Who Will Sue Google for Incorrect Traffic?

Spain's top media company Prisa said Monday it had taken legal action against Nielsen for miscounting traffic to its ElPais.com Web site as well as readers of its newspaper.

Prisa said its Internet arm Pisacom and El Pais were suing Nielson "based on the damage caused by the unjustified downward revision in the number of unique visitors of ELPAIS.com during the current year."

"The lawsuit argues that due to the serious negligence on the part of Nielson in its measurement of audience figures for ELPAIS.COM, El Pais and Prisa suffered serious damages due to lost advertising this year."

Data from marketing firms like Nielsen are important in determining the amount websites charge for advertising, with sites with high viewing figures being able to charge higher fees to sponsors. Networks sometimes have such disputes with the firms doing the counting.

One has to wonder when somebody will sue Google for mishandling a search ranking.

Is Google the New Microsoft?

Is Google the new Microsoft? Some people think it is on the way; others say there is no chance of such an enduring dominance. For regulators, the question is thornier. Every competitive market sooner or later turns less competitive, for very simple reasons: users flock to great products and stop using or buying the less-good products. Over time, that naturally creates market dominance, and that in turn ultimately draws in regulators to prevent excessive market control.

But regulators have to define what markets are in the first place, define the relevant competitors, then quantify the impact and propose remedies. Let's assume the relevant market in this case is "search." Ignore for the moment the fact that neither Google nor any of the other contestants ultimately will operate in such a narrowly-defined segment as "search."

Sometimes, regulators, users and markets get the "dominance" thing wrong. Some of us can remember very-serious discussions about how to "control" the browser market, as that was deemed essential to "control" of Internet experiences. As it turns out, the browser was not central to "control." Then Microsoft proposed an Internet identification system called "Passport." Regulators were concerned that Microsoft could become the "toll keeper" to the Internet if the identity scheme were massively adopted.

For starters, it didn't get such adoption. In broader terms, the Internet itself grew so fast that it is questionable whether any single identity system could be said to "dominate" the Internet.There was competition after all.

All that said, regulators have ruled that Microsoft has a monopoly in desktop operating systems, that Microsoft has abused its monopoly position and that consumers therefore were harmed, though not necessarily in the opearating system market but in "ancillary" markets that might have developed more competitively.

So the issue is whether Google is becoming, in search at least, the equivalent of Microsoft in the operating system area. Curiously, Google will be charged simultaneously with being a "monopolist" over information and at the same time essentially a leech as it "creates no new information of its own." Google will be called an "information gatekeeper" even as it continually tries to devise better ways for users to find the very information it is supposed to be "gatekeeping."

The issue with that line of thinking is that Google doesn't "own" or "control" the information. What it "controls" is a user preference for its algorithms and search results. If Google interferes with the value of search results, users will go elsewhere. There arguably are more issues about paid local search. But the analogy there is probably "phone books" rather than search. Phone books are in the paid local search business. What Google wants to do is provider a better paid local search experience.

There probably are better-grounded objections in the privacy area. Google will know lots about its users. But that's something other Web application providers, entertainment and access services provider also are racing to capture. Privacy is a legitimate issue. The conflict between search and advertising models built around search seem less legitimate. Think of Google as media. Media always have had business models based on ad support for content. Google's privacy issues in that regard will not be different in kind from the issues other media will face as well.

To be sure, every era of computing has been lead by new companies. So some company, some day, will be acknowledged to have become that new leader. At some broader level, one wonders whether any such company will have "control" of the Internet and the Web the way Microsoft once controlled desktops.

So far, most consumers say they haven't even heard of "online versions of desktop productivity suites," for example. That isn't to say things will always be that way; just that domination of adjacent markets on the Web will be quite difficult.

Business Broadband: Cable Modems Significant

Businesses use all sorts of access technology, if a recent Aethera Networks poll is to be believed. As you might guess, more than a quarter of business users have Time Division Multiplex access while more than a third use Ethernet of some sort.

You might not be surprised that more than a quarter use cable modems or Digital Subscriber Line, especially business-class DSL. What is interesting is that cable modem technology shows up in such surveys of the small business space. In fact, at least some business owners tell me they replaced T1 lines with cable modem service, and are happy they did.

What Disruption Looks Like: Newspapers

So what would disruption of the global telecom industry by IP communications look like? It's a hypothetical question, for a couple of reasons. The newspaper industry, for examnple, has been in a lingering decline in readership and ad revenue for decades. Nothing spectacular, year over year: just a steady, decades-long decline.

