Naughty Google
Peter, Fraser and Nick talk about the £2.42bn fine levied against Google by the European Commission for manipulating search results. Are monopolies in the tech world necessarily bad?
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Transcript
Hello and welcome to the Cognitive Engineering podcast produced by Tell Me Studios for Aleph Insights. In this series of podcasts we take a look at interesting topics and discuss what we think they tell us about analysis and decision making. I'm Fraser McGruer and I'm here with Nick Hare and Peter Coghill of Aleph Insights and this week we're discussing naughty Google.
Speaker B:Peter, go for it. So a recent thing that's happened, the EU has ruled in an antitrust case that Google needs to pay about £2.1 billion to the EU as a fine for manipulating search results, specifically results relating to shopping. It's alleged that the Google search results, if you search for something like flip flops, will preferentially direct you to Google affiliated shops or even their own shopping services. And it's been suggested that this is anti-competitive and therefore not a nice way to behave and Google should be fined as a result of it. Now this is separate, there are various other antitrust things going on with Google and the EU at the moment, but this one specifically has come to fruition.
Speaker C:Just for the avoidance of doubt, we're talking here about the main search results, we're not talking about the little adverts that pop up, which are obviously presented as adverts. The allegation is that people who were paying Google to be advertisers effectively were getting bumped up on the search rankings purely because they were paying for that.
Speaker A:And also, as you said, Google's own sort of...
Speaker B:Google's own thing. So if you put in Fast and Furious 3, it will direct you, the entry in the Google movies play, the Google shop will be more prevalent than say for example Amazon or Netflix or indeed the case has been sort of pursued by other shopping sites that earn money by making references for products and they appear very much further down the search queues of several pages down. Because that's what I was saying, it's not just that they're
Speaker A:edging out and bumping out some of the advertised stuff, they're edging out and bumping down the natural SEO stuff, right?
Speaker C:Yeah. So let me... Am I right in thinking that this is explicitly, let's say, including, do we think, in their page rank algorithm, a variable that says if this is a Google service, increase its page rank or is it something a bit more like the VW emissions scandal, where the cars were genuinely emitting less carbon monoxide or whatever in a test environment, but that's because the car detected that it was in a test environment. Now, that's part of the functioning of the car. It's part of the function of the car to really... So that's what I mean, really. They could, and I think they were relying on the idea that, well, no, this is just how the car works, right? When it detects these things, because it's smart, it switches into a low emissions mode.
Speaker B:I suspect, arguing on Google's behalf, that it's probably the latter. I think what happens is that it preferentially treats pages that have got particular structures and particular markups in how the information is displayed. Google makes use of lots of structured information, so stuff behind your webpage that isn't displayed to the person looking at it when they look at the browser is read by the Google crawler and used to rank pages, and you can explicitly include additional information that Google will pick up on. So I suspect what happens is that Google pages and pages that are affiliated in some way with Google come with additional help and support from Google to make your page better in terms of the Google crawl. So if you're an affiliate of Google selling services or goods, then Google will probably provide you with, here's how to make your page appear good on our search, whereas those companies which aren't don't have that additional help.
Speaker C:Is it true to say that the pagering algorithm is proprietary? Oh, very much, yeah. So we can only backwards engineer what we understand about its functioning. So is it fair to say this is sort of, at least in information terms, inconclusive? They have concluded that Google is doing this, but they don't know for sure because they don't know exactly how, no one knows exactly how the algorithm works.
Speaker B:Yeah, I think so, yeah, yeah.
Speaker C:Yeah.
Speaker B:So I think the way that it's been tested is essentially lots and lots of anecdotal kind of doing searches and seeing where things appear, and then subjectively deciding where a page should have appeared if it was equitable.
Speaker A:Yeah, I think the, sorry, go on. Well, what I wanted to say is, so if we just move beyond the technical side of it, okay, and just move on to the question of monopolies and move on to the question of, well, is there any difference now in the digital age between a monopoly happening now in the tech world? Is that any different from there being a monopoly of utilities, for example?
Speaker C:I think you've, I'd say that you picked on not necessarily the most interesting question. Thank you. But it is worthwhile asking that. But I think there's two other questions I think are interesting.
Speaker A:Well, let's hear your questions then.
Speaker C:First of all, is it good, right? Is it a good thing if advertising, if goods that are, you know, being advertised are being made more salient for me, right? So let's say that, you know, if I'm looking for flip-flops, is it good that, you know, people who are advertising more are more likely to get their flip-flops put in front of me? So that's another thing. Like, do we targeted advertising and that sort of thing, which is something a lot of people get stressed out about with the internet, you know, the fact that adverts will appear in your Facebook feed that are directly to do with stuff that, you know, Google knows you've been looking for or Facebook knows that you've been looking for. That's one question. But the other one is the extent to which this is something which is deceit in some way. You know, if does Google claim that the search results are entirely based on relevance, you know, is it the case that they say, well, no, these are entirely based on relevance? And if I'm using the service on the basis that I'm only going to get relevant rather than, you know, relevant material rather than material that marketers are paid for, is that the issue? So first of all, the issue of whether or not this kind of marketing activity is, you know, morally okay to begin with. And secondly, whether or not there's deceit in the way that Google presents those searches. Because I think most people are probably upset by the perception of deceit by, you know, they think that Google is serving them something based entirely on relevance. But it turns out that what they're getting is something based on what marketers have devised.
