Stephen Foley: Why does Google make it so hard to search out investor info about itself?


Stephen Foley
Saturday 21 January 2012 01:00

US Outlook Waiting for Google's quarterly figures to land in your inbox is a bit like going to press the "I'm feeling lucky" button on the search engine's website. Usually, you get just the result you were hoping for. But sometimes, like this week, you get a very disappointing surprise.

The company's ad revenues came in shy of forecasts in the final three months of 2011, profits were way off, and the shares slumped back to the level they were at when founder Larry Page took over as chief executive last April. Instead of hailing another record-busting year, analysts instead went grubbing for details as to what happened in those closing months.

Google, of course, is not like other companies. It doesn't spoonfeed earnings guidance to analysts, so Wall Street forecasts are more of a guessing game than usual, and Mr Page is a long-term thinker who has always derided the idea of managing the business to hit one quarter's revenue or profit targets. So far, so laudable.

But like Google's complex search algorithm, its advertising business is a black box. Website publishers are constantly grumbling that tweaks to the algorithm can make a huge difference to where their sites appear in the hierarchy of Google results, and that it is hard to get a handle on how Google decides on those tweaks. Now, add investors to the list of complainers.

A couple of dozen small tweaks that Google implemented in the second half of last year, which made "quality or format changes" to the ads it serves up alongside search results, apparently brought an abrupt halt to the price increases Google has been able to push through for its ads.

Instead of rising, the "cost per click" was down 8 per cent in the final quarter. More people are clicking on ads served up alongside search results, but Google was silent on exactly why. Maybe it was because an increasing proportion were ads on mobile sites, maybe some other reason that analysts couldn't guess. Google execs cited "multiple factors" and parried all attempts to find out more. Maybe it isn't quite sure. Maybe its algorithm has become too complex for humans to fully comprehend.

You wouldn't expect Google to give up any trade secrets, but if it refuses to give earnings guidance, it ought to give investors the tools to learn more about its business. This is less important now, as Google's extraordinary profits are being swept up and up on the wave of money coming into online advertising. For the long-term health of its relationship with investors, transparency will be better than simply saying, "trust us".

A bad law defeated, but it's left a bad taste

It is heartening indeed to know that an internet-organised popular uprising can derail a bad law being pushed through Congress by aggressive lobbyists and technologically ignorant politicians.

The combination of shock value from Wikipedia's blackout this week and the unprecedented seven million signatures to an online petition has prompted lawmakers to go back to the drawing board on their Stop Online Piracy Act (Sopa), and hooray for that. So why does this leave such a bad taste in the mouth?

Of all the startling images on the web on Wednesday, and there were many, the most memorable were the blacked-out words on the homepage of the Wired magazine and on Google – as if the censor's pen had been applied to the internet. That's what censorship looks like. We know what censorship is. Sopa is (was) certainly not an attempt to censor the internet.

What Sopa's supporters hoped it would do is give copyright holders and law enforcement authorities the tools to go after websites that allow illegal file-sharing and get rich on the back of other people's intellectual property. Countries around the world have been tussling with these tough questions. Technologies and websites that enable piracy can also be used for legitimate purposes, so which ones are beyond the pale? Who decides? Who should review their decisions? And how do we take action against those who infringe?

Sopa is (was) bad law, overly broad, and short on the necessary legal checks and balances on the big Hollywood copyright owners whose lobbyists have been sponsoring the legislation. It was pregnant with unintended consequences. Best to get it right now, rather than to hope that the US courts will narrow its implementation, so that the proxy servers on which Chinese dissidents rely are not criminalised along with the Pirate Bays and Megauploads of today.

The US has fashioned a Sopa-style clampdown before, when it went after illegal online poker sites operating outside its borders. Congress passed laws to criminalise credit-card companies that processed payments they knew were going to poker sites, an effective piece of legislation that at a stroke wiped out the US business of a host of London-listed gaming companies.

Internet providers can and do block access to certain illegal sites, notably child porn sites, and criminalising business dealings with foreign pirates is possible. I understand technological workarounds can always be found, but making it harder to access pirated material (and easier and cheaper to buy legitimate movies and music) will be enough to dissuade most people.

These subtleties were not on display on Wednesday, and that is what has left a bad taste. The enforcement of intellectual property rights does not equal censorship.

Those who suggest they are the same are undermining the hundreds-of-years-old principle of copyright. And that really will have unintended consequences.

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