Herbert Kohl 00:00:24 EVERYONE WHO SEARCHES OR DOES BUSINESS OVER THE INTERNET. 00:00:26 EVERYBODY. 00:00:26 IN OTHER WORDS, ALMOST WE'LL EXAMINE HOW THE WORLD'S DOMINANT INTERNET SEARCH ENGINE, NAMELY GOOGLE, PRESENTS ITS SEARCH RESULTS TO CONSUMERS AND TREATS THE BUSINESSES IT COMPETES WITH. 00:00:39 OUR INQUIRY CENTERS ON WHETHER GOOGLE BIASES THESE RESULTS IN ITS FAVOR, AS ITS CRITICS CHARGE, OR WHETHER GOOGLE SIMPLY DOES ITS BEST TO PRESENT RESULTS IN A MANNER WHICH BEST SERVES ITS CONSUMERS, AS IT CLAIMS. 00:00:52 AT THE OUTSET, I

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Google Oversight September 2011
Herbert Kohl
00:00:24 EVERYONE WHO SEARCHES OR DOES BUSINESS OVER THE
INTERNET. 00:00:26 EVERYBODY. 00:00:26 IN OTHER WORDS, ALMOST WE'LL
EXAMINE HOW THE WORLD'S DOMINANT INTERNET SEARCH ENGINE, NAMELY
GOOGLE, PRESENTS ITS SEARCH RESULTS TO CONSUMERS AND TREATS THE
BUSINESSES IT COMPETES WITH. 00:00:39 OUR INQUIRY CENTERS ON WHETHER
GOOGLE BIASES THESE RESULTS IN ITS FAVOR, AS ITS CRITICS CHARGE, OR
WHETHER GOOGLE SIMPLY DOES ITS BEST TO PRESENT RESULTS IN A MANNER
WHICH BEST SERVES ITS CONSUMERS, AS IT CLAIMS. 00:00:52 AT THE OUTSET, I
WISH TO STRESS I COME TO THIS HEARING WITH AN ENTIRELY OPEN MIND,
WITHOUT ANY PREJUDGMENT OF THESE ISSUES. 00:01:00 MY GOAL IS TO PROVIDE
BOTH GOOGLE AND ITS CRITICS WITH A FORUM TO AIR THEIR VIEWS. 00:01:07 IN
EXAMINING THESE ISSUES, WE RECOGNIZE THE INCREDIBLE TECHNOLOGICAL
ACHIEVEMENTS OF GOOGLE, AND THE NEED TO AVOID STIFLING ITS CREATIVE
ENERGY. 00:01:16 AT THE SAME TIME, WE NEED TO BE MINDFUL OF THE HUNDREDS
OF THOUSANDS OF BUSINESSES THAT DEPEND ON GOOGLE TO GROW AND
PROSPER. 00:01:24 WE ALSO NEED TO RECOGNIZE THAT AS A DOMINANT FIRM AND
INTERNET SEARCH, GOOGLE HAS SPECIAL OBLIGATIONS UNDER ANTITRUST LAW
NOT TO DEPLOY ITS MARKET POWER TO SUCCESSFUL MUCH COMPETITION.
00:01:37 THERE COULD BE NO QUESTION OF THE ASTOUNDING ACHIEVEMENTS OF
GOOGLE'S SEARCH ENGINE. 00:01:43 THROUGH THE MAGIC OF ITS SEARCH
TECHNOLOGY, GOOGLE, A COMPANY LITERALLY STARTED IN A GARAGE BY LESS
THAN 15 YEARS AGO HAS DONE NOTHING LESS THAN ORGANIZE ALL THE
BILLIONS OF INTERNET WEB PAGES INTO AN EASILY ACCESSIBLE LISTING ON THE
COMPUTER SCREEN. 00:02:03 65 TO 70% OF ALL U.S. INTERNET SEARCHES ON
COMPUTERS, AND 95% ON MOBILE DEVICES ARE DONE ON GOOGLE'S SEARCH
ENGINE. 00:02:13 MILLIONS OF PEOPLE EVERYDAY RUN GOOGLE'S SEARCHES TO
FIND OUT THE ANSWER TO NEARLY EVERY QUESTION IMAGINABLE, INCLUDING
FOR THE BEST AND CHEAPEST PRODUCTS AND SERVICES FROM ELECTRONICS TO
CLOTHING TO HOTELS TO RESTAURANTS, TO GIVE JUST A FEW EXAMPLES. 00:02:28
AND BUSINESSES EQUALLY RELY ON GOOGLE TO FIND CUSTOMERS. 00:02:31 THE
SEARCH PREMISE OF GOOGLE AT ITS FOUNDING IS THAT IT WOULD BUILD AN
UNBIASED SEARCH ENGINE THAT CONSUMERS WOULD SEE THE MOST RELEVANT
SEARCH RESULT FIRST, AND THAT THE SEARCH RESULTS WOULD NOT BE
INFLUENCED BY THE WEB PAGE'S COMMERCIAL RELATIONSHIP WITH GOOGLE.
00:02:48 THE USER OFF GOOGLE'S HOME PAGE AND ON TO THE POSSIBLE. 00:02:53
WEBSITES THAT LIST AS SOON AS AS GOOGLE'S CO FOUNDER AND CURRENT CEO,
LARRY PAGE, SAID IN 2004, AND I QUOTE, WE WANT YOU TO COME TO GOOGLE
AND QUICKLY FIND WHAT YOU WANT. 00:03:04 THEN WE'RE HAPPY TO SEND YOU
TO THE OTHER SITES. 00:03:08 IN FACT, THAT'S THE POINT. 00:03:09 HOWEVER, AS
INTERNET SEARCHES BECOME A MAJOR CHANNEL OF E-COMMERCE, GOOGLE
HAS GROWN EVER MORE DOMINANT AND POWERFUL, AND IT APPEARS ITS
MISSION MAY HAVE CHANGED. 00:03:22 IN THE LAST FIVE YEARS OR SO, GOOGLE
HAS BEEN ON AN ACQUISITION BINGE, ACQUIRING DOZENS OF BUSINESSES,
CULLMENT NATURING MOST RECENTLY WITH ITS PROPOSED ACQUISITIONS OF
MOTOR OIL MOBILITY AND ZAGOTS. 00:03:37 IT NOW OWNS SEVERAL BUSINESSES,
INCLUDING HEALTH, TRAVEL, FINANCE AND COMPARISON. 00:03:41 THIS HAS
TRANSFORMED GOOGLE FROM A ME SEARCH ENGINE INTO A MAJOR INTERNET
CONGLOMERATE. 00:03:48 AND THESE ACQUISITIONS RAISE A VERY
FUNDAMENTAL QUESTION. 00:03:51 IS IT POSSIBLE FOR GOOGLE TO BE BOTH AN
UNBIASED SEARCH ENGINE AND AT THE SAME TIME OWN A VAST PORTFOLIO OF
WEB-BASED PRODUCTS AND SERVICES? 00:04:01 DOES GOOGLE'S
TRANSFORMATION CREATE AN INHERENT CONFLICT OF INTEREST, WHICH
THREATENS TO STIFLE COMPETITION? 00:04:07 IN THE LAST FEW YEARS,
INTERNET BUSINESSES THAT COMPETE WITH GOOGLE'S NEW PRODUCTS AND
SERVICES HAVE COMPLAINED THAT GOOGLE IS NOW BEHAVING IN A WAY
CONTRARY TO FREE AND FAIR COMPETITION. 00:04:18 THEY ALLEGE THAT
GOOGLE IS TRYING TO LEVERAGE ITS DOMINANCE IN INTERNET SEARCH INTO
KEY AREAS OF INTERNET COMMERCE, WHERE IT STANDS TO CAPTURE FROM ITS
COMPETITORS BILLIONS OF DOLLARS IN ADVERTISING REVENUE. 00:04:32
RATHER THAN FAIRLY PREVENTING SEARCH RESULTS, THESE CRITICS CLAIM
GOOGLE HAS BEGUN TO SUDDENLY BIAS ITS SEARCH RESULTS IN FAVOR OF ITS
OWN SERVICES. 00:04:42 THIS CONDUCT HAS THE POTENTIAL TO SUBSTANTIALLY
HARM COMPETITION FOR COMMERCE ON THE INTERNET, AND RETIRED
INNOVATION BY COMPANIES THAT FEAR THE MARKET POWER OF GOOGLE.
00:04:55 ANTITRUST IS NOT ABOUT PICKING WINNERS AND LOSERS BUT ABOUT
FOSTERING A FULLY COMPETITIVE ENVIRONMENT SO CONSUMERS CAN FAIRLY
PICK WINNERS AND LOSERS. 00:05:04 AS MORE AND MORE OF OUR COMMERCE
MOVES TO THE INTERNET, IT SHOULD BE THE HIGHEST PRIORITY OF ANTITRUST
POLICYMAKERS AT THE INTERNET REMAIN A BASTION OF FREE AND OPEN
COMPETITION. 00:05:17 WE NEED TO PROTECT THE ABILITY OF THE NEXT GOOGLE
TO EMERGE, THE NEXT GREAT WEBSITE OR APPLICATION BEING DEVELOPED IN A
GARAGE IN SILICON VALLEY OR IN MADISON, WISCONSIN.
Michael Lee -U.S. Senator
[R] UT
00:05:36 STATES. 00:05:37 AND GOOGLE HAS LONG BEEN A DOMINANT FORCE
IN THIS ARENA. 00:05:42 INDEED, AMERICANS GOOGLE SO FREQUENTLY AND
UBIQUITOUSLY THAT THE COMPANY'S NAME HAS BECOME A GENERIC VERB THAT
MEANS TO SEARCH THE INTERNET. 00:05:51 IN THE UNITED STATES, GOOGLE
CONTROLS SOMEWHERE BETWEEN 65 AND 70% OF THE GENERAL INTERNET
SEARCH ARENA. 00:05:59 ADVERTISING. 00:05:59 AND MORE THAN 75% OF PAID
SEARCH AND 95% OF MOBILE SEARCH. 00:06:03 GIVEN ITS DOMINANT POSITION,
MOST INTERNET-BASED BUSINESSES RELY ON GOOGLE FOR A SUBSTANTIAL
SHARE OF THEIR TRAFFIC AND REVENUES. 00:06:11 AS A RESULT, LAST YEAR
GOOGLE GENERATED NEARLY $30 BILLION IN SEARCH ADVERTISING REVENUES.
00:06:18 STUDIES SHOW WHAT MOST OF US KNOW FROM EXPERIENCE. 00:06:21
THAT THE FIRST FEW GOOGLE SEARCH RESULTS ATTRACT NEARLY 90% OF ALL
USER CLICKS. 00:06:27 GOOGLE'S SEARCH RANKING, THEREFORE, HAS ENORMOUS
POWER OVER THE INFORMATION USERS FIND. 00:06:33 WHICH WEBSITES RECEIVE
TRAFFIC AND THE AMOUNT BUSINESSES MUST PAY TO BE FOUND ON THE
INTERNET. 00:06:40 A FORMER REAGAN ADMINISTRATION ANTITRUST CHIEF
RECENTLY SUGGESTED THAT THIS MARKET POWER HAS ESSENTIALLY MADE
GOOGLE A MONOPOLY GATE-KEEPER TO THE INTERNET. 00:06:49 WHETHER OR
NOT GOOGLE FORMALLY QUALIFIES AS A MONOPOLY UNDER OUR ANTITRUST
LAWS, ONE THING IS CLEAR. 00:06:56 GIVEN ITS SIGNIFICANT ABILITY TO STEER E-
COMMERCE AND THE FLOW OF ONLINE INFORMATION, GOOGLE IS IN A POSITION
TO HELP DETERMINE WHO WILL SUCCEED AND WHO WILL FAIL ON THE
INTERNET. 00:07:07 IN THE WORDS OF THE HEAD OF GOOGLE'S SEARCH RANKING
TEAM, GOOGLE IS, QUOTE, THE BIGGEST KING-MAKER ON EARTH. 00:07:15 CLOSE
QUOTE. 00:07:16 GOOGLE HAS USED ITS SUBSTANTIAL ADVERTISING REVENUES TO
BRANCH OUT INTO A MULTITUDE OF SECONDARY INTERNET BUSINESSES. 00:07:24
LARGELY BY ACQUIRING MORE THAN 100 DIFFERENT COMPANIES, GOOGLE NOW
OFFERS YOUTUBE VIDEO, G MAIL, CHROME INTERNET BROWSER, GOOGLE PLUS,
SOCIAL NETWORKING, THE ANDROID MOBILE SMARTPHONE OPERATING SYSTEM
AND A HOST OF SERVICES INCLUDING GOOGLE MAPS, NEWS, BOOKS, SHOPPING,
PLACES AND FLIGHT SEARCH. 00:07:42 AND WITH ITS RECENT PURCHASE OF
MOTOROLA MOBILITY, GOOGLE IS NOW POISED TO GET INTO THE BUSINESS OF
MOBILE HANDSET MANUFACTURING. 00:07:49 GOOGLE'S EXPANSION INTO SO
MANY AREAS, A LARGE NUMBER OF BUSINESSES, ADVERTISERS AND CONSUMER
GROUPS HAVE RAISED CONCERNS REGARDING GOOGLE'S ACTIVITIES,
SUGGESTING THE COMPANY MAY BE ACTING IN DECEPTIVE AND ANTI-
COMPETITIVE WAYS. 00:08:01 AS A RESULT, GOOGLE IS UNDER INVESTIGATION BY
ANTITRUST AUTHORITIES, BOTH IN THE UNITED STATES AND ABROAD. 00:08:06
THIS SUBCOMMITTEE HAS OVERSIGHT OF ANTITRUST ENFORCEMENT AND
COMPETITION POLICY, AND I APPRECIATE CHAIRMAN KOHL'S LEADERSHIP IN
CALLING A HEARING TO ADDRESS THIS IMPORTANT TOPIC. 00:08:17 FROM ITS
INESSENTIAL, GOOGLE'S STATED GOAL WAS TO HAVE USERS LEAVE ITS WEBSITE
AS QUICKLY AS POSSIBLE. 00:08:21 BUT OVER TIME, THE COMPANY APPEARS TO
HAVE CHANGED ITS APPROACH, TO STEER USERS NOT TO OTHER BUSINESSES AND
SOURCES OF INFORMATION, BUT TO ITS OWN COMPLEMENT OF COMPETING
SERVICES. 00:08:31 GOOGLE HAS WORKED HARD TO CULTIVATE THE PUBLIC
PERCEPTION THAT ITS SEARCHES ARE COMPREHENSIVE AND UNBIASED. 00:08:37
BUT THERE IS GROWING CONCERN THAT GOOGLE EMPLOYS DIFFERENT SEARCH
RANKING ALGORITHMS AND MORE ATTRACTIVE VISUAL DISPLAYS TO
ADVANTAGE ITS OWN SECONDARY SITES AND PRODUCTS TO THE DETRIMENT OF
COMPETING SPECIALIZED SEARCH SITES AND TO OTHER DISADVANTAGED
BUSINESSES. 00:08:51 THERE'S ALSO EVIDENCE THAT GOOGLE HAS TAKEN
INFORMATION AND REVIEWS FROM COMPETING SPECIALIZED SEARCH SITES
LIKE YELP AND TRIP ADVISER, USED THAT DATA AS PART OF ITS OWN SERVICES,
AND IN THE PROCESS, DEMOTED THE SEARCH RESULT RANKINGS OF THE SITES
