Google preparing for Senate hearing

WASHINGTON Sun Sep 18, 2011 10:11am EDT

People ride their bikes past Google Inc. headquarters in Mountain View, California, May 8, 2008. REUTERS/Kimberly White

People ride their bikes past Google Inc. headquarters in Mountain View, California, May 8, 2008.

Credit: Reuters/Kimberly White

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WASHINGTON (Reuters) - Google's Eric Schmidt, the online search giant's point man for all things Washington, goes before a Senate panel this week to argue the company is not a rival-abusing bully, but in fact is struggling to stay on top.

Google Inc controls more than two-thirds of the global search market. But Web technologies such as social networking and smartphone applications offer new ways for people to find information -- putting pressure on the company.

At the hearing before the Senate Judiciary Committee's antitrust panel on Wednesday, Schmidt will argue that Google's critics are wrong to say it gives preference to its own products. Rather, he will say Google is just trying to deliver the best-cultivated search results for users.

Schmidt had been Google's chief executive officer, but vacated the post to company co-founder Larry Page in April.

He now serves as executive chairman and oversees government affairs -- a position of critical importance as the Federal Trade Commission ramps up its antitrust probe into whether Google favors its own products in search, among other issues.

The issue of search ranking is a touchy subject with Google, which says its algorithm is devised to give users the most useful result so they will come back. Google's revenue comes from advertising on the search results page.

Schmidt is also expected to try to steer the focus of the hearing to the company's running battles with those who game its search algorithm, for example "scrapers" who take commonly searched words, combine them into a nonsensical block of text and throw it up on the Web to grab eyeballs and advertising dollars.

Google believes that, if scrapers succeed too often, consumers will lose confidence in search and turn to other resources. There is thinking within Google that scrapers and others who try to game the search algorithm could pose an existential threat to the company.

Google has taken action in the past, penalizing Overstock.com Inc and J.C. Penney Co Inc after accusing them of abusing guidelines to get their websites to rank high in searches.

BEST-CASE IS STATUS QUO

The hearing carries risk for Google because the panel is looking at its most important product -- search, says Colin Gillis, an analyst at BGC Financial in New York.

"It's never a positive to have to testify on antitrust on the Hill," said Gillis. "The best-case scenario is that things continue as they are."

Gillis added there was an outside chance Schmidt would make a damaging mistake.

"He's opening his mouth and he's speaking and there's always the possibility that something will come out of it that he thinks is logical and that the committee may not like," he said. "It's not likely to happen, but it's always possible."

Schmidt could also discuss other factors that can bring down a website's ranking, such as whether there are errors on the site, like broken links; the speed of the site and whether the site appears to have malware.

Google says it is reaching out to webmasters, letting them know about problems that could affect their search ranking.

Schmidt has been defending Google in Washington for years and is well aware many antitrust experts are skeptical that Google always plays fair.

Democratic Senator Herb Kohl, head of the Senate Judiciary Committee's antitrust panel, is one of several lawmakers expected to press Google on the issue of search.

Senator Richard Blumenthal, a Democrat who led investigations of Google when he was the Connecticut attorney general, called Google a "great American success story," but says he will have questions.

"Concerns have been raised by both regulators and competitors over whether Google has used its dominance of the online and smartphone search markets to impose extra costs on consumers, unfairly preference its own products, or disadvantage competitors through a variety of means, including its search and advertising systems," Blumenthal said in a statement to Reuters.

Republican Senator Mike Lee, who is also on the subcommittee, has expressed concern about Google's purchase of ITA travel search software. Competitors such as Expedia Inc have worried Google would abuse its new dominance in travel search.

Executives representing Expedia as well as Yelp, another Google rival, will testify at the hearing after Schmidt.

(Editing by Andre Grenon)

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