Tuesday, April 29, 2014

Who's afraid of Big Brother? This guy

Germany's largest publisher lobbies against Google.

By Jason Overdorf
April 29, 2014 (GlobalPost)

BERLIN, Germany — You wake up one morning and your smartphone tells you, “On your way to work you will run into your ex-girlfriend, Vanessa. Be sure to act surprised when she tells you she's getting married. She hasn't told anyone yet.”

That's the future in a world where Google knows more about you than George Orwell's Big Brother ever dreamed possible, argues the chief executive of Germany's largest publisher in a recent “open letter to Eric Schmidt” — his counterpart at the $50-billion company now synonymous with internet search.

Alarmist? Perhaps. Axel Springer head Mathias Doepfner borrowed the scene from futurist author Patrick Tucker's book “The Naked Future,” not any undisclosed Google strategy documents.

But Doepfner says his fear of Google is serious, and comes despite what Schmidt has called a “path-breaking advertising deal” between the two companies.

Now Doepfner and other European media players are looking to the German government and the European Union for help to counter Google’s expansion by filing an antitrust suit while mounting an unprecedented bid to force the US giant to share its search-engine revenues with the media companies that arguably supply most of the information people are actually searching for.

“We are afraid of Google,” Doepfner writes. “I must state this very clearly and frankly because few of my colleagues dare do so publicly.”

Comparisons with “1984” notwithstanding, that fear is chiefly economic, as Axel Springer's efforts to fight Google show.

In the ongoing EU antitrust action, Axel Springer and other companies argue that Google has “fixed” its search algorithms so that its own service offerings come out ahead of competitors.

Since Google accounts for as much as 90 percent of European internet searches, it's effectively the only game in town. When the search company tweaked one of its algorithms, for instance, an Axel Springer subsidiary lost a whopping 70 percent of the traffic to its website.

“Many [Google] competitors are more or less invisible for the consumer,” says Robert Maier, who heads an Axel Springer-owned e-commerce company called Ladenzeile.

In February, Google offered to settle the dispute by promising to allot space at the top of its search results for its competitors to advertise their products — a solution Axel Springer condemned as extortion because it essentially asks Google's competitors to pay for equal footing.

“It’s a question of applying existing rules and laws,” Maier says. “The EC has the relevant toolbox to take the required actions, it just has to make use of it.”

At the same time, German media companies have been pushing for an unprecedented tax that would compel Google to share a portion of its search-engine revenues with them over and above the fees generated by the advertisements hosted on their home sites. They argue Google is reaping huge benefits from people searching the internet while the companies that create the information for which they are actually looking are being driven out of business.

They may be making some headway.

Last year, the German parliament passed a copyright law that extended publishers' rights to sue websites that earn money by repackaging their content. But while the original bill would have covered the headlines and snippets that appear in a Google or Yahoo! News search, the amended version that eventually passed stopped short of that, following arguments that it would violate protections on the freedom of speech and potentially prevent media outlets and commentators from citing other articles.

Many agree, saying the media firms' demand for such a deal is like a theater demanding a cut from the taxi drivers who bring moviegoers to their door.

But there's already a precedent for such revenue-sharing in Germany, where a so-called “private copying levy” forces sellers of blank CDs and DVDs and other recordable media to give a cut from every sale to music and movie companies.

Moreover, Google’s critics say a cursory analysis of the web-based media business quickly exposes flaws in the taxi analogy.

So-called “referrals” from Google, Yahoo, Facebook and Twitter already account for the bulk of traffic to news sites.

But sites such as Google News and Yahoo! News are also emerging as indirect competitors of media outlets, the German firms argue.

Google disagrees.

“Much ink has targeted Google News and how it allegedly 'kills' journalism,” Google's Schmidt wrote in his own open letter to German executives. “[But] there is no advertising on Google News [and] each month Google sends more than 10 billion visits to publishers around the world.”

Others say it's hard to tell if Google has created $30 billion in new revenue for its “publisher partners,” as Schmidt suggests, or taken away more.

In the early days of the internet, users might have made the New York Times or Das Bild — Axel Springer’s conservative tabloid — the default page that popped up when they opened their browsers.

But with access to the latest headlines from every news provider and algorithms that push popular stories to the top, the news provider-search engine combination sites are steadily eating away at that market. Since headlines and first paragraphs of news stories are often written to communicate all the essential information, only a small number readers click through to the page that actually generates revenue for the news agency.

As Axel Springer might put it: It's as if taxi drivers are showing movie scenes every one wants to see at the cab stand.