UK Internet Search Engines

Mike Weatherley Excerpts

Wednesday 26th January 2011 Westminster Hall

[Graham Jones (Hyndburn) (Lab)]

Thank you, Mrs Main, for chairing this Adjournment debate. I am told that it is on a subject that has not been addressed in Parliament so substantially before. However, the subject affects the UK economy and other European economies, and my constituency particularly.

Reach Global, in the ward of Church in my constituency, is a major online company involved in the search for, and retrieval and collation of information—it is a search engine. Netmovers is a major property internet search site that Reach Global owns and it is part of Reach Global’s portfolio of vertical UK search engines. Reach Global’s owners are resident in the UK, they pay taxes in the UK and they employ and train British people. Reach Global is a cutting-edge British company, but like many British companies it is being squeezed out by unfair and anti-competitive practices by Google. There is growing evidence that Google is leveraging its dominance in the search engine market into adjacent markets, much as Microsoft did when it leveraged its dominance in the operating systems market into adjacent markets, such as the web browser market.

E-commerce and e-business are booming. According to 2009 figures from the Office for National Statistics, the UK’s digital economy supports 143,000 enterprises, generating a total turnover of £178 billion of revenue, with nearly £100 billion of gross added value to the UK economy. Against that exponential growth, however, there is evidence that some smaller companies are finding that they are unable to gain access to the online search engine market.

According to Ofcom, in May 2010, 87% of internet search engine users chose Google. Numerically, that is 32.4 million out of 35 million UK searches, which was up 5% on the previous year. Google’s grip is tightening further. By January 2011, its market share had risen to 91% of the UK search market and as a result it dominated online advertising revenue. Bing has 3.87% market share, Yahoo! 2.85%, Ask 1.26% and the remainder of the providers, including UK providers, have just 1.34% of market share between them.

Google has been the focus of much criticism, with claims that it could be abusing its dominant position in the market. In my view, Google has gone from being a competitor to a predator and from a horizontal organic search client to a monopoly giant, with subliminal and unclear sponsored searches that favour other Google products.

It is important that we create the right market conditions to facilitate innovation in the online economy. Competition must be allowed to flourish, which I believe would create the right conditions and defend the interests of British companies, particularly high-tech IT companies.

Concerns are now being raised that Google’s dominant position is stifling innovation and preventing smaller companies from entering the market. Earlier this month, Google was in the headlines for disclosing that in 2010 it had made £2.2 billion in the UK market, claiming approximately 50% of UK online advertising revenue.

All that has led to Google becoming subject to an EU anti-trust investigation into its European operations, with allegations of anti-competitive behaviour. There are suggestions that Google’s search results are influenced by advertising and even that Google’s technology might deliberately lower the visibility of rival sites.

Acting as the principal gateway to the internet, Google has a responsibility to ensure that it provides an open and transparent service, and one that is free from bias or purchased favouritism. Because of its domination of the global search market and its ability to penalise competitors by placing its own services at the top of search results, Google has a virtually unassailable competitive advantage. Moreover, Google can deploy that advantage well beyond the confines of the search engine sector to any service that it chooses. Wherever it does so, incumbents are toppled, new entrants are suppressed and innovation is imperilled. The top result in any search usually results in 50% of the traffic going through that site, so it is easy to see why anyone would want to have the number one slot in the return on any search that is made.

The preferential placement of Google’s price comparison service, for example, caused traffic to the UK’s leading price comparison services to fall by an average of 41% over two years. During the same period, internet traffic in general rose by 30%. That is a marked contrast, but more marked is the fact that traffic to Google’s price comparison site rose by 125% during the same period.

The preferential placement of Google Maps decimated traffic to Multimap and Streetmap, the UK’s two leading online mapping services. The share price of TomTom, a European maker of navigation systems, fell by 40% this week after the announcement of Google’s free turn-by-turn satellite navigation service. RightMove, Britain’s leading real estate portal, lost 10% of its market value on the basis of a mere rumour that Google was planning a UK property search service.

The delineation between advertising and search results is becoming blurred. It is becoming more difficult to separate a sponsored from an unsponsored result. Google’s revenues exceeded $29 billion last year, but that pales next to the hundreds of billions of dollars of other companies’ revenues that Google controls indirectly through search results and sponsored links. That revenue-driven model has encouraged Google to begin promoting its own services at or near the top of its search results, bypassing the algorithms that it uses to rank the services of others.