FROM WHICH GOOGLE ACQUIRED THAT INFORMATION. 00:09:08 IN ADDITION,
SOME REPORTS SUGGEST THAT GOOGLE HAS TAKEN STEPS TO IMPEDE
COMPETING SEARCH ENGINES FROM CRAWLING, INDEXING AND RETURNING
SEARCH RESULTS TO ITS YOUTUBE CONTENT AND BOOK SCANS. 00:09:19 ACCESS
TO THESE POPULAR STORES OF CONTENT IS CRUCIAL AND CRITICAL TO
ENABLING OTHER SEARCH ENGINES TO COMPETE. 00:09:26 THERE ARE ALSO
ALLEGATIONS THAT GOOGLE HAS ACHIEVED AND SOUGHT TO MAY WANT ITS
DOMINANCE AND SEARCH BY IMPOSING EXCLUSIVITY RESTRICTIONS PERHAPS IN
AN EFFORT TO BLOCK COMPETING SEARCH TOOLS. 00:09:39 THIS INCLUDES A
BROAD ARRAY OF -- A BROAD NETWORK OF EXCLUSIVE SEARCH SYNDICATION
DEALS WITH WEBSITES LIKE AOL AND EBAY, EXCLUSIVE ARRANGEMENTS FOR
GOOGLE'S SEARCH BOX TO APPEAR ON BROWSERS LIKE MOW ZILA, FIREFOX AND
SO SAFARI AND BE ITS DEFAULT SEARCH PROVIDER ON THE iPHONE AND MANY
ANDROID MODELS. 00:10:01 SIMILARLY, GOOGLE'S CONTRACTS WITH
ADVERTISERS APPARENTLY IMPOSE LIMITS ON THE ADVERTISERS' ABILITY TO
TRANSFER DATA ASSOCIATED WITH GOOGLE'S ADVERTISING PLATFORM. 00:10:09
TO ANY OTHER ADVERTISING PLATFORM USING THIRD-PARTY TOOLS THAT
WOULD MAKE THE PROCESS SIMPLE OR EVEN AUTOMATIC. 00:10:16 STUDIES BY A
HARVARD BUSINESS SCHOOL PROFESSOR CONCLUDED THAT THE NET EFFECT OF
THESE RESTRICTIONS IS TO REINFORCE THE TENDENCY OF SMALL TO MEDIUM-
SIZED ADVERTISERS TO USE ONLY GOOGLE AD WORDS TO THE EXCLUSION OF
COMPETING PLATFORMS. 00:10:29 MANY OBSERVERS ARE ALSO CONCERNED THAT
GOOGLE MAY BE SEEKING TO PREVENT SMARTPHONE MANUFACTURERS AND
CUSTOMERS WHO WISH TO USE THE ANDROID PLATFORM FROM USING
COMPETITORS' SERVICES, FOR EXAMPLE, BY TYING ANDROID TO GOOGLE'S
LOCATION PROGRAM IN ORDER TO EXCLUDE COMPETING GEOLOCATION
SERVICES. 00:10:45 IN ASSESSING EACH OF THESE CONCERNS, THE PRIMARY
FOCUS OF ANTITRUST ANALYSIS SHOULD BE CONSUMER WELFARE. 00:10:52
GROWING COMPLAINTS THAT GOOGLE IS USING ITS SEARCH DOMINANCE TO
FAVOR ITS OWN OFFERINGS AT THE EXPENSE OF COMPETITION DESERVES
SERIOUS ATTENTION, ESPECIALLY IF CONSUMERS ARE MISLED BY GOOGLE'S
DISPLAY. 00:11:03 SELF-RANKINGS AND PREFERENTIAL SUCH BIAS WOULD DENY
USER TRAFFIC AND REVENUE TO COMPETING SITES, DEPRIVING THOSE SITES OF
RESOURCES NEEDED TO DEVELOP MORE INNOVATED CONTENT AND OFFER
BETTER SERVICES TO CUSTOMERS. 00:11:16 WHEN COMPETING WEBSITES LOSE
TRAFFIC, THEY'RE FORCED TO INCREASE THEIR PAID SEARCH ADVERTISING ON
GOOGLE, ULTIMATELY LEADING TO INCREASED PRICES FOR CONSUMERS. 00:11:25
AS A CONSERVATIVE REPUBLICAN WHO FAVORS FREE MARKETS, I BELIEVE THAT
ENSURING ROBUST COMPETITION IN THIS CRITICAL AREA OF OUR NATION'S
ECONOMY WILL BENEFIT CONSUMERS. 00:11:33 IT WILL SPUR INNOVATION. 00:11:34
AND IT WILL LEAD TO JOB CREATION. 00:11:37 IN THIS INSTANCE, I BELIEVE THAT
PRESERVING COMPETITIVE MARKETS THROUGH ANTITRUST PRINCIPLES CAN
BURDENSOME GOVERNMENT HELP FORESTALL THE IMPOSITION OF
REGULATION.
Herbert Kohl
00:11:53
MR. SCHMIDT HAS SERVED AS THE EXECUTIVE
CHAIRMAN OF GOOGLE SINCE APRIL OF THIS YEAR.
00:11:59
AND FROM 2001 TO 2011
WAS THE CHIEF EXECUTIVE OFFICER OF THE COMPANY.
Dianne Feinstein
00:12:26 I'VE
KNOWN THE CHAIRMAN OF GOOGLE FOR MANY YEARS. 00:12:31 I'VE ALWAYS KNOWN
HIM AS A FORTHRIGHT AND -- MAN FILLED WITH INTEGRITY. 00:12:37 HE HAS A LONG
HISTORY IN SILICON VALLEY. 00:12:39 AND AT THE HELM OF A NUMBER OF AMERICA'S
MOST INNOVATIVE COMPANIES. 00:12:44 HE'S BEEN WITH GOOGLE SINCE 2001. 00:12:46
HE HAS HELPED GOOGLE GROW FROM LESS THAN 1,000 EMPLOYEES TO 28,000, 13,000
OF WHOM ARE IN CALIFORNIA. 00:12:57 IT'S A 45% GROWTH IN EMPLOYMENT, EVEN IN
THE MOST DIFFICULT TIMES OF THE PAST TWO YEARS WITH 5,000 NEW HIRES IN
CALIFORNIA IN ABOUT THAT SAME TIME. 00:13:08 UNDER HIS LEADERSHIP, GOOGLE
HAS BEEN HELPING BUSINESS THROUGHOUT THE GOLDEN STATE. 00:13:12 LAST YEAR
ALONE, PROVIDING $15 BILLION IN ECONOMIC ACTIVITY TO NEARLY $300,000 SMALL
BUSINESSES, AND NONPROFITS. 00:13:26 MR. JEFF KATZ, THE CEO OF NEXTAG IS FROM
SAN FRANCISCO. 00:13:31 THIS IS A PRICE COMPARISON WEBSITE COMPANY IN SAN
MATEO THAT ALLOWS PEOPLE TO SEARCH FOR PRODUCTS AND SEE LISTS OF
AVAILABLE ONLINE PRICES FOR THOSE PRODUCTS. 00:13:42 MR. KATZ HAS EXTENSIVE
EXPERIENCE IN THE INTERNET AND TRAVEL INDUSTRIES. 00:13:48 HAVING HELD A
VARIETY OF POSITIONS AT AMERICAN AIRLINES, SERVING AS PRESIDENT AND CEO OF
SUISSE AIR, BEING THE CHAIRMAN AND FOUNDING CEO OF THE WELL-KNOWN
TRAVEL WEBSITE, ORBITZ AND PRESIDENT AND CEO OF LEAP FROG, A TECHNOLOGY-
BASED LEARNING PRODUCT, AMONG OTHER ENDEAVORS. 00:14:12 HE HOLDS A
MASTER OF SCIENCE DEGREE FROM MY ALMA MATER, STANFORD, AMONG OTHER
DEGREES. 00:14:21 FINALLY, JERRY STOPPELMAN, CO FOUNDER AND CHIEF EXECUTIVE
OFFICER OF YELP. 00:14:25 JOINING MR. KATZ ON THE SECOND PANEL WILL BE JEREMY
STOPPELMAN. 00:14:31 HE'S CO FOUNDER, CEO OF A SMALL, INNOVATIVE COMPANY
FROM SAN FRANCISCO WHOSE WEBSITE ALLOWS PEOPLE TO SEARCH FOR LOCAL
BUSINESSES HORTYPES OF BUSINESSES AND FIND PROFILES OF THE BUSINESSES IN
ITS RESULTS. 00:14:45 INCLUDING CUSTOMER REVIEWS AND RANKINGS,
PHOTOGRAPHS AND OTHER SIMILAR BUSINESSES. 00:14:50 HE WORKED AS THE VICE
PRESIDENT OF ENGINEERING AT PAYPAL BEFORE DROPPING OUT OF HARVARD
BUSINESS SCHOOL TO CO FOUND YELP WITH RUSSELL SIMMONS. 00:15:01 AS YOU CAN
SEE, MR. CHAIRMAN, YOU HAVE THREE VERY WELL-QUALIFIED BAY AREA
CITIZENS.
Herbert Kohl
00:15:18 WE AGAIN THANK ALL WITNESSES WHO ARE
APPEARING HERE TODAY, AND I WOULD LIKE YOU ALL NOW TO RISE AND STEP
FORWARD, RAISE YOUR RIGHT HAND, AND TAKE THE OATH AS I ADMINISTER IT.
00:15:30 DO YOU TESTIFY THAT THE TESTIMONY YOU ARE ABOUT TO GIVE BEFORE
THIS COMMITTEE WILL BE THE TRUTH, THE WHOLE TRUTH AND NOTHING BUT THE
TRUTH, SO HELP YOU GOD? 00:15:38 THANK YOU ALL. 00:15:44 MR. SCHMIDT, WE'D
LOVE TO HEAR WHAT YOU HAVE TO SAY.
Mr. Schmidt
00:15:53 I THANK YOU FOR
INVITING ME HERE TODAY. 00:15:55 I WANT TO START FIRST BY TAKING A STEP BACK.
00:15:58 20 YEARS AGO, A LARGE TECHNOLOGY FIRM WAS SETTING THE WORLD ON
FIRE. 00:16:03 ITS SOFTWARE WAS ON NEARLY EVERY COMPUTER, AND ITS NAME WAS
SYNONYMOUS WITH INNOVATION. 00:16:08 BUT THAT COMPANY LOST SIGHT OF
STEPPED IN. 00:16:10 WHAT MATTERED, AND WASHINGTON I WAS AN EXECUTIVE AT
SUN AND LATER AT NOVELLE AT THE TIME, AND IN THE YEARS SENSE, MANY OF US IN
SILICON VALLEY HAVE ABSORBED THE LESSONS OF THAT ERA. 00:16:25 SO I'M HERE
WITH A SHORT MESSAGE ABOUT OUR COMPANY. 00:16:28
WE GET IT
. 00:16:30 BY THAT I
MEAN WE GET THE LESSONS OF OUR CORPORATE PREDECESSORS. 00:16:33 WE ALSO
GET THAT IT'S NATURAL FOR YOU TO HAVE QUESTIONS ABOUT OUR BUSINESS AND
THAT'S CERTAINLY FINE. 00:16:40 WHAT WE ASK THAT YOU HELP US ENSURE THAT THE
FEDERAL TRADE COMMISSION'S INQUIRY REMAINS A FOCUSED AND FAIR PROCESS,
WHICH I'M SURE YOU'LL DO, AND WE CAN CONTINUE TO CREATE JOBS AND BUILDING
PRODUCTS THAT DELIGHT OUR USERS. 00:16:51 SO BEFORE I TALK ABOUT OUR
PERSPECTIVE ON THE STATE OF TECHNOLOGY IN GENERAL, I'D LIKE TO START BY
EXPLAINING HOW WE THINK ABOUT OUR OWN BUSINESS AND A FEW OF THE
PRINCIPLES THAT GUIDE THE DECISIONS WHICH I'M SURE YOU'LL WANT TO TALK
ABOUT. 00:17:05 FIRST, ALWAYS PUT CONSUMERS FIRST. 00:17:08
LAST YEAR ALONE,
WE MADE MORE THAN 500 CHANGES
TO IMPROVE CERTIFICATE. 00:17:15 IT'S NOT AN
EASY TASK. 00:17:17 THIS MEANS THAT NOT EVERY WEBSITE CAN COME ON TOP.
00:17:20 IT'S A RANKING PROBLEM. 00:17:21 AND THERE ARE DEFINITELY COMPLAINTS
FROM BUSINESSES WHO WANT TO BE FIRST IN RANKINGS, EVEN WHEN THEY'RE NOT
THE BEST MATCH, AS BEST WE CAN TELL FOR USER SEARCH. 00:17:31
SECOND, FOCUS
ON LOYALTY, NOT LOCK-IN
. 00:17:34 WE DON'T TRAP OUR USERS. 00:17:35 IF YOU
DON'T LIKE THE ANSWER THAT GOOGLE SEARCH PROVIDES, YOU CAN SWITCH TO
ANOTHER ENGINE WITH LITERALLY ONE CLICK. 00:17:40 AND WE HAVE LOTS OF
EVIDENCE THAT PEOPLE DO THIS. 00:17:43 AND IF YOU WANT TO LEAVE OTHER
GOOGLE SERVICES, WE MAKE IT EASY FOR YOU TO DO SO. 00:17:47
YOU COULD EVEN
TAKE YOUR DATA WITH YOU WITHOUT ANY HASSLE
. 00:17:51 WE WANT CONSUMERS
TO STAY WITH US, BECAUSE WE'RE INNOVATING AND MAKING OUR PRODUCTS
BETTER, NOT BECAUSE THEY'RE LOCKED IN. 00:17:59
THIRD, BE OPEN, NOT CLOSED
.
00:18:00 OPEN TECHNOLOGY INCLUDES BOTH OPEN SOURCE, MEANING THAT WE
LEASE AND ACTIVELY SUPPORT CODE THAT HELPS GROW THE INTERNET AND OPEN
STANDARDS, MEANING THAT WE ADHERE TO ACCEPTED STANDARDS, AND IF NONE
EXIST, WE WORK TO CREATE THE STANDARDS THAT CAN IMPROVE THE ENTIRE
INTERNET. 00:18:16
FOURTH, BE TRANSPARENT
. 00:18:17 WE SHARE MORE
INFORMATION ABOUT HOW OUR SEARCH ENGINE AND OTHER PRODUCTS WORK THAN
ANY OF OUR COMPETITORS, AND WE GET ADVISERS DETAILED INFORMATION ABOUT
THEIR INVESTMENT. 00:18:26 PERFORMANCE AND RETURN ON AND FINALLY, THE ONLY
CONSTANT IS CHANGE. 00:18:31 TEN YEARS AGO, NO ONE WOULD HAVE GUESSED,
CERTAINLY I AND I DON'T THINK ANYBODY ELSE, THAT THE VOCABULARY IN
ECONOMICS WOULD LOOK LIKE IT DOES TODAY, AND NO ONE KNOWS WHAT IT
WOULD LOOK LIKE IN ONE YEAR OR FIVE YEARS. 00:18:43 SO DESPITE WHAT OTHERS
SAY ABOUT THE AMERICAN ECONOMY, I THINK OUR FUTURE IN AMERICA IS VERY
BRIGHT. 00:18:47 THERE'S NO DOUBT THAT WE'RE FACING DIFFICULT TIMES, THERE'S
NEVER BEEN A MORE EXCITING TIME TO BE PART OF THE TECHNOLOGY BUSINESS, AS
I THINK YOU'LL SEE FROM ALL OF THE COMPANIES REPRESENTED THIS AFTERNOON.
