Recently, Google (NASDAQ:GOOG) has been under fire for practices that some rivals think harm competitiveness in the tech sector. Those claims were defused last week as Google won a landmark case with the U.S. Federal Trade Commission, but it’s worth wondering where Google goes from here.
Because it seems like only a matter of time before Google runs afoul of regulators again. That’s because as GOOG becomes increasingly dominant in many areas of technology, it also is becoming more aggressive in its practices.
Consider that …
- Google is now mandating participation in its social networking software G+ to access other services such as its Zagat guides, Gmail or YouTube videos.
- Google recently pressured France to beat back a company that offered ad-blocking software. The 5.2 million subscribers of Free would have been accessing the web with limited exposure to Google’s ads, and the tech giant didn’t like this one bit.
- Google finally backpedaled this week on a previous move that had blocked its Google Maps pages from being displayed on Microsoft (NASDAQ:MSFT) devices that ran the Windows Phone 8 OS.
- Once free to small businesses, GOOG is now charging businesses with 10 employees or less for their use of Google Apps. It’s a mere $50 per person, but clearly targets the little guy since big corporations were already paying.
Does this sound like a company that is sticking to its credo of “Don’t be evil”? Or does it sound more like a big U.S. corporation looking to preserve its piece of the pie?
You can’t fault Google for actually trading like a big corporation, because … well, that’s what it is. The company has a $240 billion market value and will record more than $40 billion in revenue when it reports its fiscal 2012 numbers in a few weeks. It’s a publicly traded stock, and though insiders have great power, it’s still beholden to shareholders in many tangible ways.
As a publicly traded stock, Google is right to try to create a diversified revenue stream. Search and related ads still make up 96% of Google revenues, so it’s crucial for investors to see growth in other areas of consumer technology.
Unfortunately, that means Google isn’t going to be able to be Mr. Nice Guy in Silicon Valley anymore.
There’s a fascinating read out there making the rounds; it’s penned by James B. Stewart of the New York Times and talks about treading the line between “aggressive” and “evil,” between the desire to liberate data and the desire to keep making profits. The article summarizes complaints from competitors — which have gone before the European Union as well as the U.S. — who are worried about Google practices that give its own products and services priority in search. The list of plaintiffs include review site Yelp (NYSE:YELP), travel site Expedia (NASDAQ:EXPE) and especially Microsoft, which remains in Google’s shadow on search, mobile gadgets and a host of other areas.
So how will Google manage itself amid these complaints and amid the clamor for diversified revenue? We shall see.
But expect the gloves to come off as Google looks to protect its turf as well as grow its bottom line. And though GOOG claims it will fight fair, don’t think that means the company will hesitate to throw some haymakers at undersized competitors while it can.
- Microsoft is leaning heavily on Europe after the FTC verdict. Ironic, considering that in just 2008 the EU fined MSFT a record $1.4 billion for antitrust violations. (Telegraph)
- Competitors “help keep Google honest,” because otherwise “Google might get fat and happy.” (NYT)
- Back in December, Paul R. La Monica offered 5 reasons Google has its mojo back. The stock is up about 7% since then. (The Buzz via CNN)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at email@example.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.