The knives are out in Europe.
Yesterday, Google announced it would shut down Google News in Spain, which recently passed laws that would require online services that display snippets from news publications to pay for the privilege. “As Google News itself makes no money (we do not show any advertising on the site) this new approach is simply not sustainable,” wrote Richard Gingras, the head of Google News.
Also yesterday, on another company blog, Google noted the release of a Google-commissioned study by the Boston Consulting Group, showing that there exists “stiff competition” in Europe’s mobile internet economy.
Both of these are pre-emptive strikes by Google. The first is an attempt to make Spanish news organisations suffer for taking on Google. Traffic to German news websites plummeted after several publishers successfully stopped Google News from using snippets of their stories. The service still carried headlines, but even this change had a ruinous effect. Spanish publishers’ traffic once Google News disappears will probably suffer much more. Such tactics are not new: When a Spanish court ruled this summer that Google must grant Europeans the “right to be forgotten,” Google was accused of trying to influence public opinion by implementing it in a manner “most likely to upset journalists.”
The second is a gentler bit of lobbying. The European Commission is likely to launch a second antitrust investigation (paywall) into Google’s practices, this time concerning its Android operating system. The BCG report is an attempt to show that competition is alive and well in Europe. Google has doubled the amount of money it spends lobbying Brussels since 2011, “using private lobbying, philanthropic initiatives and public events to try to influence policy makers,” reports the Financial Times (paywall).
And then there is the ongoing antitrust investigation into Google’s search practices, which has dragged on for four years with no end in sight. The European Commission this year rejected Google’s third suggestion for how to give more prominence to rivals. For a quick overview of the actors in this drama, you could do worse than read the letters page of the latest issue of the Economist. Last month, the magazine published a four-page story on digital monopolies in Europe (paywall). That spurred responses from Google, Yelp, and the Microsoft-sponsored “Initiative for a Competitive Online Marketplace.”
Google’s Hal Varian played up the ease with which users can switch services and, in keeping with this week’s theme, the existence of “intense competition” in digital services. Yelp’s public policy boss argues that Google is misleading consumers with Google+ results while ICOMP’s chairman labelled its actions “abusive.”
The upshot
Reviewing the various challenges Google faces in Europe, it is tempting to conclude that the web giant is quaking in its boots. That is unlikely. While Google would prefer not to have fight these battles—and most certainly doesn’t want anybody mucking around with how it displays search results—the financial risk is pretty small. The ongoing investigation into Google’s search integration, for instance, will probably end up forcing Google to prominently display links to other companies in its ad results. But “given this will be limited to the EU and to vertical searches, and that the mandated “alternate” search results are likely to still generate CPCs [revenue] for Google, even a more dire settlement is still likely only a nominal hit to earnings,” reckon analysts at Morgan Stanley.
Nor will fines be particularly worrying for Google. Last year, the European Commission fined Microsoft a whopping $733 million. That was less than 1% of 2013 revenues. Google can probably absorb whatever Europe throws at it.