00:18:56 WHILE OTHERS HAVE GIVEN UP ON THE AMERICAN ECONOMY, GOOGLE IS
CERTAINLY DOUBLING DOWN. 00:19:01 WE'RE
INVESTING IN PEOPLE
,
2002 WE HAD
FEWER THAN 1,000 EMPLOYEES
. 00:19:06 AND, AGAIN NOW WE HAVE MORE THAN
24,000 AND WE'RE HIRING. 00:19:08 EARLIER THIS YEAR, WE ANNOUNCED THAT 2011
WOULD BE OUR BIGGEST HIRING YEAR YET AND WE'RE CLEARLY ON TARGET TO MEET
OR BEAT THAT. 00:19:16 WE'RE INVESTING IN MOBILE AS WAS EARLIER SUGGESTED.
00:19:19 JUST LOOK AT OUR PLANS TO
ACQUIRE OUR GREAT AMERICAN COMPANY,
MOTOROLA MOBILITY
. 00:19:24 WE BELIEVE OUR PROPOSED ACQUISITION LIKE
MANY WE HAVE MADE IS GOOD FOR COMPETITION, INNOVATION AND THE AMERICAN
ECONOMY. 00:19:30 IT'S A BIG BET, BUT WE'RE CONFIDENT THIS ACQUISITION WILL
LEAD TO GROWTH AND INNOVATION IN MOBILE TECHNOLOGY, WHICH IS WHAT WE
CARE ABOUT. 00:19:39
WE'RE ALSO INVESTING IN LOCAL
. 00:19:41 97% OF THE
PEOPLE LOOK ONLINE FOR LOCAL GOODS AND SERVICES,
BUT ONLY 63% --
ACTUALLY, 63% OF AMERICA'S SMALL BUSINESSES DO HAVE A WEBSITE AT ALL
.
00:19:50 THIS IS A MISSED OPPORTUNITY, IN MY VIEW. 00:19:52 SO WE STARTED AN
INITIATIVE TO HELP SMALL BUSINESSES GET ONLINE. 00:19:55 WE PARTNERED WITH
INTUIT AND OTHERS TO OFFER LOCAL BUSINESSES, ET CETERA. 00:20:00 LAST YEAR
ALONE,
GOOGLE SEARCH AND ADVERTISING TOOLS PROVIDED $64 BILLION IN
ECONOMIC ACTIVITY
TO OTHER COMPANIES, PUBLISHERS AND NONPROFITS IN THE
UNITED STATES. 00:20:08 AND WE'RE VERY, VERY PROUD OF THIS. 00:20:10 AND, OF
COURSE, THIS YEAR WILL BE EVEN GREATER. 00:20:12 SO WITHOUT EXAGGERATION,
HIGH-TECH IS THE MOST DYNAMIC PART OF THE U.S. ECONOMY. 00:20:17
ADVERTISING SUPPORT ALONE IS 3.1 MILLION JOBS
, ACCORDING TO THE STUDY I
JUST READ. 00:20:23 AND ACCORDING TO McKINSEY,
THE INTERNET WAS
RESPONSIBLE FOR 15% OF AMERICA'S GDP GROWTH IN THE LAST FIVE YEARS
.
00:20:30 THE INTERNET IS ALSO HOME TO SOME OF AMERICA'S MOST SUCCESSFUL
COMPANIES, AMAZON, APPLE, FACEBOOK AND GOOGLE. 00:20:36 WE COMPETE HARD
AGAINST EACH OTHER, AND WE WELCOME THAT COMPETITION. 00:20:39 IT MAKES US
BETTER, AND IT MAKES OUR COMPETITORS BETTER, TOO. 00:20:43 BUT MOST
IMPORTANTLY, IT MEANS BETTER PRODUCTS FOR OUR USERS. 00:20:46 SO TODAY IT'S
GOOGLE'S TURN IN THE SPOTLIGHT, AND WE RESPECT THE RULE THAT YOU ALL HAVE,
AND THE AGENCY, OF COURSE, IN THIS PROCESS. 00:20:53 I DO ASK YOU TO REMEMBER
THAT NOT ALL COMPANIES ARE CUT FROM THE SAME CLOTH. 00:20:58 AND THAT ONE
COMPANY'S PAST NOT BE ANOTHER'S FUTURE. 00:21:01
WE LIVE IN A DIFFERENT
WORLD TODAY, AND THE OPEN INTERNET IS THE ULTIMATE LEVEL PLAYING
FIELD
. 00:21:07 SO IF YOU KEEP THAT IN MIND, THEN WE BELIEVE THAT THE FEDERAL
TRADE COMMISSION'S INQUIRY WILL REVEAL AN ENTHUSIASTIC COMPANY FILLED
WITH PEOPLE WHO BELIEVE THAT WE'RE ONLY SCRATCHING THE SURFACE OF WHAT'S
POSSIBLE. 00:21:18 THAT PASSION TO DO BETTER WILL NOT ONLY SERVE OUR USERS
WELL, BUT IT WILL SERVE OUR NATION WELL. 00:21:24 AND BY HELPING CREATE NEW
JOBS AND ECONOMIC GROWTH THAT OUR WONDERFUL COUNTRY NEEDS.
STARTING INQUIRY
Herbert Kohl
00:21:33 THANK YOU MUCH, MR. SCHMIDT. 00:21:34 WE
APPRECIATE WHAT YOU JUST HAD TO SAY. 00:21:38 AND NOW WE'LL BEGIN OUR
INQUIRIES OF YOU INDIVIDUALLY AND WE WILL ASK QUESTIONS FOR A MAXIMUM OF
SEVEN MINUTES. 00:21:45 MR. SCHMIDT, MANY INDUSTRY EXPERTS BELIEVE THAT THE
CENTRAL MISSION OF GOOGLE HAS FUNDAMENTALLY CHANGED SINCE ITS
FOUNDING. 00:21:52 AT THE OUTSET, GOOGLE'S GOAL, ACCORDING TO CEO LARRY
PAGE IN 2004 WAS TO GET CONSUMERS OFF GOOGLE'S PAGE AND, QUOTE, ACCEPTED
YOU SEND YOU TO OTHER SITES. 00:22:02 SINCE THAT TIME GOOGLE HAS ACQUIRED
OR EXPANDED INTO INTERNET BUSINESSES IN MANY DIVERSE AREAS, INCLUDING
TRAVEL, VIDEOS AND SHOPPING. 00:22:10 AND NOW WE HEAR YOU SAY YOU WANT TO
PROVIDE CONSUMERS ANSWER TO QUESTIONS, NOT MERELY LINKS TO WEBSITES,
THAT PROVIDE THOSE ANSWERS. 00:22:17 WHAT DO YOU SAY TO THOSE WHO ARGUE
THAT THERE IS A FUNDAMENTAL CONFLICT OF INTEREST BETWEEN ONLY PROVIDING
UNBIASED WEB LINKS AND NOW PROVIDING ANSWERS? 00:22:27 WHEN YOU OWN
MANY OF THE SERVICES PROVIDING THE ANSWERS? 00:22:29 AS A RATIONAL BUSINESS
TRYING TO MAKE THE MOST PROFIT, WE EXPECT GOOGLE TO FAVOR ITS PRODUCTS
AND SERVICES IN PROVIDING THESE ANSWERS.
Mr. Schmidt
00:22:39 I'M NOT SURE
GOOGLE IS A RATIONAL BUSINESS TRYING TO MAXIMIZE ITS OWN PROFITS, SENATOR.
00:22:44 AS WE ADDRESSED IN OUR FOUNDING OF OUR -- THE IPO LETTER, THE LETTER,
GOOGLE IS RUN UNDER A SET OF PRINCIPLES THAT ARE REALLY QUITE PROFOUND
WITHIN THE COMPANY. 00:22:54 AND ONE OF THE MOST IMPORTANT PRINCIPLES IS
SOLVE THE PROBLEM THAT THE CONSUMER HAS. 00:22:59 SO TEN YEARS AGO, THE
BEST ANSWER MAY HAVE BEEN THE TEN LINKS THAT WE SAW, BUT THE BEST ANSWER
TODAY MAY BE THAT WE CAN ALGORITHMICALLY COMPUTE AN ANSWER AND DO IT
QUICKER. 00:23:10 THINK OF IT AS IF YOU'RE LOOKING FOR AN ANSWER, YOU WANT
THE ANSWER QUICKLY. 00:23:14 AND SPEED MATTERS, ESPECIALLY AT THIS SCALE WE
ARE AT. 00:23:17 SO IF WE CAN -- IF WE CAN CALCULATE AN ANSWER MORE QUICKLY,
THAT'S AN IMPROVEMENT FOR THE END USER.
Herbert Kohl
00:23:27 I APPRECIATE YOUR
RESPONSE. 00:23:29 BUT IN A LARGE -- MEASURE, IT'S ANOTHER WAY OF SAYING TRUST
US THAT WE ARE GOING TO DO AND WE DO DO AND WE WILL DO, QUOTE, THE RIGHT
THING. 00:23:39 IS MERELY TRUSTING GOOGLE TO DO THE RIGHT THING REALLY
SUFFICIENT, GIVEN YOUR CLEAR BUSINESS INCENTIVES TO MAXIMIZE THE VALUE OF
YOUR COMPANY? 00:23:47 SHOULDN'T WE BE GUIDED BY THE OF A GREAT PRESIDENT,
RONALD REAGAN, WHO SAID, "TRUST, YES, BUT VERIFY." WELL, IN FACT, I
COMPLETELY AGREE WITH TRUST BUT VERIFY.
Mr. Schmidt
00:23:58 I HOPE THIS IS THE
PROCESS WE'RE GOING THROUGH RIGHT NOW. 00:24:03 THE ULTIMATE CORRECTION
AGAINST ANY MISTAKES THAT GOOGLE MAKE IS HOW CONSUMERS BEHAVE. 00:24:09
AND WE LIVE IN A GREAT FEAR EVERY DAY THAT CONSUMERS WILL SWITCH
EXTRAORDINARILY QUICKLY TO OTHER SERVICES. 00:24:16 ONE OF THE
CONSEQUENCES OF THE OPEN INTERNET IS THAT PEOPLE HAVE CHOICES THEY DID
NOT HAVE IN PREVIOUS GENERATIONS. 00:24:23 IN EVERY CASE, THE SITE THAT WAS --
IS NOW LOWER-RANKED IS STILL AVAILABLE, IF YOU JUST TYPE THEIR NAME INTO
YOUR BROWSER AND OFF YOU GO. 00:24:31 IN ALL CASES, WHAT WE'RE TRYING TO DO
IS WE'RE SAYING THAT OUR CUSTOMERS WANT QUICK AND ACCURATE ANSWERS, AND
THE -- IF YOU WILL, THE GUIDE OR THE WAY WE CORRECT OURSELVES IS IF THEY
SWITCH. 00:24:43 WE KNOW THAT PEOPLE LIKE WHAT WE DO, BECAUSE WE HAVE AN
EXTRAORDINARILY EXTENSIVE TESTING REGIME. 00:24:48 IT MAY BE WORTH JUST
DESCRIBING BRIEFLY THAT WE HAVE
SOME NUMBER OF THOUSANDS OF ENGINEERS
WHO WORK ON SEARCH
. 00:24:53 WE THINK THEY'RE THE BEST IN THE WORLD, AND
WE'RE VERY PROUD OF THEM. 00:24:56 AND THEY MATHEMATICALLY COMPUTE WITH
MORE THAN 200 SIGNALS A WHOLE BUNCH OF INSIGHTS OF HOW TO RANK
THINGS
. 00:25:02 IT'S ONE OF THE HARDEST PROBLEMS KNOWN IN SCIENCE, BECAUSE
OF THE SCALE OF THE INTERNET. 00:25:07 AND BECAUSE WE DO IT SO WELL, WE THINK
WE HAVE EARNED THAT POSITION THAT YOU WERE DESCRIBING. 00:25:13 BUT
NEVERTHELESS, WHAT HAPPENS IS THAT WHEN WE DO THAT, WE ACTUALLY GET
DOWN TO DOING
1% TESTING
SO WHAT HAPPENS IS, WE ACTUALLY KNOW WE -- WE
DO SIDE BY SIDE TESTS TO KNOW THAT WE ARE PRODUCING WHAT CUSTOMERS WANT.
Herbert Kohl
00:25:27 DURING A CONFERENCE IN 2007, MARISSA MEYER, ONE OF
GOOGLE'S TOP EXECUTIVES, DISCUSSED HOW GOOGLE PLACED ITS OWN PRODUCTS
AND SERVICES ON ITS SEARCH RESULTS PAGE. 00:25:37 SPEAKING OF THE GOOGLE
FINANCE SERVICE, SHE SAID THAT IN THE PAST, GOOGLE RANKED LINKS, QUOTE,
BASED ON POPULARITY. 00:25:44 BUT WHEN WE ROLLED OUT GOOGLE FINANCE, WE
DID PUT THE GOOGLE LINK FIRST, SEEMS ONLY FAIR. 00:25:50 ISN'T THAT RIGHT?
00:25:51 WE DO ALL THE WORK FOR THE RESEARCH PAGE, AND ALL THESE OTHER
THINGS, SO WE DO IT -- PUT IT FIRST. 00:25:58 THAT IT IS THAT HAS ACTUALLY BEEN
OUR POLICY SINCE THEN. 00:26:01 THIS IS YOUR EMPLOY. 00:26:03 SO FOR GOOGLE
MAPS, AGAIN, IT'S FORTH. 00:26:05 THE FIRST LINK, SO ON AND SO AND AFTER THAT,
IT'S RANKED USUALLY BY POPULARITY, UNQUOTE. 00:26:12 SO WHEN SHE MADE THAT
COMMENT BACK IN 2007, SHE WAS SPEAKING IN HER MIND ACCURATELY. 00:26:20 HOW
DO YOU MEASURE WHAT SHE SAID THEN AND WHAT YOU'RE TELLING US NOW?
Mr.
