Google isn’t perfect, it made over 500 changes to the algorithm last year to improve, says executive chairman while defending company’s business practices
The US Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, grilled Google executive chairman Eric Schmidt for nearly three hours at a hearing of complaints that the search engine company is using its size to stifle competition.
The company, which recently bought mobile phonemaker Motorola, faces a Federal Trade Commission (FTC) probe and accusations that it is shutting out competition.
Yelp CEO Jeremy Stoppelman has said that Google has become unfair in its dealings with small businesses. Earlier this year, Stoppelman had complained that his company does not get any value out of its reviews appearing on Google Places, but the search company has failed to offer them any choice. Google is believed to have told Yelp that the local search company could opt out of its search index if it did not want their reviews on Google Places. Towards the end of 2009, there were rumours of first an acquisition of Yelp by Google which then quickly died. The dead deal was then estimated to be at $500m.
Others who have complained about Google’s monopoly include Nextag CEO Jeffrey Katz, and Thomas Barnett, a lawyer for Expedia.
Google said on its official blog that Schmidt will deliver a simple message at the hearing: "We welcome competition. It makes us better. It makes our competitors better. Most importantly, it means better products for our users."
In a testimony presented before the hearing, Schmidt defended the company’s business policies saying they are legal and good for consumers.
Schmidt addressed chairman Kohl, ranking member Lee, and members of the Subcommittee. He said, "Thank you for inviting me to testify before you today. I?m Eric Schmidt and I currently serve as the Executive Chairman of Google Inc. I am responsible for the external matters of Google including building partnerships and broader business relationships, government outreach, and technology thought leadership. I also advise Google?s Chief Executive Officer, Larry Page, and senior Google leadership on business and policy issues."
Schmidt referred to the jobs that Google provides in the US. Recently, he had supported President Barack Obama’s Jobs Bill, saying that the economy needs all the support it can get.
In his testimony, Schmidt said, a focus on serving consumers "has not just helped Google succeed but has also led us to create products and services that help other businesses thrive."
He continued, "Just in 2010 Google Search and our advertising products helped generate $64 billion in economic activity for hundreds of thousands of small businesses throughout the United States."
Schmidt wrote, "As hard as it may be to believe, Google is only 13 years old. When I started with Google in 2001, I was employee number 223. Today, Google employs thousands of people in the United States, in California, New York, Texas, Wisconsin, and points in between."
Schmidt said that entry into a market dominated by Yahoo was not easy.
He said, "In 1998, the year Google was incorporated, Yahoo!, which had hundreds of millions of users, was declared the winner of the ‘search engine wars’ – it got twice as many visitors as its nearest competitor and had ‘eviscerated the competition.’"
"Google’s entry into search was based on a major innovation: the PageRank system for using web links to tap into the ‘wisdom of the users’ to identify the most relevant websites for any given query. This represented a major advance on Yahoo!, which was offering ‘categories,’ and other search engines, which typically only used the number of times a keyword appeared on a page to rank websites.
"Many sites at the time, including Yahoo!, allowed advertisers to pay to be included in search results without any indication to consumers that those results were paid. Google never engaged in this practice and instead focused on improving its search results to serve users, with the result that in 2004 Google passed Yahoo! in the number of active U.S. Users," said Schmidt.
He hinted that the company’s search engine was based purely on scientific reasoning and not bias. He said, "Google?s search results are ultimately a scientific opinion as to what information users will find most useful."
He also said that consumer testing is key to the algorithm refining process, and Google uses both human reviewers and samples of real search traffic in order to measure whether a proposed algorithm change improves the user experience or not.
However, Schmidt said that the company continues to improve. He said, "The fact that we made over 500 changes to the algorithm last year is an indication that we are constantly refining the way that we organise and display information. And, like any good business, we are always happy to hear criticisms and concerns from consumers so that we can continue to improve."
Schmidt concluded, "I look forward to answering questions you might have about our efforts, and Google looks forward to working with members of the Subcommittee and others to ensure vibrant and consumer-focused competition on the Internet."
However, members of the Senate Judiciary Committee’s antitrust panel were cautious.
"Google is in a position to determine who will succeed and who will fail on the Internet," said Republican Senator Mike Lee. "In the words of the head of the Google’s search ranking team, Google is the biggest kingmaker on Earth."
Lee also used a chart to show that Google’s search results consistently ranked third price comparison sites — Nextag, PriceGrabber and Shopper – while other search engines produced different results.
Lee said, "I see you magically coming up third every time," Lee said. "I don’t know whether you call this a separate algorithm or whether you’ve reverse engineered one algorithm, but either way you’ve cooked it, so that you’re always third."
Schmidt replied: "Senator, may I simply say that I can assure you we’ve not cooked anything."
The former CEO of the search engine company faltered while answering a question from Democratic Senator Al Franken.
Franken questioned Schmidt about complaints from Yelp. Franken asked if Google still used information from Yelp.
"As far as I know, not," Schmidt answered.
Franken: "As far as you know?"
"Again I’ll have to look, but I’m not aware of any," Schmidt said.
Nextag CEO Jeffrey Katz said that though in the beginning Google helped small businesses, it was no longer the case.
"But what Google engineering giveth, Google marketing taketh away," he said in a written testimony.
Katz claimed, "Google doesn’t play fair. Google rigs its results, biasing in favour of Google Shopping and against competitors like us," Katz said in a written testimony. "As a result, Nextag’s access is more and more discriminated against … because we compete with Google where it matters most, for very lucrative shopping users."
Both Katz and Stoppelman said they would not start new businesses in the current environment.
Antitrust lawyer Thomas Barnett said, "Google doesn’t get it." He added, "Is there a problem? Yes there is a problem if Google is engaged in improper conduct."