A study commissioned for FairSearch.org concludes that Google’s net impact on the U.S. economy may be “negative” because of the search engine’s “dominance and market power.”
Analyzing Google’s statements about 2009 and 2010 that it generated $54 billion and $64 billion, respectively, in economic activity for American businesses, Allen Rosenfeld of M + R Strategic Services crunched the numbers and concluded in a study [pdf] that:
Googleâ€™s net impact on the economy could well be negative after accounting for the impacts of its dominance and market power. Google has consistently generated percent net (profit) margins that are between 4 and 8 times the U.S. corporate average, indicating that advertisersâ€™ costs are likely higher than they would be in a competitive market environment.
Rosenfeld argues that Google’s overestimate of its economic impact exceeds Rosenfeld’s own estimate by 100 times.
The study states: “Google takes credit for economic activity that is mostly generated by other economic agents. In reality, the contribution of Google’s search engine to the economy is very small, amounting to at most only 1% of the overestimated economic contribution claimed by Google in its reports.”
FairSearch opposed Google’s acquisition of ITA Software and backs the ongoing Federal Trade Commission probe of Google’s market power.
The coalition commissioned Rosenfeld’s economic analysis, and FairSearch states in a blog post that Rosenfeld “retained complete editorial control over his research findings and conclusions …”
In tandem with the study’s release, Robert Birge, the chief marketing officer of FairSearch member Kayak, refers to Google’s advertising programs as a “tax.”
“The Google tax isn’t obvious, but it’s very real,” Birge says. “As Google has become the starting place for most people on the Internet, companies large and small have to pay a toll in order to just show up on the consideration list. These costs are real, they are substantial, and they get passed along to the end user even if they are hidden.”
So, what is the overriding message here? Don’t trust Google’s pronouncements about its positive economic impact and rein in the search engine so that competitors can operate on a more-level playing field.
Ben Hammer, a FairSearch spokesman, puts it like this:
Googleâ€™s dominance online has real costs to consumers and the American economy, and any suggestion by Google to the contrary canâ€™t be taken at face value. As antitrust enforcers investigate whether Google is violating the law, and how to stop those specific practices, itâ€™s important to consider why this scrutiny is important — to ensure that American consumers and the economy gets the full benefit of truly competitive and free online markets.
Google didn’t immediately respond to a request for comment.