The telecom industry has seen something like that only in the twin areas of rates per minute charged for long distance and number of wired access lines in service. The long distance data is different from what one sees in the newspaper business in that volumes have skyrocketed even as prices have dropped. There is no such elasticity in the newspaper market.

The parallel between newspaper and telco fortunes is most similar in the area of access lines, where there might even be something like negative elasticity developing: "drop the price and people buy less." But the analogy doesn't fit very well precisely because, unlike the newspaper industry, the global telecom business has developed a huge replacement business for wirelines, namedly wireless services.

In fact, global telco revenue has been climbing steadily almost without a break for more than a century.

At the same time, telcos have discovered data services in addition to voice, broadband Internet access, entertainment video, ringtones, music and game downloads and other smallish businesses. The point isn't "smallishness." The seeds of tomorrow's business already are planted.

Newspapers have done nothing of the kind.

Last year, McClatchy, a U.S. newspaper chain, acquired Knight Ridder. To help pay down debt, McClatchy sold the Star-Tribune of Minneapolis in March for $530 million. Even with an added tax benefit of $160 million, the sale price amounted to only about half of what the company paid for the paper in 1998.

And then in November, the company took a $1.37 billion after-tax non-cash impairment charge, partly to reflect a further decline in the value of its newspapers.

The company's share price recently was $12.75, down more than 80% from the 2005 peak. The decline leaves McClatchy, the nation's third-largest newspaper publisher by daily circulation, with a market capitalization of barely $1 billion.

There is one sliver of hope: McClatchy has a position in the online classified advertising market, though newspapers collectively have lost their hoped-for lead to the likes of Craig's List.

McClatchy acquired a 14.4 percent share of CareerBuilder.com, as well as a 25.6 percent stake in Classified Ventures, the parent of Cars.com and Apartments.com.

The issue is how much success McClatchy and other major newspaper chains are going to have in the local online advertising business. Compared to the telecom industry, the newspaper industry is well behind the curve in cultivating new businesses, even if small.

One is tempted to say it is a shift of consumption to the Web that is responsible for the newspaper decline, but that's not entirely correct. Newspaper consumption began its decline long before the Web existed, so one has to blame television-based news. A shift of information consumption to the Web simply is accelerating a trend already in place.

Ubiquitous Online Communications

If you needed any reminding, email and instant messaging now is quite widespread in North America, Japan and Europe, as broadband penetration also has become a typical experience. Use of social networking sites still has a ways to go, except in Canada, where usage seems unusually high.

UK Leads in Digital TV

The U.K. is well ahead of most other European countries in its use of digital media, by some measures. By the start of 2007, more than 76 percent of U.K. TV households were receiving digital TV services, a rate higher than other Western European countries, Japan or the United States, for example.

According to Ofcom, U.K. adults also spend more time on social networking sites than other Europeans. Two in five U.K. adults regularly log on to these sites, clocking up an average of 23 visits and 5.3 hours each month.

In the U.K. market, 33 percent of users send picture messages via their mobiles and 16 percent use them to connect to the Internet. About 10 percent of U.K. adults use mobiles for e-mail.

Ofcom also believes that online advertising in the United Kingdom accounted for 14 percent of total advertising revenues in 2006, passing magazine advertising for the first time and registering more than total spending on outdoor, cinema and radio advertising combined.

Advertisers in the U.K. market also spend more money per consumer on Internet advertising than any other country, at £33. According to Ofcom, this is twice as much as France, Germany and Italy combined.

Online advertising revenues generated in the U.K. market in 2006 also beat the combined totals of Germany, France and Italy at £231 per head.

More Online Video Viewing, in All Age Segments

More viewers are turning to the Internet to supplement their traditional entertainment viewing habits, says Harris Interactive. In the past year, YouTube has widened its lead as a one-stop site for online video viewing.

Search and content providers, as well as online community sites, also have gained some ground on the video viewing front while TV network sites are holding their own as well.

While the incidence of online video viewership has increased overall in the past year (81 percent versus 74 percent), YouTube is by far enjoying the greatest increase.

Approximately two-thirds (65 percent) of U.S. online adults say they have watched a video at YouTube, compared to 42 percent at the same time last year, with the strongest gains among those over age 25.

Over 42 percent of YouTube viewers say they visit the site frequently, up from 33 percent last year. Just over two in five U.S. adults have watched videos on a TV network site (43 percent vs. 41 pecent).

While online video viewing declines with age for most sites measured, including YouTube, the incidence of online viewing on TV network and news sites remains consistent across age groups ranging from 18 to 64.

While interest in online video viewing is becoming more commonplace across older age groups, it is virtually ubiquitous among the under 30 set.