This briefing provides background, potential impact, and our recommended approach related to the following three pending legal proceedings against Google: (1) favoring its own vertical search results (EU and India), (2) Android app bundling (EU, US, Russia) and (3) expanded right to be forgotten (France).
The risks to Google from these actions include the potential for significant fines and/or the requirement to modify its business to increase competition within the industry.
While all of these actions may resolve in Google’s favor, some may not. Overall, our view is that although Google is the dominant worldwide player in digital advertising, no matter the result, we believe that with careful planning there should be little impact on a brands’ performance marketing strategies. Win or lose—current consumer trends, marketplace dynamics and emerging platforms/opportunities already require advertisers to diversify beyond Google.
In the EU (since 2009) and India (since 2012), Google has been battling antitrust charges around the manipulation of its paid and organic search algorithms to favor its own properties—like YouTube, Maps, Shopping and News. Investigators have alleged that this practice (1) harms brands that compete with Google by not giving them visibility and (2) doesn’t deliver the most relevant results, irrespective of the source, to searchers.
The EU Commission, which has been focused on Google Shopping (Product Listing Ads), said in 2015:
Our investigation so far has shown that, when a consumer enters a shopping-related query in Google’s search engine, Google’s comparison shopping product is systematically displayed prominently at the top of the search results. . . . Thus, Google’s commercial product is not subject to the same algorithms as other comparison shopping services.1
In India, Facebook, Flipkart (India shopping engine) and Nokia Maps have testified against Google, corroborating the allegations. Google has maintained that it offers searchers a wide range of choice, and that the competition is always only one click away. The length of the EU (and now Indian) investigations likely indicate that authorities aren’t going to let Google off without concessions.
If Google Wins
Google has survived similar vertical search scrutiny in other markets. After a long investigation in 2013, the US FTC decided not to bring antitrust charges against Google on the issue. Canada, Taiwan, Egypt and Brazil have also dismissed the issue. If Google wins in the EU and India, Performics has, and will continue to:
- Focus on PLAs: Since Google’s 2013 US victory, PLAs have exploded for US retailers. For Performics US retail clients, PLA ad spend growth has outpaced regular text ads. Performics will continue to manage text ads and PLAs in conjunction, allocating budget between the two based on real-time performance. During times like holiday, PLAs will often perform better than text ads. If Google wins, EU and Indian clients, like US clients, will be able to continue heavy focus on this high performing format.
- Focus on Google Vertical Optimization: Hotels, flights, maps, cars and video are other Google vertical formats that enjoy search page prominence, driving clicks and conversions for advertisers
- Integrate Traditional & Vertical Strategy: If Google vertical property dominance survives, all clients must integrate vertical search strategies like feed optimization, local business optimization and YouTube optimization with traditional, text-based campaigns.
If Google Loses or Settles
If found responsible, it has been reported that the EU can fine Google up to 10% of its annual global sales for the antitrust violation. Reportedly, this could amount to €6B. The largest fine levied previously by the EU was €1.1B against Intel in 2009, for abusing its chip market dominance. If Google is found guilty by the Indian investigative body and loses an appeal to the Supreme Court, it may be directed to discontinue the unfair practice and/or be fined up to 10% of revenue.
Google can also negotiate and settle with authorities, perhaps avoiding a fine. However, settlement talks have already failed three times in the EU. Negotiations have centered on Google displaying other shopping engine results (e.g. Flipkart) within Google Shopping PLAs. If Google loses/settles, Performics—and our clients—will shift focus to:
- Monitor Vertical Format Performance: Google vertical search formats may fall in search page prominence. We should monitor traffic levels from vertical formats to determine the impact.
- Dedicate Effort to Non-Google Product Search: Performics clients may need to shift some attention from PLAs to Google competitor vertical listings. To illustrate, if PLAs start to incorporate Flipkart shopping results in India, Indian clients need a Flipkart vertical search strategy to not only succeed on Flipkart directly, but also succeed in Flipkart results that feed into Google Shopping. We have observed that those clients that are most focused on performance marketing already have non-Google shopping engine strategies (e.g. on Amazon). In a marketplace where Google properties lose some visibility, holistic shopping engine strategies become more important. Many searchers now begin their product searches in places other than Google anyway; so moving beyond Google is a sound plan, whether or not Google wins or loses.
- Put More Resources to Non-Google Vertical Optimization: Beyond Shopping, clients should consider optimizing for non-Google map and location sites (e.g. Microsoft Maps, Yelp) and other non-Google vertical formats to achieve optimal search page visibility
ANDROID APP BUNDLING
Google is also facing scrutiny around the world in regards to bundling its own apps in Android. In April 2016, the EU filed new antitrust charges against Google, alleging that Google required Android device manufacturers to pre-load Google apps—like Google Search and Chrome—and to set Google Search as the default. It has been reported that Google has until October to respond to these allegations. Android has 74% market share in Europe (Business Insider, 2015), giving Google huge power to influence app discovery. The US FTC is also starting an investigation of Google on similar charges.