Schmidt
00:26:25 WELL, AGAIN, I WASN'T THERE, SO MAYBE I SHOULD USE MY OWN
VOICE ON THIS QUESTION. 00:26:32 THERE'S A CATEGORY OF QUERIES, WHICH ARE NOT
WELL-SERVED BY THE TEN LINKS ANSWER. 00:26:38 YOU MENTIONED IN MARISSA'S
QUOTE MAPS. 00:26:40 WHEN PEOPLE WANT A MAP, THEY ACTUALLY WANT A MAP
RIGHT THEN AND THERE. 00:26:44 AND SO OVER SIX OR SEVEN-YEAR PERIOD, WE NOT
ONLY ACQUIRED A SET OF COMPANIES, BUT HAVE ALSO INVESTED HUNDREDS AND
HUNDREDS OF MILLIONS OF DOLLARS IN PRODUCING WHAT WE THINK ARE
TECHNOLOGICALLY AND FROM AN EXPERIENCE PERSPECTIVE, THE BEST MAPPING
PRODUCTS AROUND. 00:26:58 AND WE SURFACE THOSE, BECAUSE WE -- ALL OF OUR
TESTING, PLUS OUR OWN INTUITION IS WHEN SOMEBODY TYPES IN AN ADDRESS, MAP.
00:27:05 THEY ACTUALLY WANT TO HAVE A AND WE SHOW IT TO THEM VERY QUICKLY.
00:27:09 IT WOULD BE VERY DIFFICULT TO DO THAT WITH THE TEN LINKS MODEL.
00:27:11 SO, AGAIN, IF WE WERE FORCED TO STAY WITHIN THE TEN LINKS MODEL, WE
WOULD NOT BE ABLE TO DO THAT KIND OF INNOVATION. 00:27:17 FURTHERMORE, I
SHOULD MENTION THAT ALL OF OUR COMPETITORS HAVE SIMILAR APPROACHES AND
SIMILAR PRODUCTS TO THE MAPS, PLACES AND OTHER THINGS.
Herbert Kohl
00:27:26
LET ME SAY ONCE AGAIN, SHE SAID, WHEN WE ROLLED OUT GOOGLE FINANCE, WE
DID PUT THE GOOGLE LINK FIRST. 00:27:33 IT SEEMS ONLY FAIR. 00:27:34 WE DO ALL
THE WORK FOR THE SEARCH PAGE AND ALL OF THE OTHER THINGS, SO WE DO PUT IT
FIRST. 00:27:40 NOW, YOU RECOGNIZE, OF COURSE, IF THAT'S COMPANY POLICY, THAT'S
VERY -- CONTRARY TO WHAT YOU'RE TELLING US HERE TODAY.
Mr. Schmidt
00:27:47
WELL, AGAIN, I CAN SPEAK FOR THE POLICY OF THE COMPANY DURING MY TENURE.
00:27:51 AND I REPRESENTED -- I IMPLEMENTED AND UNDERSTOOD IT. 00:27:55 IN OUR
CASE, WE IMPLEMENTED IT THE WAY I DESCRIBED IT. 00:27:59 HERSELF ON HER
QUOTE. 00:27:59 I'LL LET MARISSA SPEAK FOR IF YOU TAKE A LOOK AT GOOGLE
FINANCE, WE STARTED OFF BY PRESENTING GOOGLE LINKS, AS YOU DESCRIBED.
00:28:06 AND THEN WE DECIDED THAT IT WOULD BE BETTER TO HAVE A SIMPLE, QUICK
STOCK QUOTE, IF YOU WILL, TOOL. 00:28:11 AND
WE LICENSED THAT TECHNOLOGY
FROM THE NASDAQ AND THE NYCE
AND HER ANSWER. 00:28:16 OTHERS, AND THAT'S
THE SOURCE OF SO, AGAIN, WE MOVED FROM THE STANDARD TEN HINCKSLINKS
ANSWER TO WHAT WE CALL A SIMPLE ANSWER. 00:28:25 AND THEN WHAT HAPPENED
AFTER THAT, OF COURSE, RIGHT BELOW IT, YOU SEE ALL OF THE TOP ENGINES. 00:28:29
AND IF YOU DO THAT QUERY TODAY, NOT ONLY WILL YOU SEE WE SHOW ALL OF THE
OTHER COMPETITORS AND IDEAS AND GREAT SOURCES OF INFORMATION, BUT WE
ALSO HAVE HOT LINKS AS THEY'RE CALLED, RIGHT BELOW OUR ANSWERS,
INCLUDING, FOR EXAMPLE, YAHOO FINANCE, PROBABLY THE MOST POPULAR OF
THEM.
Herbert Kohl
00:28:44 BUT TO BE LISTED FIRST IS AN ADVANTAGE, ISN'T IT?
Mr.
Schmidt
00:28:48 THIS PARTICULAR CASE, WE DON'T ACTUALLY LIST ANYBODY FIRST.
00:28:52 WE HAVE AN INSERTION WHICH SUMMARIZES THE ANSWER AND IS TYPICALLY
THE YAHOO ANSWER COMES RIGHT AFTER OUR ANSWER. 00:28:58 IT'S EASIER IF I
DESCRIBE IT. 00:28:59 YOU WANT A STOCK QUOTE, WE'LL JUST GIVE YOU THE STOCK
QUOTE. 00:29:03 AND RIGHT AFTER THAT, WE'LL SHOW YOU LINKS TO, FOR EXAMPLE,
YAHOO FINANCE AND THE OTHERS RIGHT THERE. 00:29:08 SO I DISAGREE WITH THE
CHARACTERIZATION THAT SOMEHOW WE OTHERS. 00:29:11 WERE DISCRIMINATING
AGAINST THE THANK YOU VERY MUCH.
Michael Lee -U.S. Senator [R] UT
00:29:26 ARE
GOOGLE PRODUCTS AND SERVICES OFFERED BY GOOGLE SUBJECT TO THE SAME
SEARCH RANKING ALGORITHMIC PROCESS AS ALL OTHER ORGANIC SEARCH
RESULTS?
Mr. Schmidt
00:29:39 THEY ARE WHEN THEY'RE ACTUALLY IN RANKING -- IN
THE ANSWERS THAT YOU'RE DESCRIBING. 00:29:44 BUT I THINK THE CORE QUESTION
THAT BOTH OF YOU ADDRESSED IN OUR OPENING STATEMENTS WAS THIS QUESTION
WHERE WE SYNTHESIZE OR COME UP WITH AN ANSWER TO A QUESTION. 00:29:53 SO,
AGAIN, I WANT TO JUST REPEAT. 00:29:56 THAT IF WE KNOW THE ANSWER, IT IS BETTER
FOR THE CONSUMER, FOR US TO ANSWER THAT QUESTION SO ANYWHERE. 00:30:01
THEY DON'T HAVE TO CLICK AND IN THAT SENSE, WE TEND TO USE DATA SOURCES
THAT ARE OUR OWN, BECAUSE WE CAN'T ENGINEER IT ANY OTHER WAY.
Michael Lee
-U.S. Senator [R] UT
00:30:08 OKAY. 00:30:11 BUT I REALLY AM NOT ASKING WHETHER --
WHETHER YOU'RE GIVING THE RIGHT INFORMATION, WHETHER YOU'RE GIVING
INFORMATION THAT'S, YOU KNOW -- THAT YOU REGARD AS MOST HELPFUL TO THE
CUSTOMER. 00:30:21 I'M ASKING WHETHER YOUR OWN SECONDARY SERVICES,
SERVICES THAT GOOGLE ITSELF OFFERS, ARE THEY SUBJECT TO THE SAME TEST, THE
SAME STANDARD, AS ALL THE OTHER RESULTS OF AN ORGANIC ALGORITHMIC
SEARCH?
Mr. Schmidt
00:30:33 I BELIEVE SO. 00:30:34 AS I UNDERSTAND YOUR
QUESTION, I BELIEVE THE ANSWER IS YES. 00:30:39 I'M NOT AWARE OF ANY
UNNECESSARY OR STRANGE BOOSTS OR BIASES. 00:30:42 SO, FOR EXAMPLE, YOU'LL
SEE EVERYTHING IS INTERMIXED IN A WAY. 00:30:45 AND OFTEN COMPETITORS' LINKS
ARE IN ALONG WITH, FOR EXAMPLE, YOUTUBE.
Michael Lee -U.S. Senator [R] UT
00:30:48
OKAY. 00:30:51 I'D LIKE TO SHOW A VISUAL AID. 00:30:51 LET'S BRING UP THE FIRST
SLIDE, IF WE CAN, MIKE. 00:31:04 THIS IS A CHART THAT REFLECTS THE RESULTS OF A
STUDY COMPARING THE SEARCH RANKINGS OF THREE POPULAR PRICE COMPARISON
SITES, AND THOSE OF GOOGLE SHOPPING. 00:31:18 NOW, THE THREE POPULAR PRICE
COMPARISON SITES RESULTS ARE DEPICTED IN VARIOUS SHADES OF GREEN, AND THE
GOOGLE RESULTS ARE DEPICTED IN RED. 00:31:26 THESE PARTICULAR DATA POINTS
WERE GATHERED IN APRIL OF THIS YEAR, AND THEY REPRESENT THE RANKING
RESULTS FROM 650 SHOPPING-RELATED KEY WORD SEARCHES. 00:31:39 WHILE
NEXTAB, PRICE GRABBER AND SHOPPER ALL SHOW SIGNIFICANT VARIATION,
RANKING FIRST FOR SOME, AND NEAR 50th FOR OTHERS, GOOGLE HAS A VERY
CONSISTENT RATE OF SUCCESS. 00:31:52 GOOGLE SHOPPING RANKED THIRD IN
VIRTUALLY EVERY SINGLE INSTANCE. 00:31:57 SO TO BE CLEAR, YOUR TESTIMONY A
MOMENT AGO THAT THESE GOOGLE SHOPPING RANKINGS ALMOST EXCLUSIVELY IN
THE THIRD SPOT ARE, IN FACT, THE RESULT OF THE SAME ALGORITHM AS THE
RANKINGS FOR THE OTHER COMPARISON SITES --
Mr. Schmidt
THERE'S A -- A CON
INFLATION OF TWO DIFFERENT THINGS GOING ON IN THIS STUDY, WHICH I HAVE NOT
SEEN. 00:32:17 SO I SHOULDN'T COMMENT BEYOND THAT. 00:32:19 THERE'S A
DIFFERENCE BETWEEN SITES THAT DO PRODUCT COMPARISON AND SITES THAT OFFER
PRODUCTS THEMSELVES. 00:32:25 GOOGLE PRODUCT SEARCH IS ABOUT GETTING YOU
TO A PRODUCT. 00:32:30 AND SO WE TEND TO LOOK FOR THE PRODUCT AS OPPOSED TO
THE PRODUCT COMPARISON IN THIS PARTICULAR CASE, WHICH IS WHY THE PRODUCT
IS MORE HIGHLY RANKED THAN THE RESULT OF A PRODUCT COMPARISON SITE.
00:32:40 IF YOU DID THE SAME STUDY WITH ALL OF THE OTHER PRODUCT SITES,
RESULT. 00:32:44 YOU WOULD FIND A VERY DIFFERENT
Michael Lee -U.S. Senator [R]
UT
OKAY. 00:32:47 WE CALL THIS A PRODUCT SEARCH, IF WE CALL THE RESULT A
GOOGLE PRODUCT RESULT, THAT IS NOT SUBJECT TO THE SAME ALGORITHMIC
SEARCH INPUT THAT BRINGS ABOUT THE OTHER ORGANIC ALGORITHMIC SEARCH
RESULTS.
Mr. Schmidt
00:33:00 AGAIN, I'M SORRY, I MAY HAVE CONFUSED YOU. 00:33:03
AND I APOLOGIZE. 00:33:06 WE DO PRODUCT SEARCH RANKING, THINGS LIKE THE
COMPANIES THAT ARE MENTIONED THERE ARE PRICE COMPARISON SHOPPING. 00:33:12
THEY'RE DIFFERENT ANIMALS, IF YOU WILL. 00:33:14 THEY DO DIFFERENT -- THEY'RE
IMPORTANT, THEY DO DIFFERENT THINGS. 00:33:18 GOOGLE PRODUCT SEARCH IS
ABOUT SEARCHING FOR SPECIFIC PRODUCTS. 00:33:21 IN THAT SENSE, PRODUCT
SEARCH DOES SOMETHING SIMILAR TO WHAT PRICE GRABBER, NEXTAB AND SHOPPER
DOES, WHICH IS WHY THE CONFUSION EXISTS. 00:33:29 IT'S NOT -- IT'S AN APPLES TO
ORANGES COMPARISON.
Michael Lee -U.S. Senator [R] UT
00:33:36 WHY IS IT THAT THERE
THEY'RE ALWAYS THIRD? 00:33:42 THIS SEEMS TO ME THIS AN UNCANNY STATISTICAL
COINCIDENCE, IF WE CAN CALL IT THAT. 00:33:45 THIRD EVERY SINGLE TIME. 00:33:48
OUTLIERS WHERE YOU'RE FIRST, THIRD OR FOURTH. 00:33:51 YOU'RE ALSO
INTERESTINGLY ENOUGH OCCASIONALLY 11th. 00:33:53 YOU'VE NEVER 12th. 00:33:54
CERTAINLY NEVER 50th OR ANYTHING CLOSE TO IT. 00:33:56 YET EVERY ONE OF THOSE
OTHERS WILL FIND THEMSELVES EVERYWHERE ALONG THE SPECTRUM. 00:34:01
EVERYWHERE. 00:34:02 TIME. 00:34:02 YOU'RE ALWAYS THIRD ALMOST EVERY HOW DO
YOU EXPLAIN THAT?
Mr. Schmidt
00:34:05 AGAIN, I WOULD HAVE TO LOOK AT THE
SPECIFIC RESULTS. 00:34:07 WELL, WE'VE GOT THE RESULTS RIGHT HERE. 00:34:09 I
WOULD ACTUALLY NEED TO SEE THE TECHNICAL DETAILS. 00:34:13 TO GIVE YOU A
DIRECT ANSWER. 00:34:16 BUT IN GENERAL, WHAT'S HAPPENING HERE IS YOU'RE
HAVING PRODUCT COMPARISON SITES, AND THEIR RESULTS ARE BEING COMPARED
AGAINST GOOGLE ANSWERS, WHICH ARE PRODUCTS. 00:34:24 AND THE TWO CANNOT
BE PROPERLY COMPARED. 00:34:26 AND THAT'S WHY I THINK YOU'RE SEEING SUCH
STRANGE RESULT.
Michael Lee -U.S. Senator [R] UT
00:34:29 OKAY. 00:34:31 IT SEEMS TO
ME, FOR WHATEVER IT'S WORTH, WHEN I SEE THIS -- WHEN I SEE YOU MAGICALLY
COMING UP THIRD EVERY TIME, THAT SEEMS TO ME THAT -- I DON'T KNOW WHETHER
YOU CALL THIS A SEPARATE ALGORITHM OR WHETHER YOU HAVE REVERSE
ENGINEERED ONE ALGORITHM. 00:34:43 BUT EITHER WAY, YOU'VE COOKED IT. 00:34:45
SO THAT YOU'RE ALWAYS THIRD. 00:34:46 LET'S MOVE ON --
Mr. Schmidt
SENATOR, MAY I
-- MAY I SIMPLY SAY THAT I CAN ASSURE YOU WE HAVE NOT COOKED
ANYTHING.
