Facebook and Amazon dropped the dime on Google

1

When federal regulators launched an antitrust probe into Google a decade ago, Facebook and Amazon stayed mum in public. But behind closed doors the social media giant and the online retailer urged the government to crack down on their Silicon Valley rival.

Facebook claimed Google used its ubiquitous search engine to pilfer users for its Google+ social network. Amazon said Google cribbed information from its website for its own shopping product. And both argued that Google was taking overt actions to dominate markets that made products more cumbersome for users.

These complaints and others, detailed in documents obtained by POLITICO, offer a new glimpse of the depth of rivalry among three tech powers that now rank among the United States’ most valuable companies. Years before Facebook and Amazon would face their own antitrust scrutiny at the Federal Trade Commission, they turned to the FTC in 2012 to complain privately that Google was undercutting their businesses, even as both companies publicly teamed up with Google on lobbying efforts in Washington.

The efforts by Amazon and Facebook may have come up short in part because they were relatively new to the Washington influence game. While these two companies were starting to spend on lobbying, Google already had a heavy presence in D.C. and allies in the Obama administration. But the failure to provoke a federal crackdown on Google also contained a long-term benefit for Amazon and Facebook: Washington’s reluctance to battle alleged tech monopolists postponed the two companies’ own turns in the antitrust spotlight.

Facebook’s and Amazon’s public silence about their complaints could have been an effort to avoid drawing attention to their burgeoningempires, said Yelp public policy chief Luther Lowe, a Google critic who spoke to FTC staffers multiple times during the probe.

“Amazon and Facebook — amidst their growth — are thinking, ‘We can’t be too vocal here because in a couple years it’s going to be used against us,’” Lowe argued. He said he was aware at the time that the two companies had told the commission that Google was squeezing them, even if much of the public was not.

Google declined to comment Monday on Facebook and Amazon’s complaints about its conduct.

If the companies’ arguments had been known, it might have changed the entire perception of the FTC’s probe into Google. Back in 2012, many inside and outside Silicon Valley viewed antitrust complaints against the search company as coming from “whiny competitors" trying to use the government to prop up weak products, said Greg Sterling, who has spent the past 20 years as an analyst on issues related to search and advertising.

“There was a widespread perception that it was coming from competitors who were just not as good,” Sterling said. Some of the loudest voices — Yelp, TripAdvisor and even the tech superpower Microsoft — were already falling behind Google in the markets for products like review websites, browsers and mobile phone software. Microsoft was also promoting its Bing search engine, which failed to topple Google as the king of the search market.

Amazon and Facebook were in a different category. Amazon was already the most successful online retailer in 2012, though it posted a loss of $39 million for the year because of heavy investments to help launch its new Kindle Fire tablet. Facebook went public in 2012 and was emerging as a key challenger to Google in online advertising.

Google, Amazon and Facebook were publicly friendly at the time. All three strongly advocated against anti-piracy legislation in Congress in January 2012 — Silicon Valley’s first collective effort to influence policy in Washington. Later that year the three companies teamed up to launch the Internet Association, a D.C. trade association still in existence today that lobbies for internet companies.

Then came the FTC’s 19-month investigation into complaints that Google was abusing the power its search dominance provided over the content users see on the internet. The probe provided an opportunity for Facebook and Amazon to try to sway the outcome without exposing themselves. And they seized it.

Facebook: The Google+ network and phone wars

Google’s fledgling social network, Google+, had about 500 million users in 2012 compared with more than 1 billion people on Facebook. (Facebook now has an estimated 2.8 billion users worldwide.) But Facebook said the new upstart had an unfair advantage: Google had structured its search website so that users would see links to Google+ profiles before those from networks like Facebook and Twitter.

In a previously unknown March 2012 presentation to FTC staff detailed in the memos, Facebook showed what happened when a user searched for computer manufacturer Dell: Google displayed a link to Dell’s Google+ page at the top of the right-hand column, next to the search results.

