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Yelp’s Six-Year Grudge Against Google

Jeremy Stoppelman, chief executive of Yelp, the local search and reviewing site, would like this article to be focused on his company’s growth, or on how its reviews help independent businesses, or on pretty much anything besides what it is about: how Yelp became Google’s most tenacious pest.

“If you were to have asked me 15 years ago, ‘Hey, are you going to be an antitrust crusader?’ I would have said, ‘No, I have no interest in that,'” he said in a recent interview. “That was not a childhood dream.”

For six years, his company has been locked in a campaign on three continents to get antitrust regulators to punish Google, Yelp’s larger, richer and more politically connected competitor. He has testified before Congress, written op-ed columns and used Twitter to bash Google’s behavior.

Google wasn’t always a rival. At one point, it was a suitor. But out of that union that never happened was born a mighty grudge, perhaps even an obsession.

At one point, Yelp held a hackathon to create a sort of alternate-universe Google, the better for it to explain Google’s ways to regulators. And then you have Luther Lowe.

Mr. Lowe, Yelp’s vice president for government relations, once spent $3,000 on a stuffed elephant, because it had been knit by Europe’s antitrust chief.

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Unlike Google, whose office is full of artwork and free food, Yelp’s Washington presence is just a rented co-working space. So Mr. Lowe keeps the elephant at Yelp’s San Francisco headquarters, where there is more room. “This is a shoestring operation,” he said.

But after years of trying and failing, that operation has finally landed a good punch. On Tuesday, the European Union fined Google $2.7 billion — the largest antitrust fine in its history — for unfairly favoring its own services over those of its rivals. The fine was related to Google’s shopping service, so strictly speaking it had nothing to do with the Yelp-Google dispute, which is part of a separate investigation into local search.

Still, Yelp and other American technology companies pushed hard to get regulators to issue a bold condemnation of Google’s behavior toward competitors, signing a letter that accused Google of “destroying jobs and stifling innovation.” And by affirming that Google is the dominant company in online search — something most people take for granted — Tuesday’s decision is likely to help Yelp’s case.

Asked about future investigations, Margrethe Vestager, the antitrust chief, offered a diplomatic answer, saying that even though other cases make similar allegations against Google, they must be considered one by one.

“The one thing that has sort of changed from yesterday, before the decision was taken, was that now we will consider Google as a dominant company,” she said.

Yelp is one of a number of American companies — Microsoft and Oracle are others — that have agitated for the world’s governments to take up the fight against Google. It is one tiny player, but through persistence and doggedness, and by being loud and public with its complaints, it has become an unusually prominent voice.

Mr. Stoppelman feels he has no choice. Like a lot of small internet companies, Yelp lives in a world where one company, Google, accounts for an outsize share of its business, and could destroy it at any time. Its complaints to regulators are less about working toward some epic and definitive conclusion than they are about continuously brushing back the giant so Yelp can have more room to grow.

“It’s like, you get traffic from this company, and this company is a monopoly,” he said. “If you’re me, it seems like the obvious move.”

Yelp’s campaign against Google provides an inside look at a constant battle in the technology industry: the conflict between large companies that control how people use technology and the internet, and the smaller, more vulnerable businesses that live inside those platforms.

Be it Netscape, whose 1990s-era internet browser was the catalyst for antitrust charges against Microsoft and its Windows operating system, or Spotify, whose music service must now compete with Apple’s own music app, any company trying to build a business on another company’s system runs the risk of being snuffed out or swallowed up.

For Yelp, the issue is where Google displays “organic” website rankings — the ones spit out by its algorithm — in relation to the “vertical” results that Google itself provides.

For example, say you searched for “steakhouse New York.” The first set of results, consuming the entire screen of a mobile phone, is a map and a set of restaurants from Google’s local offering. The results have information like hours, stars and customer reviews. Below that are links to reviews, articles and other sites. Like Yelp.

Yelp’s contention is that by putting its own results at the top, Google is giving itself an unfair advantage, because those results don’t have to jump through the same algorithmic hoops non-Google sites are subjected to. And since Yelp says few people go beyond the first or second result, companies like Yelp are made invisible.

Google disagrees. The company declined to comment beyond its official statement on the European fine, but it has repeatedly said that as smartphones displace desktop computers as the internet gateway, people just want the answer to their question — not a link to a site where they might have to repeat the query — and that Google’s results oblige.

Local queries — such as looking for nearby restaurants — account for roughly a third of all search traffic. So Google has a big incentive to keep people within its search engine, where it can sell ads, instead of sending them to Yelp, which also sells ads.