Michael Lee -U.S. Senator [R] UT
00:34:53 WELL, OKAY. 00:34:55 YOU HAVE AN
UNCANNY ABILITY, AND AN UNAN EAND NATURAL ATTRACTION TO THE NUMBER
THREE IN THAT INSTANCE. 00:35:03 LET'S LOOK AT THIS SEARCH RESULT. 00:35:08 THIS
ONE IS A PRODUCT OF A SEARCH QUERY. 00:35:12 HERE IT'S A SEARCH QUERY FOR A
PARTICULAR CAMERA MODEL. 00:35:14 WE BRING UP A GOOGLE PRODUCT LISTING.
00:35:17 NOW, IT'S NEAR THE MIDDLE OF THE SEARCH SCREEN RESULT. 00:35:24 YOU
KNOW FROM YOUR RESERVE THAT RESEARCH THAT THE MIDDLE OF THE SCREEN IS
WHERE THE USER IS MOST LIKELY TO FOCUS. 00:35:29 THAT'S THE PRIME REAL ESTATE
ONLINE, CORRECT?
Mr. Schmidt
00:35:31 ACTUALLY, CLICKS GO FROM THE TOP TO THE
BOTTOM. 00:35:35
Michael Lee -U.S. Senator [R] UT
OKAY. 00:35:36 BUT YOU WANT TO BE AT
OR NEAR THE TOP OF THE LIST.
Mr. Schmidt
00:35:39 IN GENERAL, YOU WANT TO BE ON
THE FIRST PAGE AND AMONG THE FIRST ENTRIES, THAT'S CORRECT.
Michael Lee -U.S.
Senator [R] UT
00:35:43 OKAY. 00:35:45 NOW, AMONG THE NATURAL SEARCH RESULTS,
THE GOOGLE LISTING, THE GOOGLE PRODUCTS LISTING IS THE ONLY RESULT THAT
INCLUDES THE PHOTO. 00:35:52 WE'VE HIGHLIGHTED IT HERE IN BLUE, JUST TO
DEMONSTRATE HERE THAT IT'S DIFFERENT. 00:35:57 BUT THERE'S NOTHING ONLINE
THAT ACTUALLY DIFFERENTIATES IT AS NECESSARILY A GOOGLE LISTING. 00:36:02
THERE IS NOTHING THAT INDICATES THAT THIS IS AN ADVERTISEMENT, THAT IT'S
EVEN GOOGLE. 00:36:06 AND IT'S ALSO THE MOST PROMINENT, GIVEN ITS PLACEMENT.
Mr. Schmidt
00:36:10 SO, AGAIN, THAT'S NOT AN AD. 00:36:12 THAT IS AN ORGANIC
SEARCH RESULT WHICH IS TRIGGERED BY A PRODUCT SEARCH DATABASE WHICH WE
HAVE GATHERED BY SEARCHING AND RANKING OFFERINGS FROM MANY DIFFERENT
VENDORS. 00:36:20 IF YOU ACTUALLY CLICK WITHIN THAT, YOU'LL SEE THAT YOU'LL
ACTUALLY GO TO THE VENDOR THAT OKAY. 00:36:25 WILL THEN SELL YOU THE
PRODUCT.
Michael Lee -U.S. Senator [R] UT
00:36:26 I'M GOING TO WANT TO FOLLOW UP
ON THAT, BUT I SEE MY TIME IS EXPIRED.
Charles Schumer
00:36:42 00:36:42 PASSION FOR
MAINTAINING FREE AND FAIR COMPETITION IN THE MARKETPLACE. 00:36:46
ESPECIALLY IN THE HIGH-TECH SECTOR. 00:36:48 GOOGLE AND ITS COMPETITORS ARE
BUILDING THE INFRASTRUCTURE OF THE FUTURE ECONOMY. 00:36:53 AND IT'S
CRITICAL THAT TECHNOLOGICAL GROWTH NOT BE UNFAIRLY CONSTRAINED. 00:37:00
THAT'S HOW ALL MARKETS WORK, BUT PARTICULARLY IN THIS AREA WHERE
INNOVATION REALLY MATTERS AND THINGS CHANGE QUICKLY. 00:37:07 SO I THINK
THAT THE FTC INVESTIGATION WILL HELP GET TO THE HEART OF THE FACTS BEHIND
HEARING TODAY. 00:37:12 THE KINDS OF ALLEGATIONS WE'RE AND THAT'S A GOOD
THING. 00:37:15 IT'S ALWAYS IMPORTANT WE EXAMINE MARKET DOMINANCE WITH A
CRITICAL EYE, ESPECIALLY IN AN INDUSTRY THAT'S A FOUNDATION OF OUR
ECONOMIC FUTURE. 00:37:23 NOW I'VE BEEN PARTICULARLY PASSIONATE ABOUT THE
GROWTH OF HIGH- -- OF THE HIGH-TECH SECTOR, BECAUSE IT HAS BEEN AND WILL BE
CRITICAL TO THE FUTURE GROWTH OF NEW YORK. 00:37:34 I REALIZE THAT WHEN
MOST PEOPLE HEAR ABOUT HIGH-TECH SECTORS IN THE UNITED STATES, THEY DON'T
NECESSARILY THINK OF NEW YORK. 00:37:43 YET BY MANY MEASURES, NEW YORK'S
NUMBER ONE OR TWO WHEN IT COMES TO EMPLOYMENT OR INVESTMENT IN THE
ENTIRE SECTOR. 00:37:48 WE'RE NOW THE SECOND LARGEST RECIPIENT OF HIGH-TECH
VENTURE CAPITAL IN THE COUNTRY. 00:37:54 WE HAVE PASSED BOSTON THIS YEAR.
00:37:56 AND ONLY TRAIL SILICON VALLEY IN THE AMOUNT OF HIGH-TECH VENTURE
CAPITAL CAPITAL YICHB VESTED. 00:38:03 AND THIS IS THE STATISTIC MOST AMAZING
TO ME. 00:38:05 BY SOME MEASURES, THE NEW YORK METROPOLITAN AREA
ACTUALLY HAS MORE WORKERS IN THE HIGH-TECH INDUSTRY THAN ANY OTHER
REGION OF THE COUNTRY. 00:38:13 300,000 MEN AND WOMEN, 22,000 FIRMS CLASSIFIED
AS HIGH-TECH COMPANIES. 00:38:17 THAT'S RIGHT, WE HAVE MORE THAN SILICON
VALLEY, MORE THAN BOSTON, MORE THAN WASHINGTON. 00:38:21 IT'S SORT OF
HIDDEN BY SOME OF THE OTHER INDUSTRIES. 00:38:25 JPMORGAN, I'VE BEEN TOLD,
HAS MORE COMPUTER PROGRAMMERS THAN COMPANIES LIKE GOOGLE OR
MICROSOFT MICROSOFT. 00:38:33 SO IT'S VERY IMPORTANT TO NEW YORK. 00:38:35
GOOGLE, FRANKLY, HAS BEEN A VERY IMPORTANT PART OF THAT EQUATION IN NEW
YORK. 00:38:40 LAST YEAR, GOOGLE BOUGHT THE LARGEST OFFICE BUILDING IN
MANHATTAN, GOOGLE EMPLOYS AROUND 3,000 PEOPLE IN NEW YORK, THAT'S
DOUBLE ITS EMPLOYMENT RATE FROM 2010. 00:38:52 AND IN 2010, IT PROVIDED $8.5
BILLION OF ECONOMIC ACTIVITY FOR NEW YORK AND NONPROFITS. 00:38:56
BUSINESSES, WEBSITES, PUBLISHERS AND I'D LIKE TO ASK UNANIMOUS CONSENT, MR.
CHAIRMAN, A NUMBER OF LETTERS I'VE RECEIVED FROM MEMBERS OF THE NEW
YORK LEGISLATURE, NEW YORK BUSINESSES DESCRIBING THE SIGNIFICANT CAN'T
ECONOMIC DEVELOPMENT. 00:39:08 ROLE GOOGLE PLAYS IN NEW YORK'S WITHOUT
OBJECTION. 00:39:10 BUT OBVIOUSLY, WITH THAT GREAT POWER, GOOGLE HAS, AS MY
PREVIOUS COLLEAGUES HAVE MENTIONED, GREAT RESPONSIBILITY. 00:39:18 ON THIS.
00:39:18 SO I WANTED TO GET A SORT OF FIX AND FRANKLY, THE FUTURE OF NEW
YORK'S HIGH-TECH IS LOTS OF LITTLE COMPANIES. 00:39:26 THERE ARE HUNDREDS OF
THEM THAT ARE BURGEONING, ONE OR TWO OF WHOM MIGHT GROW INTO A GOOGLE
OR A FACEBOOK OR ONE OF THE OTHERS. 00:39:34 SO IF GOOGLE WERE BEING
RAPACIOUS AND SHUTTING DOWN THE ABILITY OF THESE SMALL COMPANIES TO
FUNCTION, IT WOULD HURT NEW YORK. 00:39:40 AND EVERY SIX MONTHS OR SO, I
MEET WITH SOME OF THE LEADING HIGH -- THE CEOs OF THE HIGH-TECH COMPANIES
IN NEW YORK, THE GROWING -- THE LITTLE ONES. 00:39:49 AND WE TALK ABOUT
PROBLEMS THEY FACE. 00:39:50 WE DON'T HAVE A GOOD -- YOU KNOW, WE DON'T HAVE
ENOUGH ENGINEERS IN NEW YORK, WE'RE TRYING TO BUILD AN ENGINEERING
SCHOOL. 00:39:56 IMMIGRATION IS A HUGE PROBLEM TO THEM. 00:40:02 WE NEED
REFORM H1B VISAS, THINGS WE'RE WORKING ON, THE IMMIGRATION COMMITTEE.
00:40:05 BUT WITHOUT EVEN PROMPTING THEM, AND I THINK THIS IS IMPORTANT FOR
MY COLLEAGUES TO HEAR, THERE ARE OVER A DOZEN COMPANIES AT THE TABLE OF
DIFFERENT TYPES, EACH OF WHOM HAD 100, 200, 300 EMPLOYEES, AND MOST OF
WHOM HADN'T EXISTED A COUPLE YEARS AGO. 00:40:17 AND I ASKED THEM, WHAT DO
YOU THINK OF GOOGLE? 00:40:21 IT WAS OFF THE RECORD. 00:40:32 IS GOOGLE
RAPACIOUS? 00:40:34 I THOUGHT KODAK WAS BEING TAKEN ADVANTAGE BY ANOTHER
HIGH-TECH COMPANY. 00:40:40 OR ARE THEY GENERALLY -- DO THEY HAVE A MORE
POSITIVE ATTITUDE OF BEING OPEN, ENCOURAGING, ET CETERA? 00:40:46 ATTACK
GOOGLE. 00:40:46 FRANKLY, I EXPECTED THEM TO THAT WOULD BE THE NATURAL
THING YOU WOULD THINK. 00:40:53 BUT THEY DIDN'T. 00:40:54 4/5 SAID GOOGLE IS A
POSITIVE FORCE, MUCH MORE POSITIVE THAN MOST OF THE OTHER LARGE
COMPANIES THEY DEAL WITH. 00:40:59 THEY SAID IT HELPS US MORE THAN IT HURTS
US. 00:41:03 THEIR WORDS, THE CONSENSUS WAS MEMBERS OF THE JURY THEM,
GOOGLE IS ACTUALLY PRETTY GOOD. 00:41:09 WE DON'T SEE THEM AS RAPACIOUS.
00:41:10 IT SURPRISED ME AND IT'S INFLUENCED ME. 00:41:12 AND SO I THINK MY
COLLEAGUES OUGHT TO HEAR THAT. 00:41:17 THAT WHILE IT'S IMPORTANT, OF
COURSE, THAT WE PAY ATTENTION TO COMPETITION IN THE HIGH SECTOR, I AGREE
WITH YOU, SENATOR LEE, THAT THAT'S THE BEST WAY TO GET GROWTH. 00:41:28 IT'S
ALSO IMPORTANT WE FOCUS ON GROWTH AND INVESTMENT AND JOBS, AND SO I -- I
THOUGHT I'D JUST SHARE THAT WITH MY COLLEAGUES, BECAUSE I THINK IT'S
IMPORTANT TO HEAR, AND IT WAS NOT, YOU KNOW -- THERE WAS NO -- THEY HAD NO
IDEA I WAS GOING TO ASK ABOUT GOOGLE. 00:41:44 IT WAS OFF THE RECORD, THEY'RE
VERY FRANK WITH ME ABOUT THINGS, INCLUDING PEOPLE'S POLITICS AND OKAY.
00:41:49 THINGS LIKE THAT. 00:41:50 NOW I HAVE A QUESTION FOR YOU THAT'S
SPECIFIC FOR NEW YORK AND THEN A COUPLE OF GENERAL QUESTIONS -- WELL, I
DON'T HAVE TOO MUCH TIME REMAINING. 00:41:58 BUT LAST YEAR, GOOGLE
SELECTED KANSAS CITY AS A SITE FOR YOUR NEW ULTRA HIGH-SPEED INTERNET
SERVICE. 00:42:05 THAT REALLY HELPED KANSAS CITY. 00:42:09 HUDSON VALLEY IS
VERY EAGER TO BE ANOTHER TEST PLACE FOR YOUR NETWORK. 00:42:13 WE HAVE
IBM THERE, WE HAVE A LOT OF HIGH-TECH INDUSTRY. 00:42:16 IT'S GROWING, BUT IT'S
BEING HINDERED BY A LACK OF INTERNET CAPACITY. 00:42:21 WOULD YOU AGREE TO
CONSIDER THE HUDSON VALLEY AS A FUTURE TEST SITE FOR YOUR BROADBAND
PROJECT?
Mr. Schmidt
00:42:26 I THINK THE ANSWER IS ABSOLUTELY. 00:42:28 I'VE BEEN
THERE, AND IT'S A -- IT'S BOTH A GREAT TECHNOLOGY PLACE AND ALSO A
WONDERFUL NATURAL RESOURCE. 00:42:34 WHAT WE'RE DOING IN KANSAS CITY IS
WE'RE ACTUALLY EXPERIMENTING WITH A NEW MODEL FOR BROADBAND, DIFFERENT
PRICING, DIFFERENT SPEED AND SO FORTH. 00:42:41 AND IF IT WORKS, I THINK IT HAS
AN OPPORTUNITY TO REALLY CHANGE COUNTRY. 00:42:46 THE DIE SIX OF
BROADBAND IN THIS WE WANT IT TO SUCCEED IN KANSAS CITY. 00:42:49 SO
ABSOLUTELY. 00:42:51 AND LAST WE DID.
Charles Schumer
0:42:53 WE'VE HEARD YOUR
ANSWERS HERE, BUT I'M SURE YOU HAVE TO THINK ABOUT THIS, BECAUSE YOU'RE
ALWAYS A GROWING AND EVOLVING COMPANY. 00:43:00 WHAT DO YOU THINK
GOOGLE COULD BE DOING BETTER TO FOSTER COMPETITION THAT YOU COULD DO TO
HELP LITTLE COMPANIES GROW INTO BIG, SUCCESSFUL COMPANIES?