At the same time, the page displayed “no content or links to Dell’s other social media content (such as Facebook or Twitter) that might be more relevant to the query in this prominent space,” FTC staff recounted in a memo on the presentation.

Facebook also expressed worries that Google was positioning itself to force mobile phone manufacturers to install its Google+ app on devices, shutting out Facebook from doing the same. This threat existed because Google’s contracts with the major smartphone makers gave it the right to require them to install certain Google apps on their Android phones and not those of competitors. The FTC lawyers discounted Facebook’s complaint, however, noting that such action against Facebook “has not occurred so far.”

Facebook didn’t have an immediate comment when contacted by POLITICO about its concerns about Google.

Amazon: Rival and customer

As huge as Amazon was, it told the FTC that Google’s actions had substantially damaged its bottom line.

One of the starkest examples: Amazon told the FTC that changes Google made to its search algorithm in 2011 led to a 35 percent drop in traffic from the comparison sites that used to send customers to the online retailer.

Amazon also told the FTC that it had taken action to prop up competitors to Google — sacrificing its own revenue — because it was so worried about the search company’s dominance over online advertising.

Like many companies, Amazon sells space on its site for Google ads in return for a share of the revenue from searches. Google paid a higher percentage than its main competitors, Microsoft and Yahoo, but Amazon said it opted to use all three services to prevent Google from gobbling up the market.

“Amazon decided that it is in its long-term, strategic interest to funnel some query volume to Bing, even if it is losing money on each query,” FTC lawyers recounted, citing written answers Amazon gave in response to staff questions. “Amazon is using multiple suppliers just to try to foster a more competitive marketplace.”

The financial hit was significant. FTC lawyers found that Google paid advertisers about $14 more than Bing did for every 1,000 page views an ad generated. Amazon said it earned about $175 million a year from this type of advertising, one of its biggest steady revenue streams. Had it used only Google, Amazon would have earned at least $7 million more, based on data it offered the FTC — money the company forwent to help prop up Bing and Yahoo.

And like Yelp — which complained to Google about the search engine copying its reviews — Amazon said Google was siphoning and reusing reams of its product reviews, star ratings, sales ranks and other information, a practice known as scraping.

Amazon complained to Google in August 2010 about its scraping of Amazon’s product reviews, and Google stopped that practice, according to the documents. But Google continued to include Amazon’s star ratings in product ratings on Google Shopping.

Google also used Amazon’s website as a basis for its product taxonomy, a classification system used to organize products within categories such as movies and books. Although Google could have purchased or created its own taxonomy, the company instead crawled Amazon’s site to duplicate that information.

“Amazon considers its classification system an important competitive advantage that it spends tremendous resources to develop, and does not approve of Google’ use of Amazon’s system to develop its own,” the FTC lawyers wrote.

Amazon declined to comment Monday about its past complaints against Google.

Google: Both big gun and underdog

In Google’s eyes, however, it was fighting for survival against the likes of Amazon and Facebook, which it argued could even endanger its search business.

In a May 2012 interview with the FTC, Google co-founder Sergey Brin said the company was keeping an eye on Amazon and Facebook as potential competitors because users can and do bypass the Google search engine by going directly to those other sites to look for products or information.

Amazon in particular had significant leverage with Google as its second-biggest advertiser. Like Facebook, the online retailer was unhappy when Google added Google+ links to the top of its search results page, telling the FTC it worried that the links would drive traffic to the upstart social network rather than to the Amazon website. But Google removed the link to Amazon’s Google+ page after Amazon complained.

Both Google+ and Google Shopping were newcomers to markets dominated by the other two companies. Still, some evidence in the FTC documents backs up a contrary explanation: that Google was using aggressive tactics to compensate for products it knew were inferior.

“Basically google is not as good as amazon and its hard to buy products using Google [sic],” Google’s then-CEO Eric Schmidt wrote in a 2009 email. That same year, Google Shopping started using Amazon’s taxonomy.

View original post