search engine delivers 4 billion clicks a month to news media outlets, 1 billion of which come from Google News. That’s a lot of leverage.

In an age where interns are rarely paid, local news and newspapers are struggling and journalism jobs are shrinking it’s hard to argue with someone pushing traffic to your site and content. What’s hard to swallow is the ability to add, drop and change the traffic without any notice.

It will be interesting to see how the U.S. handles these issues compared with some of the other countries looking into them. No matter what, the face of the Internet and access to its information could look different this time next year.