Mr. Schmidt
00:43:08 I'M ALWAYS INTERESTED IN CREATING GREATER PLATFORMS FOR
INNOVATION. 00:43:12 IF YOU TAKE A LOOK AT ANDROID TODAY, 550,000 PHONES, THE
NUMBER OF NEW PLATFORM COMPANIES EXCITING. 00:43:23 TO BUILD NEW APPS AND
ANDROID IS WE COULD INVEST A LOT MORE MONEY IN DEVELOPER SUPPORT AND
PLATFORM SUPPORT FOR THE INDUSTRY THAT WILL BE BUILT AROUND THE
PLATFORMS THAT GOOGLE I'VE ALWAYS FELT THAT'S IS BUILDING. 00:43:32 MORE IN.
00:43:32 SOMETHING WE COULD INVEST EVEN
Charles Schumer
MY TIME IS UP, MR.
CHAIRMAN.
John Cornyn
00:43:35 THANK YOU VERY MUCH, SENATOR THANK YOU.
00:43:37 SCHUMER. 00:43:40 SENATOR CORIN. 00:43:42 THANK YOU, MR. CHAIRMAN.
00:43:43 WELCOME, MR. SCHMIDT. 00:43:44 THANKS. 00:43:45 MR. SCHMIDT, I'M A
FREQUENT PROFD,DUCT, AND I'VE LEARNED A LOT WHEN I'VE HAD A CHANCE TO VISIT
YOUR FACILITIES IN CALIFORNIA AND IT IS A MARVEL 00:43:59
I HAVE TO CONFESS
THAT WHEN I READ THE NONPROSECUTION AGREEMENT BETWEEN GOOGLE AND
THE U.S. JUSTICE DEPARTMENT, IT GAVE ME SOME CONCERNS
. 00:44:06 AND I JUST
WANT TO GIVE YOU AN OPPORTUNITY TO COMMENT ON THAT. 00:44:10 BECAUSE SINCE
THE CHAIRMAN TALKED ABOUT TRUST, AND WE QUOTED RONALD REAGAN, TALKED
ABOUT TRUST AND VERIFY, I JUST WANT TO KNOW HOW YOU PUT THIS INTO THE
CONTEXT OF WHAT I WOULD REGARD GENERALLIES ARE AS A VERY POSITIVE
CONTRIBUTION TO PRODUCT ACTIVITY AND TECHNOLOGY. 00:44:30 BUT
THE
NONPROSECUTION AGREEMENT BETWEEN GOOGLE AND DEPARTMENT OF
JUSTICE DATED AUGUST THE 19th BASICALLY GOOGLE ADMITS TO HELPING
ONLINE PHARMACIES ILLEGALLY SELL HUNDREDS OF MILLIONS OF DOLLARS OF
POTENTIALLY COUNTERFEIT AND TAINTED PRESCRIPTION DRUGS TO U.S.
CONSUMERS.
00:44:48 RESULT, AS YOU KNOW,
GOOGLE PAID A -- WHAT IS REPORTED
TO BE ONE OF THE LARGEST CRIMINAL PENALTIES LEVIED IN COOPERATION IN
U.S. HISTORY, $500 MILLION
. 00:45:00 AND JUST QUOTING, AS EARLY AS 2003, GOOGLE
WAS ON NOTICE THAT ONLINE CANADIAN PHARMACIES WERE ADVERTISING
PRESCRIPTION DRUGS TO GOOGLE USERS IN THE UNITED STATES THROUGH GOOGLE'S
AD WORDS ADVERTISING PROGRAM. 00:45:15 ALTHOUGH GOOGLE TOOK STEPS TO
BLOCK PHARMACIES IN COUNTRIES OTHER THAN CANADA,
OTHER THAN CANADA
FROM ADVERTISING IN THE UNITED STATES THROUGH ADD AD WORDS, GOOGLE
CONTINUED TO ALLOW CANADIAN PHARMACIES TO TARGET ADVERTISING
CAMPAIGNS. 00:45:31 THE UNITED STATES IN
AD WORD GOOGLE KNEW THAT U.S.
CONSUMERS WERE MAKING ONLINE PURCHASES OF PRESCRIPTION DRUGS FROM
THESE CANADIAN ONLINE PHARMACIES
. 00:45:39 IN THIS DOCUMENT, GOOGLE
ADMITTED TO KNOWING AT THE TIME THAT MANY OF THESE CANADIAN ONLINE
PHARMACY ADVERTISERS
DISTRIBUTED PRESCRIPTION DRUGS, INCLUDING
CONTROLLED SUBSTANCES, BASED ON AN ONLINE CONSULTATION RATHER THAN
A VALID PRESCRIPTION FROM A TREATING MEDICAL PRACTITIONER
. 00:45:59 AND
IT WAS NOT UNTIL 2009 WHEN
GOOGLE BECAME AWARE OF THE DOJ'S
INVESTIGATION
OF ITS ADVERTISING PRACTICES IN THE ONLINE PHARMACY AREA
THAT GOOGLE
TOOK A NUMBER OF SIGNIFICANT STEPS TO PREVENT
THE
UNLAWFUL SALE OF PRESCRIPTION DRUGS BY ONLINE PHARMACIES TO U.S.
CONSUMERS. 00:46:14 SO I WANT TO GIVE YOU AN OPPORTUNITY, MR. SCHMIDT, TO PUT
THAT IN CONTEXT SO WE CAN GET A COMPLETE AND ACCURATE PICTURE OF GOOGLE
AS A CORPORATE CITIZEN AND I THINK IT ALSO SPEAKS DIRECTLY TO THE ISSUE OF
TRUST.
Mr. Schmidt
00:46:32 AND, AGAIN, ALL OF THAT'S GENERALLY QUITE CORRECT.
00:46:35 WE REGRET WHAT HAPPENED. 00:46:36 AND WE ENTERED INTO THE
AGREEMENT THAT YOU NAMED AND CITED FROM. 00:46:41 UNFORTUNATELY, AS PART
OF THAT AGREEMENT, AND I'VE BEEN ADVISED VERY CLEARLY BY OUR LAWYERS
THAT WE HAVE AN AGREEMENT WITH DEPARTMENT OF JUSTICE THAT WE ARE NOT TO
SPEAK ABOUT ANY OF THE DETAILS OF IT. 00:46:51 SO I WOULD HAVE TO ASK YOU TO
SPEAK TO THE DEPARTMENT OF JUSTICE FOR MORE OF THAT.
John Cornyn
00:46:55 IS
THAT IN THE 15-PAGE AGREEMENT?
Mr. Schmidt
00:46:57 IT'S IN THERE SOMEWHERE,
YES, SIR. 00:47:02 AND SO IN ANY CASE, THE IMPORTANT THING FOR ME TO SAY IS THAT
THE CONDUCT THAT WAS COVERED IS NOT -- HAS NOTHING TO DO WITH ANY OF OUR
CURRENT ADVERTISING PRACTICES OR POLICIES. 00:47:12 IN OTHER WORDS, IT WAS A
HISTORICAL EVENT.
John Cornyn
00:47:20 WAS IT -- WAS IT THE RESULT OF OVERSIGHT
OR INADVERTENTANCE, OR WERE THERE SOME EMPLOYEES IN THE COMPANY THAT
WERE DOING THIS THE -- WITHOUT YOUR KNOWLEDGE, OR WELL, CERTAINLY NOT
WITHOUT MY KNOWLEDGE.
Mr. Schmidt
00:47:34 AGAIN, I HAVE BEEN ADVISED,
UNFORTUNATELY I'M NOT ALLOWED TO GO INTO ANY OF THE DETAILS, AND I
APOLOGIZE, SENATOR. 00:47:40 EXCEPT TO SAY THAT WE'RE VERY REGRETFUL AND IT
WAS CLEARLY A MISTAKE.
John Cornyn
00:47:47 MY COUNSEL ADVISES ME THAT UNDER
THE AGREEMENT, YOU'RE NOT ALLOWED TO CONTRADICT THE AGREEMENT. 00:47:54
ALTHOUGH YOU CAN COMMENT ON IT. 00:47:56 IS YOUR UNDERSTANDING DIFFERENT?
Mr. Schmidt
00:48:01 LET ME ASK MY COUNSEL. 00:48:16 AGAIN, I'M NOT ALLOWED TO GO
INTO THE DETAILS OR CHARACTERIZE IT BEYOND THE -- BEYOND WHAT HAS BEEN
STATED IN THE AGREEMENT. 00:48:23 WE ABSOLUTELY REGRET WHAT HAD HAPPENED,
IT WAS A MISTAKE, AND WE CERTAINLY APOLOGIZE.
John Cornyn
00:48:29 WELL, DO YOU
DISAGREE WITH THE CHARACTERIZATION THAT I GAVE IT OR THE WORDS --
Mr. Schmidt
I AGREE WITH YOU, SENATOR. 00:48:34 YEAH.
John Cornyn
00:48:36 AND YOU'VE TAKEN
STEPS TO MAKE SURE THAT THAT SORT OF THING NEVER HAPPENS AGAIN?
Mr. Schmidt
00:48:41 ABSOLUTELY. 00:48:42 AND, AGAIN, I SAY THAT WITH REGRET.
John Cornyn
00:48:50 MR. SCHMIDT, THE -- OF COURSE, THIS IS THE ANTITRUST SUBCOMMITTEE.
00:48:54 WOULD YOU AGREE WITH ME THAT AT SOME POINT IT BECOMES ILLEGAL
UNDER THE ANTITRUST LAWS TO ENCYST THAT CUSTOMERS OF ONE PRODUCT BUY
ANOTHER SEPARATE PRODUCT? 00:49:03 GENERALLY CALLED TYING?
Mr.
Schmidt
00:49:04 YES. 00:49:05 I'M NOT AN ATTORNEY, BUT MY GENERAL
UNDERSTANDING IS THAT THAT'S CORRECT.
John Cornyn
00:49:10 DO YOU BELIEVE THAT
YOUR MOBILE ANDROID OPERATING SYSTEM -- YOUR MOBILE OPERATING SYSTEM,
ANDROID, HAS REACHED THAT POINT?
Mr. Schmidt
00:49:18 IT'S AT ABOUT 40% OF THE
MARKET AND GROWING FAST, CORRECT? 00:49:22 AS A BIT OF BACKGROUND, AS I
MENTIONED EARLIER, ANDROID IS ON ITS WAY TO BECOMING THE MOST SUCCESSFUL
MOBILE PLATFORM. 00:49:28 THIS. 00:49:28 WE'RE EXTRAORDINARILY PROUD OF AS I
SAY, WE HAVE 550,000 ACTIVATIONS, AND THE ANDROID OPERATING SYSTEM IS FIRST
AND FOREMOST FREELY LICENSED. 00:49:37 THAT IS, THERE IS NO FEE WHATSOEVER
TO USE IT. 00:49:41 SPECULATING ON THE BASIS OF YOUR QUESTION, IT TURNS OUT
THAT IT'S TO USE GOOGLE SEARCH ALONG WITH ANDROID, BUT IT'S EXPRESSLY ALSO
POSSIBLE TO NOT USE GOOGLE SEARCH. 00:49:54 SO THE ANSWER IS, THAT'S NOT AN
EXAMPLE OF THE CASE YOU WERE DESCRIBING.
John Cornyn
00:50:01 CAN GOOGLE
DESIGN ANDROID SO THAT OTHER APPLICATIONS CANNOT WORK AS WELL AS GOOGLE
APPLICATIONS? 00:50:07 FOR EXAMPLE, THE GMAIL APPLICATION WILL ALWAYS BE
FASTER THAN THE YAHOO MAIL APPLICATION? 00:50:11 IS THAT POSSIBLE?
Mr.
Schmidt
00:50:13 I'M SURE THAT'S NOT TRUE IN GENERAL, BECAUSE UNDER THE RULES
OF OPEN SOURCE, IT'S POSSIBLE FOR ANYONE TO TAKE OPEN SOURCE AND MODIFY IT
IN ANY WAY POSSIBLE. 00:50:24 SO ANYTHING THAT WE DID, WHICH WE WOULDN'T DO
THAT WOULD ADVANTAGE OUR OWN APPS WOULD BE REVERSIBLE BY SOMEBODY,
BECAUSE WE GIVE THEM THE SOURCE CODE. 00:50:31 IN OTHER WORDS, THE HISTORY
-- HISTORICALLY, THE PROBLEM IN THIS CASE WAS THAT THERE WAS SOME HIDDEN
FEATURE THAT A PREVIOUS COMPANY WOULD DO THAT WASN'T VISIBLE. 00:50:39
BECAUSE ANDROID SOURCE IS MADE AVAILABLE TO EVERYONE, YOU CAN SEE IT AND
WE COULDN'T CHOOSE THAT IF WE WANTED TO.
John Cornyn
00:50:45 THANK YOU.
00:50:50 MY TIME IS UP.
Amy Klobuchar
00:52:11 FIRST, THE DIFFERENCE BING RANKED
FIRST AND SECOND, THE FIRST-RANKED RESULT GETS ABOUT 35% OF THE CLICKS, THE
SECOND RESULT GETS ONLY ABOUT 11%, AND WHEN GOOGLE CHANGED ITS
FORMULA, COMPANIES THAT MIGHT FIRST END UP BEING ON THE SECOND PAGE OR
FURTHER DOWN THE LINE, AND BUSINESSES ARE ALWAYS TELLING ME THEY WANT
CERTAINTY, AND AT THE SAME TIME GOOGLE IS INNOVATING AND CHANGING TO
IMPROVE ITS PRODUCT, BUT DO YOU THINK COMPANIES SHOULD HAVE A RIGHT TO
EXPECT MORE CERTAINTY IN HOW 00:52:41 EXPECT MORE CERTAINTY IN HOW THEY
ARE BEING RANKED?
Mr. Schmidt
00:52:44 IN THE SITUATION YOU ARE DESCRIBING, I
HAVE A LOT OF SYMPATHY FOR THE BUSINESS WHOSE RANKING HAS GONE DOWN.
00:52:51 THERE'S NO QUESTION THAT NATURAL SEARCH RESULTS DO DRIVE REVENUE
TRAFFIC, POPULARITY, AND SO FORTH, SO WHEN WE MAKE A CHANGE, THERE ARE
ANCILLARY CONSEQUENCES BECAUSE OF THAT. 00:53:04 IT'S IMPORTANT TO NOTE AT
THE SAME TIME COMPANY A IS PUSHED DOWN, ANOTHER COMPANY GOES TO THE TOP,
AND WE ARE IN THE BUSINESS OF RANKING. AND BY DEFINITION THOSE RANKING
DECISIONS ARE NOT PERFECT. OUR ALGORITHMS ARE NOT SPECIFIC TO A SPECIFIC
COMPANY, SO YOU CAN HAVE A SITUATION WHERE THE RANKING .....
