In European Antitrust Fight, Google Needs to Appease Competitors

The European Commission on Wednesday formally said for the first time that Google’s proposal for addressing antitrust concerns did not go far enough, and demanded that it come up with more far-reaching remedies or potentially face a fine of up to $5 billion.

It was a significant setback for Google, which in April struck a deal with the commission to settle its three-year antitrust investigation by making certain changes in the way it displays answers to search inquiries. But the deal was contingent on feedback from Google’s rivals. The commission determined that the proposal was inadequate, and said the company needed to do more to address rivals’ concerns.

The about-face followed an outcry from Google competitors during the market testing phase of the inquiry, in which the commission asked for feedback on the proposal.

“What they discovered in the market test was that overwhelmingly, everyone said the settlement was inadequate and doesn’t solve the problem,” said a person with knowledge about the feedback competitors gave the commission, but who spoke anonymously because the filings were not public.

Joaquín Almunia, the European Union competition commissioner, said at a news conference, “I concluded that the proposals that Google sent to us months ago are not enough to overcome our concerns.” He said he had written to Eric E. Schmidt, Google’s executive chairman, “asking Google to present better proposals.”

A Google spokesman, Al Verney, said on Wednesday that it would “continue to work” with the commission to settle the case. He added that Google was confident that its earlier proposal “clearly addresses” the commission’s concerns.

Mr. Almunia did not give Google a deadline for presenting a new set of concessions, according to a person with direct knowledge of Mr. Almunia’s letter who spoke anonymously. So the case, which both sides had hoped to close this year, could continue for several months or more.

The main issue is the way Google, which, according to comScore, handles 86 percent of Web searches in Europe, orders its search results. Regulators have been investigating whether Google favors its own services — like travel, local business, mapping and shopping — over those of competitors. Regulators have also examined whether it disadvantaged competitors by including material from other Web sites in search results and whether its advertising business complied with European antitrust law.

Google managed to avoid antitrust charges in the United States, where it has two-thirds market share, after a two-year investigation of similar issues. Google has faced a more hard-line approach in Europe, where critics have accused the antitrust authorities of relying too much on outside complaints from competitors rather than on evidence of consumer harm. That is somewhat of a sore point for European officials, who insist they share the same goals as the Americans when it comes to consumers.

In April, Google proposed to change its search results to clearly label results from some of its own properties, like Google Plus Local, and in some cases to show links from rival search engines. It also proposed giving competitors more control over how it used information from their sites in its vertical search results and making it easier for small businesses to transport their ad campaigns to other search engines.

The proposal was the first time Google had agreed to legally binding changes to its search results, and went much further than the minor concessions it made to the Federal Trade Commission in its inquiry.

Still, the proposal would not have required Google to change the algorithm that produces its search results. Also, if it had been accepted, Google would have escaped a possible fine of about 10 percent of its annual global revenue of about $50 billion and a formal finding of wrongdoing that could limit its ability to expand in Europe.

James Kanter reported from Brussels, and Claire Cain Miller from San Francisco.

As Web Search Goes Mobile, Competitors Chip at Google’s Lead

Either way, Google lost a customer.

Google remains the undisputed king of search, with about two-thirds of the market. But the nature of search is changing, especially as more people search for what they want to buy, eat or learn on their mobile devices. This has put the $22 billion search industry, perhaps the most lucrative and influential of online businesses, at its most significant crossroad since its invention.

No longer do consumers want to search the Web like the index of a book — finding links at which a particular keyword appears. They expect new kinds of customized search, like that on topical sites such as Yelp, TripAdvisor or Amazon, which are chipping away at Google’s hold. Google and its competitors are trying to develop the knowledge and comprehension to answer specific queries, not just point users in the right direction.

“What people want is, ‘You ask a very simple question and you get a very simple answer,’ ” said Oren Etzioni, a professor at the University of Washington who has co-founded companies for shopping and flight search. “We don’t want the 10 blue links on that small screen. We want to know the closest sushi place, make a reservation and be on our way.”

People are overwhelmed at how crowded the Internet has become — Google says there are 30 trillion Web addresses, up from 1 trillion five years ago — and users expect their computers and phones to be smarter and do more for them. Many of the new efforts are services that people do not even think of as search engines.

Amazon, for example, has a larger share than Google of shopping searches, the most lucrative kind because people are in the mood to buy something. On sites like Pinterest and Polyvore, users have curated their favorite things from around the Web to produce results when you search for, say, “lace dress.”

On smartphones, people skip Google and go directly to apps, like Kayak or Weather Underground. Other apps send people information, like traffic or flight delays, before they even ask for it.

People use YouTube to search for things like how to tie a bow tie, Siri to search on their iPhones, online maps to find local places and Facebook to find things their friends have liked.

And services like LinkedIn Influencers and Quora are trying to be different kinds of search engines — places to find high-quality, expert content and avoid weeding through everything else on the Web. On Quora, questions like “What was it like to work for Steve Jobs?” get answered by people with firsthand knowledge, something Google cannot provide.

“There is a lot of pressure on search engines to deliver more customized, more relevant results,” said Shar VanBoskirk, an analyst at Forrester. “Users don’t need links to Web pages. We need answers, solutions, whatever intel we were searching for.”

But Google remains the one to beat, even as alternative search sites become popular. “They’re the specialty store you’re going into here and there,” said Danny Sullivan, an editor of Search Engine Land, a blog, “but they’re not your grocery store.”

Yet the promise of search is big enough that even though Microsoft loses billions of dollars a year on Bing and has failed to make a dent in Google’s market share, it keeps at it. Microsoft — which in February had 17 percent of the market, and 26 percent including the searches it powered for Yahoo — has said it views search as essential to its other products, from the Xbox to phones. And there is still a lot of money to be made as No. 2.

“You have millions of people a day saying exactly what they want, and if you’re an advertiser, it’s a beautiful vehicle,” Mr. Sullivan said.

EMarketer estimates that Google earns about three-quarters of search ad spending. Search engines bring companies troves of data and a measure of control as Internet users’ entry point to the digital world.

There are signs that people’s search behaviors are changing, however, with consequences for these companies.