Business

September 7, 2008

Pepperjam casts a wary eye at huge partner

Pepperjam casts a wary eye at huge partner

MICHAEL LIEDTKE AP Technology Writer

MOUNTAIN VIEW, Calif. — When Larry Page and Sergey Brin founded Google Inc. on Sept. 7, 1998, they had little more than their ingenuity, four computers and an investor’s $100,000 bet on their belief that an Internet search engine could change the world.

It sounded preposterous 10 years ago, but look now: Google draws upon a gargantuan computer network, nearly 20,000 employees and a $150 billion market value to redefine media, marketing and technology.

Perhaps Google’s biggest test in the next decade will be finding a way to pursue its seemingly boundless ambitions without triggering a backlash that derails the company.

“You can’t do some of the things that they are trying to do without eventually facing some challenges from the government and your rivals,” said Danny Sullivan, who has followed Google since its inception and is now editor-in-chief of SearchEngineLand.

Even business partners have concerns. “Ironically, Google is both a partner and a competitor,” said Kristopher Jones, founder and chief executive of Wilkes-Barre-based internet marketer Pepperjam.

Pepperjam built its business by connecting buyers and sellers through search engine marketing and “since Google is far and away the market leader it is imperative that we have a partnership with them,” Jones said. The cooperation includes having a dedicated agency team at Google that can provide 24-hour service.

But Google also launched a competing service to Pepperjam’s new affiliate network, on which advertisers and internet publishers can track referrals and sales. Jones is casting a wary eye at the larger firm’s offering, because he expects the network to grow faster than Pepperjam’s other divisions.

“With Google’s immense and virtually unlimited resources they have the ability to make life very difficult for companies with less resources,” he said. “I see the relationship now as more competitive than it ever has been.”

Intensifying regulatory and political scrutiny on Google’s expansion also could present roadblocks. Even now, there’s a chance U.S. antitrust regulators will challenge Google’s plan to sell ads for Yahoo Inc., a fading Internet star whose recent struggles have been magnified by Google’s success.

Privacy watchdogs also have sharpened their attacks on Google’s retention of potentially sensitive information about the 650 million people who use its search engine and other Internet services like YouTube, Maps and Gmail. If the harping eventually inspires rules that restrict Google’s data collection, it could make its search engine less relevant and its ad network less profitable.

To protect its interests, Google has hired lobbyists to bend the ears of lawmakers and ramped up its public relations staff to sway opinion as management gears up to conquer new frontiers.

“Google will keep pushing the envelope,” predicted John Battelle, who wrote a book about the company and now runs Federated Media, a conduit for Internet publishers and advertisers. “It’s one of the things that seems to make them happy.”

In the latest example of its relentless expansion, Google has just released a Web browser to make its search engine and other online services even more accessible and appealing. Not every peripheral step has gone smoothly, though; several of the company’s ancillary products have flopped or never lived up to the hype.

Extending Google’s ubiquity to cell phones and other mobile devices sits at the top of management’s agenda for the next decade.

But the lengthy to-do list also includes: making digital copies of all the world’s books; establishing electronic file cabinets for people’s health records; leading the alternative energy charge away from fossil fuels; selling computer programs to businesses over the Internet; and tweaking its search engine so it can better understand requests stated in plain language, just like a human would.

“There are people who think we are plenty full of ourselves right now, but from inside at least, it doesn’t look that way,” said Craig Silverstein, Google’s technology director and the first employee hired by Page and Brin. “I think what keeps us humble is realizing how much further we have to go.”

Page and Brin, both 35 now and worth nearly $19 billion apiece, declined to be interviewed for this story. But they have never left any doubt they view Google as a force for good — a philosophy punctuated by their corporate motto: “Don’t Be Evil.”

“If we had a light saber, we would be Luke (Skywalker),” Silverstein said.

A “Star Wars” analogy can just as easily be used to depict Google as an imposing empire. It holds commanding leads in both the Internet search and advertising markets. The company processes nearly two-thirds of the world’s online search requests, according to the research firm comScore Inc., and sells about three-fourths of the ads tied to search requests, according to another firm, eMarketer Inc.

The dominance has enabled Google to rake in $48 billion from Internet ads since 2001. Google hasn’t hoarded all of that money: the company has paid $15 billion in commissions to the Web sites that run its ads during the same period, helping to support major online destinations like AOL, Ask.com and MySpace as well as an array of bloggers.

“Google is the oxygen in this ecosystem,” Battelle said.

But some rivals are determined to thwart Google. TV and movie conglomerate Viacom Inc. is suing Google for $1 billion for alleged copyright infringement at YouTube, while Microsoft signaled how desperately it wants to topple Google by offering to buy Yahoo for $47.5 billion this year.

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