Chuck Grassley
00:58:43 I'M GOING TO HAVE A SHORT STATEMENT, THEN I WANT TO PUT A LONG
STATEMENT ON THE RECORD, MR. CHAIRMAN. 00:58:50 I'VE HEARD BOTH GOOD AND
BAD ABOUT GOOGLE FROM IOWANS. 00:58:55 SOME FEEL IT'S MANIPULATING SEARCH
AND DRIVE WEB TRAFFIC TO ITS OWN SITES TO THE DETRIMENT OF SMALL BUSINESS
AND CONSUMERS, THEY ARE FRUSTRATED BY BUSINESS PRACTICES THAT ARE NOT
TRANSPARENT. 00:59:08 THEY BELIEVE GOOGLE IS ENGAGING IN ANTICOMPETITIVE
BEHAVIOR, THWARTING COMPETITIVE MARKETPLACE. 00:59:19 OTHERS ARE
SUPPORTIVE OF GOOGLE AND CONCERNED THE GOVERNMENT IS BEING OVERLY
AGGRESSIVE AND WILL FACE BURDENSOME REGULATIONS ON A COMPANY CREATING
JOBS. 00:59:31 WE SHOULD NOT BE PENALIZING COMPANIES PROVIDING COST-
EFFECTIVE AND PRODUCTIVE SERVICES AND CREATING JOBS, BUT I ALSO BELIEVE
COMPANIES SHOULD NOT ENGAGE IN DECEPTIVE BUSINESS PRACTICES THAT
NEGATIVELY IMPACT THE MARKETPLACE. 00:59:48 THE GOVERNMENT SHOULD NOT
BEEN PICKING WINNERS AND LOSERS, THE ANTITRUST LAWS HAVE A ROLE TO PLAY.
00:59:55 ALL COMPANIES MUST PLAY BY THE RULES. 00:59:59 COMPANIES SHOULD
EMPLOY OPEN, FAIR, AND TRANSPARENT BUSINESS PRACTICES THAT DO NOT HARM
COMPETITION AND IMPEDE CONSUMER CHOICE. 01:00:08 I GO TO MY QUESTIONS NOW,
MR. 01:00:10 SCHMIDT, AND I'M GOING TO QUOTE WITHOUT ATTRIBUTION SEVERAL
COMMUNICATIONS I'VE HAD WITH IOWANS ON BOTH SIDES. 01:00:21 I'LL START OUT
WITH WHAT DO YOU SAY TO IOWANS WHO ARE CONCERNED THAT GOOGLE "USES ITS
POWER TO MANIPULATE CONSUMERS AND DRIVE TRAFFIC TO ITSELF AND AWAY
FROM POTENTIAL COMPETITORS FOR TRAFFIC AND AD REVENUE," SO KIND OF HOW
DO YOU RESPOND TO THAT, AND ADDITIONAL QUOTE IS "ARE YOU CONCERNED THAT
YOUR COMPANY HAS ENORMOUS POWER TO DIRECT INTERNET TRAFFIC IN WAYS
THAT HURT MANY SMALL RURAL BUSINESSES?"
Mr. Schmidt
01:00:55 SO I'D LIKE TO
RETURN TO THE PHILOSOPHY WE'VE HAD FOR SOME YEARS, WHICH IS TO FOCUS ON
GETTING TO THE RIGHT ANSWER, AND WE HAVE A LOT OF SYSTEMS INSIDE THE
COMPANY,
INTERNAL TESTING, EXTERNAL TESTING, 1% TESTS
THEY ARE CALLED,
TO REALLY MAKE SURE WE'RE PRODUCING THE BEST RESULTS, AND THAT IS THE
GUIDE THAT WE USE. 01:01:16 IT'S REALLY ABOUT CONSUMERS. 01:01:19 AS WE
DISCUSSED EARLIER, IT'S PERFECTLY POSSIBLE THAT IN THE COURSE OF THAT,
EXTREMELY GOOD AND WELL-MEANING SMALL BUSINESSES MOVE UP AND DOWN IN
THE RANKINGS, BUT WE ARE IN THE RANKINGS BUSINESS, SO FOR EVERY LOSER,
THERE'S A WINNER, AND SO FORTH. 01:01:34 I AM SATISFIED THAT THE VAST MAJORITY
OF SMALL BUSINESSES ARE EXTREMELY WELL-SERVED BY OUR APPROACH, AND AS I
SAID EARLIER, I DO BELIEVE THAT IF ANYTHING, OUR SYSTEM PROMOTES AND
ENHANCES SMALL BUSINESS OVER LARGER BUSINESSES, BECAUSE IT GIVES THEM A
HEARING AND RULE THEY WOULD NOT OTHERWISE HAVE BECAUSE OF THE NATURE
THEY WORK.
Chuck Grassley
01:01:56 HERE'S A QUOTE FROM SOMEBODY THAT SUPPORTS
GOOGLE. 01:02:00 HOW WOULD YOU RESPOND TO THE IOWAN WHO WROTE "FURTHER
RESTRICTIONS ON SUCCESSFUL BUSINESSES LIKE GOOGLE ARE THE SUREST WAY TO
IMPEDE INNOVATION, ENTREPRENEURSHIP, ULTIMATELY THREATENING ANY
SUSTAINABLE ECONOMIC RECOVERY."
Mr. Schmidt
AGAIN, WE'D LIKE TO BE JUDGED
AND WE'RE HAPPY TO BE JUDGED AND RULED BY YOU ALL BASED ON THE PRINCIPLES
WE SET OUT, WHICH IS TO FOCUS ON CONSUMERS AND CONSUMER CHOICES. 01:02:27
WE ARE ALWAYS WORRIED ABOUT CONSUMERS BEING ABLE TO MOVE FROM OUR
CELLS TO OUR CURRENT LARGER COMPETITOR, WHICH IS BING, AND THE NEW
COMPETITORS THAT HAVE EMERGED OVER THE LAST FEW YEARS, SO WE ARGUE
WE'RE IN A HIGHLY COMPETITIVE MARKET AND ASK YOU TO UNDERSTAND THE WAY
WE'RE MAKING DECISIONS BASED ON PRINCIPLES.
Chuck Grassley
01:02:48 YOU MAY
WANT TO SAY THESE WORKSHOPS THAT YOU HAVE, BUT IN ADDITION TO ANYTHING
YOU WANT TO SAY ALONG THAT LINE, HOW CAN SMALL BUSINESS SES' WEBSITES
COMPETE WITH BIG BOX STORES ON GOOGLE?
Mr. Schmidt
01:03:06 IT'S INTERESTING
GOOGLE WAS FIRST A SUCCESS IN SMALL BUSINESSES, BECAUSE SMALL BUSINESSES
WERE MORE NIMBLE WHEN IT CAME TO THE INTERNET, SO WE HAVE A LONG HISTORY
OF PROMOTING AND HELPING SMALL BUSINESSES, AND WE LOVE THIS, AND SMALL
BUSINESSES SUCCEED WHERE LARGE ONES DON'T. 01:03:23 THEY SUCCEED BECAUSE
OF SPECIALIZATION. 01:03:27 WE TRY TO GET THEM TO ARTICULATE THE UNIQUE WAY
IN WHICH THEY ARE DIFFERENT, SO IN YOUR WAY, WITH YOUR CONSTITUENTS,
THERE'S SOMETHING UNIQUE ABOUT THE CITIZENS AND CULTURE AND VIEW OF
YOUR STATE. 01:03:42 THEY WILL BE RANKED HIGHER AND APPEAL TO A BROADER
AUDIENCE. 01:03:47 WE CAN HAVE LOCAL FLAVOR WITH GLOBAL IMPACT. 01:03:50 THE
GLOBAL IMPACT IN TERMS OF THE MARKET THAT YOU'RE SERVING.
Chuck Grassley
01:03:55 A QUESTION THAT WOULD COME FROM SOMEBODY WHO IS NOT AN ADMIRER,
COMPLAINTS ALONG THE LINE THAT GOOGLE IS DIRECTING INTERNET USERS TO
GOOGLE-OPERATED WEBSITES REGARDLESS OF WHETHER THE ORGANIC RESULTS OF
THE SEARCH WOULD DIRECT USERS TO COMPETING SITES, SPECIFICALLY SOME OF MY
CONSTITUENTS ARE CONCERNED THAT SMALL LOCAL IOWA BUSINESSES ARE NOT
TREATED IN A FAIR AND COMPETITIVE MATTER AND THE TOP SEARCH RESULTS TO A
QUERY ARE OFTEN GIVEN TO LARGE NATIONAL COMPANIES, EVEN WHEN A SEARCH
DESIGNATES A SPECIFIC IOWA LOCATION IN THE QUERY, SO -- OBVIOUSLY, FEELS
SMALL BUSINESSES ARE BEING CHEATED AND CONSUMERS BEING MISLED, YOUR
RESPONSE.
Mr. Schmidt
01:04:55 IT MAY BE DIFFICULT FOR US TO DETECT IT, STATING
FAILURES OF OUR ALGA RHYTHM. 01:04:57 WE'RE CONSTANTLY TRYING TO IMPROVE
IT. 01:04:59 IN THE CASE THAT YOU'RE DESCRIBING, PART OF THE ANSWER WE WOULD
GIVE IS HOPEFULLY YOU'LL HAVE A MIXTURE OF LARGER COMPANIES AND SMALLER
BUSINESSES THAT REFLECT THE BEST OF IOWA IN THAT PARTICULAR SCENARIO, BUT
THE PRECISE RANKINGS ARE SO DIFFICULT TO CHARACTERIZE, WHERE AM I FIRST
AND OTHERS SECOND, IT'S HARD TO REASON FROM A CASE. 01:05:23 SPECIFIC CASE
OUT TO THE GENERAL THANK YOU.
Al Franken
01:05:36 FIRST I WANT TO START OUT BY
SAYING I LOVE GOOGLE, AND I SAID THAT THE LAST TIME GOOGLE WAS HERE IN
FRONT OF MY SUB COMMITTEE, BUT I THINK IT BEARS REPEATING. 01:05:49 GOOGLE'S
UTTERLY TRANSFORMED THE WAY WE LOCATE AND USE INFORMATION, I HAVE A
FEELING GOOGLE IS GOING TO CONTINUE TO BE THOSE SETTING A STANDARD FOR
INNOVATION IN THIS COUNTRY FOR DECADES TO COME, BUT IN MY WAYS, GOOGLE'S
UNPRECEDENTED GROWTH AND SUCCESS IS ALSO ONE OF THE REASONS WE NEED TO
PAY ATTENTION TO WHAT YOU'RE DOING, AND AS YOU GET BIGGER AND BIGGER AND
BIGGER, I WORRY ABOUT WHAT THAT MEANS FOR THE NEXT LARRY PAGE WHO ARE
STRUGGLING TO BUILD THE NEXT INNOVATIVE PRODUCT IN THE GARAGE. 01:06:31 I
AM ADMITTEDLY SKEPTICAL OF BIG COMPANIES THAT SIMULTANEOUSLY CONTROL
BOTH INFORMATION AND THE DISTRIBUTION CHANNELS TO THAT AT THE HEART OF
THE PROBLEM INFORMATION, AND FOR ME THAT IS HERE. 01:06:46 WHEN YOU
COMPLETELY DOMINATE HOW FOR THAT INFORMATION AND YOU OWN SEPARATE
PRODUCTS AND SERVICES THAT YOU WANT TO SUCCEED, YOUR INCENTIVES SHIFT,
YOUR FIDUCIARY DUTIES TO YOUR SHAREHOLDERS SHIFT, AND PEOPLE HAVE
REASON TO WORRY THAT YOU AREN'T GOING TO PLAY FAIR, AND THERE'S BEEN A LOT
OF TALK ABOUT WHERE YOUR PLACEMENT ON A SEARCH, COMPANIES, AND I WAS A
LITTLE TAKEN ABACK BY AN ANSWER YOU GAVE WHEN CHAIRMAN BROUGHT UP
MARISSA MAYERS QUOTE THAT WHEN WE ROLLED OUT GOOGLE FINANCE WE DID PUT
THE GOOGLE LINK FIRST, IT SEEMS ONLY FAIR, RIGHT, WE DO ALL THE WORK FOR THE
SEARCH PAGE AND ALL THESE OTHER THINGS, SO WE DO PUT IT FIRST, AND YOU
ANSWERED THAT BY SAYING WELL, YOU PUT A MAP OUT THERE WHEN SOMEONE
WANTS A MAP TO SOMEPLACE, YOU PUT A MAP OUT THERE, AND THAT'S WHAT THEY
WANT. 01:08:04 SORT OF UNDERSTAND THAT. 01:08:07 OR A FINANCIAL ANSWER, A
STOCK PRICE, BUT THEN THE RANKING MEMBER ASKED YOU, WELL, WHEN THAT'S
NOT THE CASE, WHEN YOU'RE NOT PUTTING OUT THE ANSWER THAT PEOPLE WANT,
WHEN YOU'RE NOT DOING THAT, DO ALL YOUR RANKINGS REFLECT AN UNBIASSED
ALGA RHYTHM, AND YOU SAID -- AFTER A LITTLE HESITATION, I BELIEVE SO. 01:08:44
THAT SEEMED LIKE A PRETTY FUZZY ANSWER TO ME COMING FROM THE CHAIRMAN.
01:08:59
IF YOU DON'T KNOW, WHO DOES
? 01:09:01 THAT REALLY BOTHERS, ME,
BECAUSE THAT'S THE CRUX OF THIS, ISN'T IT? 01:09:07
AND YOU DON'T KNOW.
01:09:09
SO WE'RE TRYING TO HAVE A HEARING HERE ABOUT WHETHER YOU FAVOR YOUR
OWN STUFF, AND YOU'RE ASKED THAT QUESTION, AND YOU ADMITTEDLY DON'T
KNOW THE ANSWER. 01:09:24 I WANT TO TALK ABOUT YELP A LITTLE BIT. 01:09:26 I
READ THROUGH THE TESTIMONY OF MR. STOPPELMAN, THE CO-FOUNDER AND CEO
OF YELP LAST NIGHT, AND I HAVE TO SAY I FOUND HIS STORY QUITE COMPELLING.
01:09:39 IT SOUNDS TO ME, LIKE GOOGLE FIRST TRIED TO LICENSE YELP'S CONTENT,
AND DID, AND THEN WHEN YELP TERMINATED THAT CONTRACT, GOOGLE TRIED TO
BUY YELP, AND WHEN YELP REFUSED,
GOOGLE STARTED TAKING YELP'S REVIEWS
AND SHOWED THEM ON GOOGLE'S PAGE. 01:10:01 AND WE'RE GOING TO HEAR FROM
MR. 01:10:03 STOPPELMAN SOON, BUT I WANTED TO GIVE YOU A CHANCE TO RESPOND
TO SOME OF THE POINTS OF HIS TESTIMONY. 01:10:09 DID YOU GET A CHANCE TO READ
IT AND LOOK AT THE EXHIBITS?
Mr. Schmidt
01:10:13 IN GENERAL TERMS, YES, BUT NOT
IN SPECIFICS. 01:10:17 BUT I'M GENERALLY FAMILIAR WITH YELP.
Al Franken
01:10:21
FIRST OF ALL, YELP CONTENDS THAT EVEN NOW CONSUMERS CANNOT FIND LINKS TO
YELP IN GOOGLE'S MERGED RESULTS AND MR. 01:10:31 STOPPELMAN GOES ON TO SAY
"IT'S IMPOSSIBLE TO BE DISPLAYED AS PROMINENTLY AS GOOGLE ITSELF, EVEN IF
GOOGLE'S OWN ALGORITHM RATES THEM HIGHER." FAIR?
