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As Yahoo can't decide on merger partner, Google looms ever larger

Roy Greenslade
21 May 2008


Google is never out of the news nowadays. If you Google Google it reveals, all within 11 seconds, that there are 2,520,000,000 entries under its own name. If you consult only the news results, it will tell you, among other positive stories, that it has added 10 new languages to its Google Translate service and that a US-based pharmaceutical company has agreed to use Google Health as a go-between for patients and doctors.

Among the more negative stories is one about Google defending itself against accusations that it is becoming the internet's Big Brother. Another reveals that a leading American senator has called on Google to remove propaganda for terrorist organisations supposedly posted on YouTube.

People talk about Google all the time. As the world's leading search engine, it is now both noun and verb. Google is not the proverbial elephant in a room. It is the elephant in every room in every house in every country on every continent.

It is a media behemoth on a scale no mogul, not even Rupert Murdoch, can hope to match. It is the home page of choice on millions of computer screens, with a 53.6% market share of the search engine market compared with the 19.9% share of its closest rival, Yahoo.

Though it does not celebrate its tenth anniversary until later this year Google is already one of the largest US companies. Its market capitalisation, as of yesterday, was $180.84 billion. Its co-founders, Larry Page and Sergey Brin, are billionaires, as are several of their employees.

Although Google has been eager to promote itself, in line with the overall internet philosophy, as a benign company, it has often found itself embroiled in controversy. Despite embracing its unofficial slogan "Don't be evil", it has been unable to avoid being drawn into the corporate world it previously affected to despise.

The reason is obvious. As with every major business player, Google must protect and enhance its position. That is the major reason it decided to act as a "white knight" when its most prominent search engine rival, Yahoo, was the subject of a bid by Microsoft in February. Yahoo's board of directors, led by its chief executive, Jerry Yang, rejected the offer and sought a possible merger with Google.

The rejection outraged some of Yahoo's investors, who argued that the directors were breaching their duty to shareholders pursuing a "value destructive" alternative to the Microsoft deal.

That prompted Google's chief executive, Eric Schmidt, to suggest that a Yahoo-Microsoft merger might harm the internet by compromising its openness. (No word, you note, that a Google-Yahoo deal would result in a 73.5% share of the search engine market).

Meanwhile, Yahoo tried to pressure Microsoft into increasing its offer until, 18 days ago, Microsoft withdrew its offer. The result has been a dramatic plunge in Yahoo's share price and an attempt by one activist investor, Carl Icahn, to mount a boardroom coup. He is evidently hoping to oust Yahoo's management at its annual meeting in July.

But Google may well pre-empt Icahn's initiative because Brin is playing the white knight role to perfection. Google recently ran a small trial of its technology on Yahoo's site in the US, a clear indication of the intentions of both companies to forge some kind of alliance, even if it is short of a full merger.

Brin, speaking on Monday at Google's Zeitgeist conference in London (where the Prime Minister, Gordon Brown, lavished praise on Google for its inclusiveness and its support for an "open, non-protectionist economy") was warm about Yahoo.

"Primarily, we learned it was good to work with them again," he said "Things went very well with that test, so we would be very excited to work with them again."

Sure they will. With Microsoft giving large hints that it may yet change its mind and return to the negotiating table, it is in Google's interest to ensure that Microsoft is locked out of the search engine market. Schmidt has admitted as much. If Google pulls it off, as I believe it may well do, then we ought to be concerned about the level of its dominance. Not because I believe Brin, Page and Schmidt are evil or wish to do evil. I take them at their word that they will try to safeguard the privacy of the wealth of information their company has assembled about the online habits of the millions of people who use their service.

As Page put it: "If we are not trusted, we have no business. We have such a lot to lose, we are forced to act in everyone's interest."

What concerns me more is the precedent set by Google's willingness to do deals with China's totalitarian government, itself the result of trying to prevent rivals from encroaching on its turf.

The reason the Chinese firewall works so effectively is because Google has acted in concert with the Chinese authorities. Chinese customers cannot search on Google for "democracy" or "Falun Gong", for example.

Google's executives may argue that they are being pragmatic, but such deals - to borrow the phrase they employ to criticise Microsoft - do great harm to internet freedom.

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