Google Questions £2 Billion Fine From The European CommissionBy Anna Gibbon
June 28, 2017
Google has made headlines once again this week, after being fined a mammoth €2.42bn ($2.7bn or £2.1bn). That’s a record-sized penalty, and is the most recent scandal to fall upon the heap of trouble Google seems to have found itself in lately.
So what exactly has Google done now?
The European Commission found Google guilty of breaking EU anti-trust rules, abusing its power by putting Google’s own shopping service at the top of certain search results. According to the Commission, this is both unfair and manipulative, with the Search Engine giant allegedly using their dominance in the market to “distort” results to their advantage.
In case you’re unfamiliar with Google’s shopping feature, it displays products relevant to a user’s search queries. These usually appear at the top of SERPs, dominating a large section of the page. It includes images and prices alongside other handy information, such as names of shops the products can be found in, and reviews and star-ratings if available.
In addition to this record-breaking fine, Google has been ordered to end its “anti-competitive” practices within 90 days. Failure to do so could mean the company will face a further penalty. Parent company, Alphabet, would be forced to make payments of 5% of their daily worldwide earnings. Estimates suggest this would be around $14m a day. This may sound completely mad, but remember that Alphabet currently has more than $172bn of assets.
Despite threats of further penalties, Google contests this ruling as unfair:
“We respectfully disagree with the conclusions announced today. We will review the Commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case.”
A fair ruling?
Ms Vestager, a spokesperson for the European Commission, claims that Google’s actions have “denied other companies the chance to compete on their merits and to innovate, and most importantly it has denied European consumers the benefits of competition, genuine choice and innovation.”
Now, we may just be a mere digital marketing agency, but in our experience, this isn’t necessarily the case. Google Shopping actually gives small brands a chance against the retail giants (think Amazon and Ebay) who have an unfair dominance within the organic search results.
Contrary to some belief, Google’s shopping feature allows smaller, more niche retails to compete with major players who have far more money, more products and more man-power. In fact, for SMEs, it’s one of the most effective online advertising platform in terms of Return on Ad Spend (ROAS).
The shopping feature helps businesses reach the people who are most likely to buy. For businesses smart enough to target niche search terms, this means going after relevant, high-converting traffic and leaving the more generic traffic to the big guys. This means that those with a smaller ad budget aren’t wasting any of that budget on users who weren’t likely to convert in the first place.
What’s more, when it comes to Google Shopping, a big budget isn’t the be-all and end-all. Thanks to ‘bidding’ options, increasing CPC (cost per click) isn’t always the way to get more sales. A bid high can just mean Google is showing your products for very generic queries from less-relevant searchers who are less likely to convert and thus overbidding can be detrimental. So for companies that don’t have a fighting chance to outbid in the first place strategies like geotargeting, campaign segmentation, RLSA lists etc. provide a welcome alternative way to win.
So while Google is being demonised as a somewhat greedy money-grabbing giant, in the case of Google Shopping, small businesses don’t necessarily have to invest a load of money to benefit. Money doesn’t equal an efficient Google Shopping campaign.
This seems to contradict Ms Vestager’s comment about Google’s so-called manipulative actions denying other companies the chance to compete and innovate. On Google’s Adwords blog, the company states their intention with Google Shopping is to “help small businesses like you tap into the power of customer intent to reach the right people with relevant products ads, when it matters the most”. The blog goes on to outline the way in which Google Shopping actually helps small and local businesses “gain a competitive edge and spark shoppers’ interest across the country by leveraging their strengths: unique designs and inspired products.” Far from “[denying] consumers the benefits of competition, genuine choice and innovation,” as Vestager fears, Google Shopping (in theory) prioritises and offers the user precisely that: competition, innovation and a way to discover and engage with smaller, unique brands (i.e. an alternative choice to the usual giants).
Another explanation for all the accusation?
According to the BBC’s report, Google believes the commission has a weak case with little evidence to prove that either consumers or rivals have been harmed by prioritising its own shopping service. It’s evident they intend to appeal. And why not? Google isn’t perfect, of course, they’re a successful, enormous mega-business with a ton of money and a lot of people aren’t cool with that. But really, who can blame them for using their own platform to promote themselves? Hey, we’re using our platform (our website) to promote ourselves right now. Head to Amazon, and what do they show you first? Their own product! Type in ‘tablet’ and what’s the first sponsored ad? Amazon’s all-new Fire HD.
So why all the fuss? Could there be another reason for the Commission’s strong reaction?
It is likely that these seemingly harsh measures can, in part, be explained by the current political climate. There is clearly a mounting anxiety over GAFA (the Google, Apple, Facebook and Amazon gang) who play a decisive role in determining what we all read, use and purchase today. GAFA is still relatively unregulated and uncontrolled, but their influence, reach, knowledge and power is growing every day. Further action to try to limit these online superpowers, therefore, should come as no surprise.
Another explanation for the lofty fine could be that Google has been under a lot of pressure over taxes recently, too. Perhaps this case was an attempt by the European Commission to try and recuperate some of the taxes they believe Google owes. While Google isn’t evading tax, they certainly arrange their business to reduce how much tax they pay and thus still not paying its “fair share” of tax in the UK. It’s much easier to avoid paying taxes than it is paying a fine.
Whatever the reason, it will certainly be interesting to see how this Google fine news story plays out over the coming months, as well as any consequences it may have for those businesses currently advertising with Google Shopping.
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