Separately, some businesses have claimed that Yelp stacks the deck by playing up bad reviews when businesses don’t buy ads from it. Yelp has denied those claims.

This dispute would be moot if people were in the habit of using a variety of search engines. Google has become so universally known and depended upon that it is sometimes hard to remember that it is a company, and it exists to make money.

But as Microsoft learned in its 1990s antitrust battle, companies can face a heap of legal problems when their platform becomes so popular that people hardly use anything else. With one strike against it now in Europe, Google may be increasingly careful about how it treats competitors throughout the search engine.

“Even if nothing else takes place, a consequence of this kind of intervention, so visible and so significant, has been to give other firms more room to maneuver,” said William E. Kovacic, a former chairman of the United States Federal Trade Commission and now a professor at the George Washington University Law School.

Google is sitting on close to $100 billion in cash, so the $2.7 billion fine — a sum larger than Yelp’s market capitalization — is hardly unmanageable.

A larger concern is that the decision, and the potential for other antitrust actions, will limit Google’s ability to position ads around its search box. And for all the talk about self-driving cars and delivery drones, Google is still the foundation of a big advertising company.

“We’ve never been as concerned as we are following this ruling,” said Ben Schachter, an analyst with Macquarie Securities, after the fine was announced.

The impact is hard to discern, because it’s impossible to judge whether Google has done wrong — and if so, how to make things right — without delving into minute detail about software algorithms and concepts like “consumer harm.” Explaining all that, in a way that ordinary people can understand, has been Yelp’s principal challenge with regulators. The war over how Google serves up information has been an information war.

In summer 2004, a few months before the highly anticipated moment when Google first took its shares to market, Mr. Stoppelman got the flu. He searched the internet for a doctor, but instead of learning anything — like whether a doctor’s patients were satisfied, or the ease of getting an appointment — he kept landing on insurance websites.

This gave him an idea: How about a site where users rate and review local services? He and a co-founder got $1 million from investors and began work on the site that became Yelp. A year later, Yelp signed a two-year licensing deal that allowed Google to use Yelp content.

“It was better to be friends than enemies at that stage,” Mr. Stoppelman said.

Later, when the deal came up for renewal, Google told Mr. Stoppelman that it would soon add a feature allowing its own users to review and rate local services. Worried that Google wanted to create a parallel service that would snuff out his company, Mr. Stoppelman declined to renew the license.

Two years later, Google offered to buy Yelp for $550 million. One concern analysts raised about the proposed deal was that if Google owned Yelp, it might steer users toward Yelp instead of its organic search results — that is, the kind of steering Yelp says Google is now doing for its own benefit. The deal fell apart, however, and Google focused instead on building its own offering.

By 2011, Google was facing inquiries by various federal and state authorities along with regulators in Europe and Asia. It had steadily added services focused on areas like local businesses, comparison shopping and travel, and companies were complaining that it was giving its own properties preferred treatment in results.

That year, Mr. Stoppelman got worried about something else. Google, he said, was taking Yelp’s reviews and using them in Google products that competed with Yelp. When he raised these concerns, he said, Google responded that it was displaying information derived from search results, and that if Yelp objected, it could simply withhold its content from the search engine.

Given Google’s market share, the response amounted to saying “take yourself off the internet,” Mr. Stoppelman said. “That would have destroyed the company, so it was a false choice.”

Yelp took its first step into the regulatory arena that July, when Vince Sollitto, the company’s senior vice president for communications and government relations, accused Google of stealing Yelp content at a conference of state attorneys general.

The next day, according to Mr. Stoppelman, a Google executive sent him an email saying it would stop. A Google spokesman said the decision had been made long before, and was unrelated to the prosecutors’ gathering. Nonetheless, Yelp concluded that there was no better way to get Google’s attention than to raise the specter of regulation.

“The pattern was that they would do something pushing the envelope or, frankly, evil, and we would complain about it privately, and they would say they would fix it, and nothing would happen,” Mr. Stoppelman said. “We realized that if we were going to get what we wanted, we had to be very scrappy.”

Mr. Stoppelman appeared before a Senate panel to complain about Google’s behavior. Yelp elevated Mr. Lowe to the new position of director of government affairs, a job that more or less entails flying around the world trying to sic antitrust regulators on Google. Over the next few years, Yelp hired its first lobbyist and started a political action committee. Recently, it has started filing complaints in Brazil.