Speaker B:I don't think Google has ever said that this is the most equitable search ever. I think they aim for the best search. And how you define best is really quite sort of subjective. So I think it's almost disingenuous to have a go at Google for providing this amazing free service that's probably added billions if not trillions of value to the economy and then whinge that it's not good enough.
Speaker C:I mean, it reminds me of the sort of eternal struggle between advertisers and media. So, you know, it was always the case that, you know, the people producing content on newspapers, the journalists, et cetera, would really want to make it absolutely clear in the paper which bits was news and which bits was adverts. And of course, but the marketing teams and the advertisers themselves want to make it look like news. So hence the phenomenon of those ridiculous adverts for, you know, lumbar supports, which are dressed up to look like they're a news article.
Speaker B:The outer page of the Metro, which is a peel-off page, which is all adverts.
Speaker C:And of course, you know, from a sort of strategic point of view, the newspapers have ultimately made the decision that it's better to have those things distinct. Even though they could probably charge more to the marketers, they recognise that it's better to have the news be as objective and clear as possible and distinguished from adverts because that's what the consumers ultimately want. And this is not too dissimilar. This question is very much the digital version of that.
Speaker A:But it would also, it's actually also interest of the marketers and the advertisers as well that it's like that.
Speaker C:No, marketers, if I was selling a new kind of lumbar support, I'd want people to think that my advert is actually news.
Speaker A:You wouldn't. You wouldn't. Because in one sense, you might, but it's very short termist because ultimately what those people want are an audience. And once you start producing a newspaper magazine that is not authentic or reliable, then your readership will drop and suddenly your market is an advertiser out of a job. So, I mean, it's in their interest as well. But actually, by its nature, commerce can be quite short termist. And so that's why they would pursue those short term goals.
Speaker C:Yeah, sure. I mean, but in this case, you know, the question is, if Google are open about the fact that they, you know, sometimes it's influenced by, the search results are influenced by whether or not a service is provided by Google or whether it's by one of Google's, you know, someone who's paying Google to do marketing or whatever. If they're open about that, are they then vulnerable? I mean, is there a market for someone to come along and say, aha, but I've got a different search engine. So this does go back. This goes back. Now we've got back to what you said, which is, are Google a monopoly? And should we start regulating them like a monopoly? And so what's the answer to those two questions? Well, you first of all have to decide what their services are. So what service do they allegedly have a monopoly over? And the kind of the definition of a monopoly is that the fixed costs are, you know, in the industry of setting yourself up to provide something are such that the market can only support one provider, basically. So, you know, what you can't have, it's just going to be too expensive for me to set up my own gas distribution company. You know, the cost of putting all of the pipes in to be a rival gas distribution company is such that, you know, either I will stay in business or my rival would stay in business. But one way or the other, there can only really be the market enough for one. And then, you know, then you have effectively an entirely redundant set of gas pipes covering a bunch of people. So the argument is, well, that industry, the fixed costs are such that there will only ever be one player in that market. Now, the question is, is that true here? I don't think so.
Speaker A:Is that still a valid definition, though? Well, I think so. I mean, what about what's happening with News International, for example?
Speaker C:Nothing's stopping it, stopping someone setting up a rival search engine. If we're just thinking about Google search services, nothing's stopping anyone.
Speaker B:There are other viable search engines. I mean, Bing is pretty good. And likewise, Yahoo has come on in recent years. But yeah, Google do enjoy a sort of market dominance that those other ones don't have.
Speaker C:And they also have this issue of, well, is their service something to do with the integration between things like all of their, you know, their map services and their news feeds? And, you know, their email service and all of these other things that they provide. If they are getting value out of, you know, the fact that there's an economy of scale for providing those things and that the services are better, then that becomes another argument to say, well, actually, what they're providing is something is not just a search service. They're providing this sort of basket of services that really no one else can enter now, that Google has such a strong sort of network economy of scale that it's going to be impossible for somebody else to enter that market. Then that's potentially an argument for regulatory intervention.
Speaker B:For the sake of moving things on a bit.
Speaker A:Yeah, well, also, we need to move things on a bit because actually we're getting close to wrapping up time-ish.