Reach Global in my constituency currently hosts a UK-focused search engine that is in its seventh incarnation. The search engine, Searchers, has been in continual development for seven years and is independent and owned and funded by a private company. It is a very British enterprise. I am led to believe that it is the largest UK search engine apart from those emanating from the United States. Reach Global believes that Searchers could have an important role to play in the domestic economy where it claims Google fails: focusing on British business, promoting a sense of our national identity and, crucially, aiming to keep at least a portion of the massive advertising revenues available within our economy. As it is UK-based, its results are relevant to UK users.

I hope that the Minister will take up an offer to visit Reach Global. It is a fantastic company, and its investment in IT is incredible. I hope that he will accept that offer and see for himself what a great company it is. According to the ONS, Reach Global is one of 65 businesses working in the information and communications sector in Hyndburn, one of 2,000 in Lancashire and one of 144,000 in the UK.

Foundem is another British company that appears to have been blocked or sanctioned by Google in what appears to be a misuse of internet-filtered search results. The company provides search database solutions to a variety of British high street companies. It was leading the way in supporting US and European Union investigations into monopoly practices. In 2006, Foundem dropped to 144th in Google searches but remained first on Yahoo! and seventh on Ask. It is time to look beyond network neutrality and consider search neutrality: the principle that search engines should have no editorial policies other than that their results be comprehensive, impartial and based solely on relevance.

Without search neutrality rules to constrain Google’s competitive advantage, we may be heading toward a bleakly uniform world of Google everything—Google Travel, Google Finance, Google Insurance, Google Property, Google Telecoms and, of course, Google Books. Some will argue that Google is so innovative that we need not worry, but Google Maps, Google Earth, Google Groups, Google Docs, Google Analytics, Android and many other Google products are all based on technology that Google has acquired rather than invented.

It is not just about computers. Google’s Android smartphone operating system is gaining significant market share. The bundling of Google products with the operating system puts other companies that offer a free product, such as Skype, at risk of losing out to Google’s in-built advantages.

[Mike Weatherley (Hove) (Con)]

Will the hon. Gentleman give way?

[Mrs Anne Main (in the Chair)]

Order. Is the hon. Member for Hyndburn (Graham Jones) prepared to give way?

[Graham Jones]

I will.

[Mike Weatherley]

I thank the hon. Gentleman and congratulate him on securing this debate. I have also met representatives of Foundem. Does he agree that the Google position is stifling British businesses? I congratulate him on taking part in this debate, and particularly on championing the British aspect.

[Graham Jones]

I welcome that intervention, which is helpful. That is quite true, and it is the thrust of the point that I am making. British companies are being stifled. Moreover, the Treasury is losing out. In 2008-09, The Guardian reported that Google, by locating its companies outside the UK, avoided paying £450 million to the UK Treasury, and that was just in one year. Google is also taking advantage of the lower tax rates. It has leverage with large organisations and can employ other commercial anti-competitive practices to the disadvantage of British companies. I take on board the hon. Gentleman’s point; it is very relevant.

I want to come on to the extension of Google into the mobile market. There is speculation that Google may seek to acquire, or seek preferential contracts with, 3G networks specifically to harness advantageous proprietary Google technology into that network, which again would be to the disadvantage of other companies.

Although I am aware that competition law is predominantly dealt with on a European level, what legislative and non-legislative efforts do this Government intend to take to address the imbalance and protect cutting-edge British companies, such as the one that the hon. Gentleman mentioned? I am sure that in his constituency he has IT companies like Reach Global that need our help. What action are the Government planning to take to ensure that a competitive yet innovative market exists in the UK online industry, for the benefit of companies, customers and the economy?

At a time when other markets are struggling, the online digital economy is growing and innovating. We must ensure that it remains open to fostering as many innovative competitors as possible and that British companies and British interests are not compromised.

A recent study by the Boston Consulting Group found that the internet contributed an estimated £100 billion to the UK economy in 2009. To put the figure into perspective, it contributed more than construction, transport or utilities. To achieve its full potential, smaller businesses need to be given the opportunity to grow. The Government need to ensure that we create the right conditions for new economic activity to flourish.

In conclusion, it is in the interests of customers, business and securing the recovery of the UK economy that this issue be dealt with.