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The Internet April 29, 2009, 3:29PM EST

Google's PR Campaign

The search giant hopes to counter charges of monopoly abuse with a charm offensive

By Michael Orey

Brian Stauffer

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Google (GOOG) is facing a rising tide of discontent about its market dominance. Take the ongoing lawsuit over its effort to digitize millions of books. Google reached a tentative settlement with angry book authors and publishers earlier this year, but antitrust enforcers now are considering whether the agreement gives the search giant monopoly rights to commercialize a big chunk of that content.

Separately, advertisers are also up in arms. They say they have no bargaining power because Google controls so much Internet search ad real estate—more than 70%, according to the U.S. Justice Dept. And a lawsuit filed recently in New York complains that Google has used its market power to squash competition from rival search providers.

While companies can become monopolies in the U.S. without breaking any laws, titans like Google often find rivals and regulators banding together to rein them in. Google got a taste of that last November, when the Justice Dept. pressured it to abandon an ad tieup with Yahoo! (YHOO)

To head off further trouble, Google has launched a full-throttle public relations campaign that goes beyond just invoking its "don't be evil" mantra. Company officials are talking to advertisers, reporters, academics, and lawmakers to explain why, despite its commanding position, Google should be loved, not feared.

Microsoft Lessons

Part of what's prompting this charm offensive is the view within Google that Microsoft (MSFT) mishandled similar complaints a decade ago. The Justice Dept. sued Microsoft in 1998, claiming it abused its monopoly power to curb competition in operating systems and Internet browsers, and there was talk about busting up the company. Microsoft "didn't take its critics seriously enough," says Dana R. Wagner, Google's top in-house antitrust lawyer. "If you ignore people who are making policy decisions … you can pay a big price."

Nobody expects the Obama Administration to try to break up Google, but antitrust scrutiny will create challenges. "Here's a company that has been very successful, but how do they move forward?" asks Greg Sterling, an Internet analyst in San Francisco. "You're not going to fund your competitors; you're not going to stop pursuing your own interests. What do you do?"

Wagner, a former antitrust enforcer at the Justice Dept., says Google must explain itself better. And the heat is on. In a Feb. 17 complaint, TradeComet.com, operator of a business-to-business Web search site called Source­Tool, alleges that Google attempted to "starve nascent competition" from other search sites. A central charge involves the very core of Google's and SourceTool's business model: the sale of keywords that trigger the display of ads, called sponsored links, when a consumer enters those terms. Initially, according to the complaint, TradeComet itself purchased hundreds of thousands of keywords from Google in order to drive traffic to the Source­Tool site. But once Google determined TradeComet was a competitive threat, the complaint states, Google raised the price SourceTool had to pay for many keywords 100-fold (from 10¢ a word, for example, to $10). In a short time, TradeComet alleges, SourceTool lost 90% of its monthly traffic from Google and millions of dollars in revenue. Wagner said he can't comment on pending litigation other than to say, "We don't think there's merit to the TradeComet complaint."

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