For a moment, it seemed as if Google risked major regulatory action. It was under investigation by the Federal Trade Commission, and in Europe. But in early 2013, the F.T.C. decided it would not pursue a case. It later came out that an internal report had recommended stronger action, but Yelp and other companies had turned their focus back to Europe.

“I thought, this is a chance to totally refine our strategy,” Mr. Lowe said.

Mr. Lowe is from Arkansas and speaks with a slight drawl. He is passionate and garrulous and has a habit of sometimes tattooing his audience with a mix of detailed history and arcane policy points about Yelp’s problems with Google. He is crushed if listeners don’t find it to be as big a deal as he does.

He said he learned some hard lessons when the F.T.C. closed its Google investigation. The first was that antitrust law is boring, complicated and political. The second was that technology is difficult to explain, even to regulators.

Mr. Sollitto, who made the presentation at the prosecutors’ meeting, said that during the trade commission’s case, he had found himself making imperfect analogies, such as the one that Google was the only store in town and put all of its own products on the best shelves. Not an unusual thing for a merchant to do, he concedes, except that Google puts competitors’ products on shelves that are out of reach.

“We were having a difficult time explaining to the F.T.C. why consumers were harmed,” he said.

In March 2013, Mr. Lowe asked Yelp engineers if they could build an online simulator showing what Google would look like if its own services had to live by the algorithm dictating the position of third-party services, like Yelp.

“They need something they can touch and experience,” he wrote in an email.

During a company hackathon, engineers created software that produced pages of search results ranked purely by an algorithm and compared them with Google’s presentation. Their conclusion, which Google disputes, is that Google was providing its users with less useful information by steering them to its own products instead of results from around the web.

That month, Joaquín Almunia, then the European Union’s antitrust chief, announced he was discussing a possible settlement with Google, and asked interested parties for comments. In addition to the legal documents it had sent to the F.T.C., Yelp submitted a white paper that it said showed users preferred outside companies’ results over Google’s in-house products.

This was based on the software Yelp had started developing at the hackathon, and Mr. Lowe flew to Brussels to give a demonstration to regulators. That presentation later became the basis for a website called Focus on the User.

“You can do PowerPoints all day long, but it’s hard for people to understand until they can sit in the driver’s seat and come up with their own searches and see the results for themselves,” Mr. Lowe said.

By early 2014, it looked as though Europe’s investigation was over as well. Mr. Almunia announced a settlement within which Google would escape a fine and a finding of wrongdoing but would agree to increase its rivals’ visibility in search results. The deal fell apart when French and German officials argued that it did too little, and American companies, including Yelp, submitted studies showing scant gains for Google’s competitors.

When Mr. Almunia’s term ended without a settlement, and Ms. Vestager became Europe’s new head of competition, Yelp went into a full-on political campaign. Mr. Lowe started building a small European government-relations operation, which he staffed with employees from companies and consumer groups that were also pursuing complaints about Google.

In April 2015, Ms. Vestager filed formal antitrust charges against Google, saying it had abused its market dominance by systematically favoring its own comparison shopping service over those of its rivals. In addition to a reputation for toughness, Ms. Vestager is known for knitting during meetings. Shortly after the charges were filed, one of her works, an elephant, was featured in a charity auction.

Mr. Lowe bid for it online, and ended up spending $3,000. “I don’t know why, but I had to have it,” he said.

The European Union’s various cases against Google are likely to drag on for years, and it’s not clear when local search issues will become a priority. And Microsoft, which had initially been Google’s fiercest critic in Europe, has now backed away.

A few months after Europe filed its first antitrust charges, Microsoft withdrew its regulatory complaints against the search giant because of “changing legal priorities.” Last year, it dropped out of FairSearch, an anti-Google industry group.

Mr. Stoppelman said Yelp had no real choice but to keep at the regulators. “It’s just part of the overall competition playbook for us,” he said.

It would be hard to find a drier assessment than the one from Mark Mahaney, a veteran internet analyst at RBC Capital Markets in San Francisco. Mr. Mahaney covers both Google’s stock and Yelp’s. Right now, he recommends buying Google, but not Yelp.

The reason is something he calls the Death of Free Google. As the internet has migrated to mobile phones, Google has compensated for the smaller screen space by filling it with so many ads that users can have a hard time finding a result that hasn’t been paid for.

Asked about Yelp’s regulatory battles with Google, Mr. Mahaney said he had no idea what kind of impact, if any, it might have on the company’s prospects. Still, it never hurts to try.

“I’m not a lawyer,” he said, “but the decision by Yelp to go to regulators made a lot of business sense.”

Source: Tech CNBC
Yelp’s Six-Year Grudge Against Google

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