Future search: Like, is Google still relevant?

Ira Basen on Google's mounting problems.

Maybe it's the law of gravity ("what goes up must come down"), or maybe the law of averages ("you can't win 'em all").

If you're looking to understand Google's recent spate of troubles, either of those explanations might be helpful.

After spending the last decade on an extraordinary roll, going from almost zero to one of the world's biggest and most widely respected companies, the search engine giant suddenly finds itself in a bit of a funk.

Who has the searching touch in the fight for web supremacy? (Rick Wilking/Reuters)

Last week's surprise announcement that Google co-founders Larry Page and Sergey Brin would be assuming a larger role in the day-to-day running of the company was seen by many as a sign that all is not well.

The problem is not money. The company has a market value of about $200 billion along with annual revenues of more than $28 billion. Its earnings in the fourth quarter of 2010 were up 26 per cent over the same period in 2009.

And it's not about market share, either. More than three-quarters of all web searches in the world are carried out on Google. No other search engine comes close.

But Google has always been about more than money and market share. This is, after all, a company that adopted "Don't be evil" as its founding principle.

Even while it holds a near-monopoly position in a critical industry, it's still the company that most people love to love.

Thank you, but ...

Before Google came along, the web was sinking in a sea of spam and irrelevant search results.

Think back to the late1990s. The search engines of the day — Lycos, Yahoo, AltaVista — couldn't deliver the results web searchers were looking for.

Google saved us from all that. Its search algorithm delivered high quality, relevant results, kept the spammers at bay and continued to do so as the number of web addresses grew into the trillions.

Three's company. In this July 2010 photo, Google founders Sergey Brin (left) and Larry Page (right) flank then CEO Eric Schmidt. In a shakeup in January 2011, Page returns to the CEO job while Schmidt moves upstairs and Brin is to work on pet projects. (Nati Harnik/Associated Press)

But the love affair with Google seems to be cooling off. The company is under attack from European regulators who think the don't-be-evil gang is in fact a gang of competition crushers.

Europeans don't get all warm and fuzzy towards Google the way many North Americans do, and regulators there are not reluctant to take on giant American technology companies, as Microsoft discovered the hard way.

Earlier this month, Google settled an antitrust claim brought by Italian newspaper publishers. (The publishers had opted out of the Google News aggregator and they alleged that Google was punishing them by not listing their stories in Google search results.)

Meanwhile in France, where Google enjoys a 90 per cent market share, the government recently imposed a 1 per cent tax on online advertisements.

Dubbed the "Google tax," it will cost the company over $60 million a year.

But Google's biggest headache comes from an antitrust investigation launched by the European Commission at the end of November.

Regulators are exploring whether Google abused its dominant position in the online search business to stifle competition.

One of the questions under investigation is whether Google has ever offered a higher search ranking in exchange for an advertiser buying ads from Google.

The company has always insisted its search results are determined by its algorithm and are not subject to human manipulation.

Critics have long questioned that claim. Now an independent regulator will try to determine if it's true.

Another Microsoft?

Some of the European agitation against Google is being bankrolled by Microsoft, which has more than a passing interest in the outcome of these investigations.

Microsoft's search engine, Bing, has shown impressive growth in its first 18 months of operation, but it remains a very distant second to Google.

At the same time, Microsoft knows better than anyone the debilitating effect that prolonged antitrust investigations can have on a company.

After fighting European regulators for more than a decade, it eventually emerged on the losing end of nearly $2.6 billion in cumulative fines and agreed to give European consumers better access to rival browsers in its Windows operating system.

Microsoft wouldn't be unhappy if Google had to devote similar time, energy and resources to battling the Europeans, particularly if it was forced to reveal some of the secrets of its mighty search algorithm in the process.

Not so nimble anymore

In their rivalry, Microsoft probably haunts Google in another way as well.

As technology companies grow older and bigger they invariably become slower and more bureaucratic. In short, they can lose the edge that made them innovative and successful in the first place.

It happened to Microsoft, and many people believe it is now happening to Google.

In fact, one blogger recently even dared to ask "Has Google jumped the shark?" and veered off into irrelevancy. 

Google, in fact, has had several problem-plagued product launches recently (Buzz, Wave, Google-TV).

They have been a dramatic reversal for a company used to turning out winners like Gmail and the popular, mobile operating system Android.

In announcing his return as CEO, Larry Page acknowledged the problem in an interview with the New York Times when he said: "One of the primary goals I have is to get Google to be a big company that has the nimbleness and soul and passion and speed of a start-up."

Even Google's iconic search engine has come under fire recently.

Many users are convinced Google's search results just aren't as good as they used to be. One critic, Vivek Wadhwa, the director of research for the Centre for Entrepreneurship at Duke University, complained that "Google has become a jungle: a tropical paradise for spammers and marketers."

In other words, the web in 2011 is beginning to look a lot like the web in 2000 when Google rode in to save the day.

Enter, friends

But this time, salvation is not likely to come from building a better algorithm.

Facebook CEO Mark Zuckerberg in November 2010, allying with Microsoft and taking on Google on two fronts: email and searching. (Robert Galbraith/Reuters)

The future of search, it seems, is not an improved Google, or Bing, or even the new kid on the block, Blekko, which promises to produce better results by allowing users to help filter out spam.

The big worry, if you are Google at least, is that algorithmic search is being replaced by social search.

Millions of searchers, weary of sorting through low-quality, irrelevant search results served up by algorithms, are turning to their online "friends" for salvation.

Facebook's "like" button, introduced last spring, has become an indispensable tool for millions of users who would rather learn about movies, restaurants and products from their friends than a search algorithm that may have been gamed by spammers or unscrupulous search engine optimizers.

Google tried to get into the social search game when it introduced Google Buzz last spring. But it generated almost no buzz at all.

Then Microsoft announced a new partnership with Facebook that incorporated "like" data into Bing's search engine results.

Bing users can now choose whether they want results based on likes, or links. 

These are clearly not the best of times for Google, but it would probably be foolish to bet against them. The company has very deep pockets and a very smart and innovative talent pool.

Also, with Page taking over again in April, it will presumably have a new sense of purpose.

Still, just days before the announcement of his new position, Page plunked down $45 million to buy a luxury yacht called Senses. Let's hope it's fitted out for rough waters.