If Google Wins
Google’s bundling practices have likely contributed to its mobile search dominance (+90% share). If Google wins, it achieves a key victory in preserving and growing this share. Performics has, and will continue to:
- Maintain Focus on Google Mobile Search: The large majority of mobile search spend and effort must be focused where searchers are, on Google
- Still Diversify in Mobile: Beyond antitrust concerns, Google faces other challenges in preserving mobile dominance, including: ad blocking, people spending more time in-app vs. the mobile web and Facebook catching up in total mobile ad revenue. The way mobile consumers discover brands, interact and buy is expanding well beyond Google mobile search, particularly to apps, Facebook, Twitter, Pandora, Yelp, LinkedIn and Amazon. While Google still dominates in mobile search attention, it’s losing ground in overall mobile. We must understand how best to engage and convert mobile consumers, and this includes investing well beyond Google.
If Google Loses or Settles
The EU can fine Google up to 10% of its annual global sales for this antitrust violation, reportedly, another €6B. Google—in defeat or settlement—would also likely be required to amend its contracts with OEMs, which has already happened in Russia. After complaints from Yandex in 2015, Russia’s antitrust commission found that Google did in fact unfairly bundle Google services into Android. Google lost an appeal to the Moscow Arbitration court. If Google loses/settles in the EU, Performics should:
- Monitor Google Mobile Search Traffic, and Perhaps Reallocate Budget: It’s possible that Google could see a decline in mobile search share in the EU, spurring advertisers to invest more in Bing and Yahoo. However, Google Search is so ingrained in the EU, at 93% total share (Bing is second at 3%), that unbundling apps in Android may not have a significant impact on Google’s share. In Russia, Google’s lose served to preserve Yandex’s dominance (Yandex has 60% Russian market share vs. Google at 35%). But in the EU, Google has, for all intents and purposes, already won the entire market.
EXPANDED RIGHT TO BE FORGOTTEN
In 2014, the EU’s highest court ruled that search engines must protect individual right to privacy by removing search links that lead to “inadequate, irrelevant or no longer relevant” information (the “right to be forgotten”). Recently, Performics and Northwestern University conducted the Digital Satisfaction Index™ (DSI) study (Q3 2016), which measured US and UK consumer attitudes and perceptions around online experiences. UK users skewed higher in satisfaction around the Privacy factor (level of comfort in information collection) vs. the US. This makes sense, as there’s a stronger expectation of online privacy in Europe vs. the US, and European regulatory bodies have sought to protect this privacy with directives like the right to be forgotten.
To comply with the right to be forgotten, Google started removing links from its EU domains, like google.fr. France’s privacy body, CNIL, thought this wasn’t good enough. Google then start removing links from Google.com, but only for people within the EU. CNIL, still not satisfied, fined Google €100K in March 2016. CNIL argued that “personal or professional contacts living outside Europe can still access the delisted search result linking to content that may infringe the privacy of the person concerned.” In short, CNIL wants Google to remove EU citizen links globally, not just in the EU. Google is fighting back in the French Supreme Court, arguing:
We comply with the laws of the countries in which we operate. But if French law applies globally, how long will it be until other countries—perhaps less open and democratic—start demanding that their laws regulating information likewise have global reach?2
Win or lose, the current right to be forgotten (or expanded right to be forgotten) doesn’t have much impact on the reputation of brands. The rights granted only apply to individuals. Therefore, Performics cannot use it as part of a reputation management strategy to remove search listings for client brands. The right to be forgotten also has a public interest exception. That means the law cannot be used to remove listings for individuals in the public eye, like celebrities or government officials. Although there may be an opportunity to still seek to remove listings for individuals and executives who work for our client brands as part of a reputation management strategy, implementing this strategy may prove problematic due to: (1) the public interest exception (if the executive is widely known), (2) the fact that Google only removes about 40% of requests and (3) Google not having to remove links that are accurate and lawful.
Google isn’t likely to settle, as it believes it’s trying to protect freedom of expression. Google stated,
This order could lead to a global race to the bottom, harming access to information that is perfectly lawful to view in one’s own country. For example, this could prevent French citizens from seeing content that is perfectly legal in France. . . . We have received demands from governments to remove content globally on various grounds—and we have resisted, even if that has sometimes led to the blocking of our services.3
As Google noted, accepting any of these limitations can lead to an ever steeper slippery slope. To illustrate, Russia also enacted a right to be forgotten law in 2014, but Russia’s law doesn’t contain a public interest exception. Following France’s lead, Russia could also push for global application of its law, which is much stricter.
In summary, Google is facing a series of diverse legal issues, where any negative ruling could result in: (1) huge, but not crippling, financial penalties and (2) increased access for Google competitors in vertical search and mobile. This could slightly shift strategy and investment for Performics clients away from Google. That being said, legal outcomes are just another component of an already fragmented performance marketing landscape. Based on current consumer and marketplace trends, all advertisers should have an eye towards diversifying beyond Google, no matter the result of legal proceedings.
1Press Release, European Commission, Statement by Commissioner Vestager on Antitrust Decisions Concerning Google (Apr. 15, 2015) (http://europa.eu/rapid/press-release_STATEMENT-15-4785_en.htm).
2Kent Walker (Google Global General Counsel), A Principle that Should Not Be Forgotten, Google Europe Blog, May 19, 2016, http://googlepolicyeurope.blogspot.com/2016/05/a-principle-that-should-not-be-forgotten.html.