Speaker B: going to look at more. But in: Speaker C:That's not necessarily the aim of intervention, though. It actually is really tricky with Google because all of the things that they provide are free at the point of use. Typically, the aim of intervention would be to regulate prices. Because if you have a monopoly, what it means is effectively they're able to restrict supply and increase price. So normally you have price regulation. That's what we have for things like water and, you know, to an extent, things like rail. In this case, that's not quite the intended effect. But it might be another argument for fines, at least, is that you're trying to capture for the public in the form of the government, the value that they would have got through if it was a competitive market. So, you know, if the idea being that things would be cheaper, if you have competition in this hypothetical world where you have competition, where you don't in the real world, things are going to be cheaper. So the fine is supposed to reject that balance. But again, in this case, as far as the consumers are concerned, it's all free anyway. So it's quite unusual. It's not very like a lot of other anti-monopoly intervention.
Speaker A:We need to finish. So have we come to some sort of conclusion on this?
Speaker C:No.
Speaker A:No, not really.
Speaker C:No, if it was easy, we wouldn't be talking about it. My feeling is that we might overestimate how sticky some web industries are. So I know sort of, you know, people point to something like Facebook. So there can't be another Facebook now. Facebook has sucked up the entire market. But actually, they completely can. I mean, look at things like Myspace. And, you know, it just totally died. Facebook just turned up and killed Myspace off. You know, if somebody came up with something better than Facebook, you know, the setup costs are not huge. And if it was easy to transfer your data, which, you know, arguably it isn't, but perhaps it's getting easier, then, you know, I can foresee these massive web monopolies, these online monopolies, actually, you know, being outcompeted. I just think people fail to imagine what the next thing is. Sure.
Speaker B:But another question we've not really got into is, are big web monopolies actually much of a problem in terms of the consumer, who they're ultimately providing services for, providing value to everybody? Because, you know, if Google hadn't been able to get into a position of market dominance, it wouldn't have been able to develop the services to the extent it has done, which are extremely varied and incredibly useful. And, you know, had they been forced into a more competitive environment, their stuff would be less good.
Speaker C:Yeah, I mean, just probably worth saying that the, you know, there's this saying, isn't there, that if the service is free, you know, you're not the customer, basically. And I think in the case of Google, the argument is, well, actually, Google's customers are the people who pay Google to advertise, and the business consumers who use their services and subscribe to them. And the argument is that if there were more than one Google, if there were multiple, you know, multiple companies providing the same service, those advertisers would get a cheaper service. So, ultimately, that's the idea. Sure. That actually advertisers only have one choice for advertising. So, really, when you think of the advertisers as the customers, which we should, you know, they're the ones in whose interest these sort of anti-monopoly agencies are at.
Speaker A:Good point. Actually, just to round it off and bring it back around to something you were saying, Nick, is just how dominant, really, how sure is the place of something like Facebook, which, you know, it feels ubiquitous, let's say. And something I've heard anecdotally a lot is, oh, younger generations, they don't really use Facebook. It's for oldies and things like that. And, you know, I more or less believe that or didn't believe that. I don't know. But I'm doing a bit of teaching at the moment and working with lots of 14 to 17-year-olds. And I was astonished when they all revealed that they never, ever use Facebook. And, you know, some are saying, one, I've never used it, while others are saying, oh, I might have looked at it in the last year. That's it. And they really don't use Facebook, you know. And I thought I was all young and cool and trendy and very much at the cutting edge of technology using Facebook, using this social media. But I'm not.
Speaker C:No, you want to be sending rude pictures of yourself via Snapchat. Right. That's what all teenagers do, apparently. According to the internet.
Speaker A:Yeah. And indeed, they are really into Snapchat, WhatsApp, Instagram. Instagram was the big one. That's what they used to talk to each other as well. So, yeah, there we go. That's the death knell rung on Facebook. And you heard it here first.
Speaker B:It might be a generational thing, though. As your social priorities change, then you might start adopting Facebook because it's a more convenient, all-in-one-place kind of social platform. And the desire, as you start getting older and start wrinkling and drooping, you don't want to share naked photos of yourself with your friends. Then you stop using.
Speaker C:You want to get on there and have a moan about your lumbago. Yes, yeah. Yeah, personally, I actually have really noticed, perhaps, you know, this is after 10 years now, I think, since I went onto Facebook. Recently, I've found myself thinking less and less, oh, I must check Facebook. I've really a feeling of, I think I've seen all this before. It's someone else's holiday pics from the Bahamas.
Speaker A:I'll be sure to tag you in my photos and from the Bahamas.
Speaker C:No, I think I've finally had enough. Which could be, yeah. When I stop using something, it really is, you know. Which is surprising.
Speaker A:It contradicts what Peter said because, obviously, you're very wrinkly and drooping. And yet, there he is turning off Facebook. Yeah. Okay. I'm moving to Snapchat. Gentlemen, thank you very much. That's it from the Cognitive Engineering Podcast. I'm Fraser McGruer. We've been here with Peter Coghill and Nick Hare of Aleph Insights. Thank you and until next time. Bye-bye.