Mr. Schmidt
01:10:52 AGAIN,
HE'LL HAVE AN OPPORTUNITY TO SAY WHAT HE'D LIKE IN A MINUTE, BUT THE
BACKGROUND ON YELP, IS THEY'VE BEEN A PARTNER FOR MANY YEARS AND HAVE
BEEN HIGHLY RANKED IN OUR SEARCH RESULTS. 01:11:06 SOME YEARS AGO, WE
DECIDED TO START WORKING ON A PROJECT BUILT AROUND LOCATION, AND THE IDEA
WAS TO CREATE, IF YOU WILL, A HUB OF INFORMATION AROUND A PLACE, SO THAT
WOULD BE A MAP, INFORMATION ABOUT THE THINGS AT THAT MAP, SO A
RESTAURANT, A STORE, WHAT HAVE YOU. 01:11:24 AND GIVEN THAT WE SEARCH THIS
INFORMATION, WE ALSO TOOK SNIPPETS OF THE RESULTS FROM YELP, ALONG WITH
MANY OTHERS, AND PUT THOSE INTO THOSE WEB RESULTS. 01:11:34 THOSE BECAME
WHAT ARE KNOWN AS PLACE PAGES TODAY. 01:11:37 I SHOULD SAY, BY THE WAY, OUR
COMPETITORS ALSO HAVE A SIMILAR OFFERING, AND IF THERE'S CONFUSION AS TO
WHY WE NEED THE DEVICE. 01:11:44 PLACE PAGE, THINK ABOUT A MOBILE IF YOU
HAVE A PHONE, YOU HAVE YOUR PHONE HERE, IT'S GOING TO BE VERY DIFFICULT FOR
YOU TO GO THROUGH THE TEN LINKS, WHERE IF YOU HAVE A MAP AND CAN THUMB
AROUND, THAT ALL MAKES SENSE. 01:11:57 SO IN THE PARTICULAR CASE OF YELP, I
FELT THAT YELP WOULD BE VERY HAPPY WITH US POINTING TO THEIR SITE AND THEN
USING A LITTLE BIT OF THEIR REVIEWS, BECAUSE WE'VE GOTTEN THOSE IN THE
INDEX, AND THEN SENDING TRAFFIC TO THEM. 01:12:10 THEY WERE NOT HAPPY WITH
THAT. 01:12:12 THEY SENT US A LETTER TO THAT EFFECT, AND WE TOOK THEM OUT OF
THE PLACE PAGES, SO IF YOU LOOK TODAY, YOU'LL SEE THAT THEY ARE NOT IN
THERE. 01:12:20 YOU HAVE THE GOOGLE REVIEWS AND A BUNCH OF OTHER STUFF
LIKE THAT, AND ULTIMATELY WE BOUGHT A COMPANY TO DO SOMETHING SIMILAR.
01:12:29 THIS IS NOT A CASE OF GENERIC RANKING AND SO FORTH, IT'S ABOUT US
TRYING TO THESE PLACE PAGES AND GET INFORMATION TO SOLVE A DIFFERENT
PROBLEM.
Al Franken
01:12:36 I'M OUT OF TIME, I'D JUST LIKE TO ASK ONE SHORT
QUESTION, AND HOPEFULLY GO TO A SECOND ROUND IF WE CAN, IS GOOGLE STILL
USING YELP'S CONTENT TO DRIVE GOOGLE PLACES?
Mr. Schmidt
01:12:48 AS FAR AS I
KNOW, NOT. 01:12:50 AS FAR AS YOU KNOW? 01:12:51 AGAIN, I'LL HAVE TO LOOK, BUT
I'M NOT AWARE OF ANY.
Al Franken
01:12:56 OKAY, MAYBE MR. STOPPELMAN WILL HELP
US ON THAT, THANK YOU.
Richard Blumenthal
01:13:40 THOSE CONCERNS FOCUSING ON
THE SIZE AND MARKET POWER OF GOOGLE A SCOPE AND SCALE THAT IT INVOKES
CERTAIN RESPONSIBILITIES UNDER OUR LAW, AND WHETHER OR NOT GOOGLE HAS
COME -- COMPLYIED WITH THOSE RESPONSIBILITIES, BUT THERE'S NO FACT THAT
GOOGLE IS THE BEHEMOTH OF SEARCHES THESE DAYS, AND IT FAR OUTSIZES ITS
NEAREST COMPETITOR, WHICH HAS LESS THAN 30% OF THE MARKET AS COMPARED
TO GOOGLE'S 65% OR 70% MORE IN SEARCHES, AND AN EVEN HIGHER SHARE IN
ADVERTISING REVENUE, AND THAT THE TREND WILL BE TOWARD PERHAPS EVEN
MORE SIZABLE SHARE ON THE PART OF GOOGLE IN THE SEARCH MARKET, AND THE
REASON I SAY IT IS YOUR NEAREST COMPETITOR IS LOSING $2 BILLION AND GOOGLE
MADE $29 BILLION IN 2010, AND I THINK THAT THE DYNAMIC HERE IS BEST
SUMMARIZED BY JONATHAN ROSENBURG, WHO IS YOUR OWN VICE PRESIDENT OF
PRODUCT MANAGEMENT, WHO SAID, AND I'M QUOTING, HE SAID IT IN 2008, IT'S NOT
YOUR VOICE BUT DOES SPEAK TO THE DYNAMIC IN THE MARKET, "MORE USERS,
MORE INFORMATION, MORE USERS, MORE ADVERTISEMENT, MORE USERS, IT'S A
BEAUTIFUL THING, LATHER, RINSE, REPEAT, THAT'S WHAT I DO FOR A LIVING. 01:15:26
SO THAT'S THE ENGINE THAT CANNOT BE STOPPED." THE HEARING AND THE
TESTIMONY HERE AND A LOT OF WHAT'S BEEN WRITTEN AND SAID HAS MANY
ALLEGATIONS, THEY ARE ONLY ALLEGATIONS. 01:15:41 THEY HAVEN'T BEEN PROVEN
ABOUT SCRAPING CONTENT AND COOPTING CONTENT. 01:15:49 MY COLLEAGUE,
SENATOR FRANKEN JUST RAISED YELP'S ALLEGATIONS. 01:15:55 THE OTHER KINDS OF
CLAIMS ABOUT ANTICOMPETITIVE CONDUCT, SO MY QUESTION TO YOU IS, DRAWING
ON THE LESSONS THAT PRESUMABLY YOU HAVE LEARNED AS YOU VERY FORTH
RIGHTLY ACKNOWLEDGE, CAN GOOGLE SUGGEST MEASURES TO BE TAKEN
VOLUNTARILY AT THIS POINT TO PROMOTE COMPETITION, TO DISPEL THOSE
ALLEGATIONS, AND PERHAPS DISSIPATE SOME OF THE MOMENTUM TOWARDS
GOVERNMENT INTERVENTION, AND I ASK THIS QUESTION IN THE SPIRIT OF TRYING TO
AVOID GOVERNMENT REGULATION AND INTERVENTION. 01:16:38 IN MY VIEW, SOME
OF THE COMPANIES WHO HAVE OCCUPIED YOUR CHAIR BEFORE YOU HAVE BEEN
THEIR OWN WORST ENEMY IN THAT REGARD, YOU'RE VERY FRANK
ACKNOWLEDGMENT ABOUT GOOGLE'S RESPONSIBILITIES AND APPROACH, I THINK,
SPEAKS AN APPROACH TO, IN EFFECT, TRY TO DO VOLUNTARILY WHAT'S IN
CONSUMERS' BEST INTEREST, BECAUSE COMPETITION IS IN CONSUMERS' BEST
INTEREST BEFORE THERE IS INTERVENTION EITHER BY A GOVERNMENT AGENCY OR
01:17:12 BY A COURT.
Mr. Schmidt
01:17:13 MY GENERAL ANSWER WOULD BE THAT
MAKING THE INTERNET WIN GUARANTEES VERY STRONG COMPETITION FROM ULALL
OF US. 01:17:27 THE FACT OF THE MATTER IS THERE'S MANY, MANY START-UPS. 01:17:32
THERE ARE SITES NOW SEEING MORE THAN HALF OF THEIR TRAFFIC COMING FROM
FACEBOOK, AND GOOGLE IS A VERY SMALL COMPONENT OF THE TRAFFIC THAT GET,
THERE'S EVERY REASON TO BELIEVE A BROAD STRATEGY TO PROMOTE THE AND
INVESTMENTS TO COMPANIES. 01:17:51 I WOULD ARGUE THE LEVERS ARE NECESSARY
-- THAT ARE NECESSARY TO GUARANTEE THE OUTCOME YOU'RE LOOKING FOR ARE
LARGELY ALREADY IN PLACE.
Richard Blumenthal
01:18:03 LET ME BE MORE NARROW IN
MY QUESTION. 01:18:07 RIGHT NOW, AS I UNDERSTAND IT, CERTAIN GOOGLE
PROPERTIES, MAPS, FOR EXAMPLE, ARE AT THE TOP OF GOOGLE'S RESULTS. 01:18:15
REGARDLESS OF THE ALGORITHMS, THEY ARE AT THE TOP. 01:18:18 WOULD, FOR
EXAMPLE, ELIMINATING THAT PREFERENCE BE A STEP IN THE RIGHT DIRECTION?
Mr.
Schmidt
01:18:22 I WOULD DISAGREE FOR TWO REASONS, FIRST, IT WOULD BE BAD FOR
CONSUMERS, BECAUSE CONSUMERS WANTED A MAP, AND BY VIRTUE OF SUCH A
RULE, YOU'RE FORCING PEOPLE TO DO TWO STEPS. 01:18:33 THE SECOND, OF COURSE,
IS THAT IT WOULD ALLOW THE COMPETITORS TO OFFER SUCH THAT BUT WITHOUT
GOOGLE BEING ABLE TO DO IT, BECAUSE COMPETITORS ALL HAVE THAT AS WELL.
01:18:44 SO I'M WORRIED SUCH A RESTRICTION WOULD ESSENTIALLY PRESENT US
FROM MEETING OUR PRIMARY MISSION.
Richard Blumenthal
01:18:49 ARE THERE OTHER
SPECIFIC STEPS THAT YOU WOULD SUGGEST, I MEAN, IF WE WERE A COURT AND
LIABILITY WERE FOUND AND THE QUESTION WERE REMEDIES, WHAT WOULD YOU
SUGGEST? 01:19:05 WELL, AGAIN -- I DON'T MEAN TO PUT YOU IN AN UNFAIR POSITION.
01:19:14 IT'S A VERY, VERY, VERY HYPOTHETICAL QUESTION.
Mr. Schmidt
01:19:17 WE
HAD A LONG CONVERSATION SOME YEARS AGO ABOUT HOW GOOGLE WOULD EVADE
TO AVOID BEING EVIL WHEN WE WERE BIG, AND WE ACTUALLY BELIEVE WE'VE MADE
THOSE CHANGES, STEPS AND SO FORTH. 01:19:29 A CLASSIC EXAMPLE, WE CREATED
THE DATA LIBERATION FRONT, SO WE CANNOT HOLD YOUR DATA. 01:19:36 IF YOU
WISH TO FLEE GOOGLE TO A COMPETITOR, BING, FOR EXAMPLE, OR ANOTHER ONE,
WE MAKE IT VERY EASY FOR YOU TO DO THAT, BOTH FOR YOUR PERSONAL DATA AS
WELL AS YOUR ADVERTISING DATA, SO WE THINK WE'VE DONE THE THINGS TO MAKE
SURE WE STAY BOX. 01:19:51 IN A APPROPRIATE COMPETITIVE WE'RE OPEN TO
SUGGESTIONS FOR ADDITIONAL STEPS. 01:19:58 IN A COMPETITIVE MARKET WITH THE
EXTRAORDINARY CHANCES OF THE INTERNET, ULTIMATELY, THE INTERNET IS THE
REAL PROTECTION BECAUSE OF THE COMBINATION OF THE ONE CLICK AWAY AND
HUGE AMOUNTS OF MONEY PREVIOUSLY DESCRIBED GOING INTO THESE
SPACES.
Richard Blumenthal
01:20:13 MY TIME HAS EXPIRED.
Herbert Kohl
01:20:33 MR.
SCHMIDT, STATS SHOW GOOGLE RUNS BETWEEN 65% AND 70% OF ALL INTERNET
SEARCHES IN THE U.S. 01:20:40 DONE ON COMPUTERS AND 95% DONE ON MOBILE
DEVICES. 01:20:45 HAS OVER 75% OVER ALL SEARCH ADVERTISING REVENUE IN THE
UNITED STATES. 01:20:50 UNDER A COMMON ANTITRUST STANDARDS, THIS KIND OF A
MARKET SHARE IS CONSIDERED TO CONSTITUTE MONOPOLY POWER. 01:21:01 DOES
GOOGLE RECOGNIZE THAT AS A MONOPOLIST OR DOMINANT POWER? 01:21:06 SPECIAL
RULES APPLY THAT THERE IS CONDUCT THAT MUST BE TAKEN AND CONDUCT THAT
MUST BE REFRAINED FROM.
Mr. Schmidt
01:21:11 WE CERTAINLY UNDERSTAND THE
RULE THAT WE PLAY IN INFORMATION, AND WE ALSO UNDERSTAND THE PROPER
ROLE OF GOVERNMENT AND YOUR ROLE AND SO FORTH TO INSPECT WHAT WE'RE
DOING. 01:21:22 WE'RE SATISFIED TODAY THAT THE THINGS THAT WE'RE DOING ARE
WELL WITHIN BOTH LEGAL AND PHILOSOPHICAL BALANCE OF WHAT WE'RE TRYING
TO DO, BECAUSE WE'RE VERY FOCUSSED ON CONSUMERS, SO THE ANSWER, SENATOR,
WE VERY MUCH UNDERSTAND THE ROLE THAT WE HAVE TO PLAY, AND WE'RE KEPT
HONEST ALL THE TIME, AND NOT JUST BY YOUR GOOD GRACES, BUT ALSO THAT OF
THE PRESS AND MANY OTHER PEOPLE WHO LOOK AT WHAT WE DO.
Herbert Kohl
01:21:52
BUT YOU DO RECOGNIZE THAT IN THE WORDS THAT ARE USED IN ANTITRUST
OVERSIGHT, YOUR MARKET SHARE CONSTITUTES MONOPOLY, SPECIAL POWER
DOMINANT FOR A MONOPOLY FIRM. 01:22:09 YOU RECOGNIZE YOU'RE IN THAT AREA?
Mr. Schmidt
01:22:11 I WOULD AGREE, SENATOR, THAT WE'RE IN THAT AREA. 01:22:14
AGAIN, WITH APOLOGIES BECAUSE I'M NOT A LAWYER. 01:22:17 MY UNDERSTANDING
IS THIS IS A JUDICIAL PROCESS, SO I'D HAVE TO LET THE JUDGES AND SO FORTH DO
SUCH A FOINDINDING. 01:22:28 FROM OUR PERSPECTIVE WE FIND OURSELVES HAVING
A RESPONSIBILITY AND DO UNDERSTAND IT.
Herbert Kohl
01:22:31 THANK YOU. 01:22:34
OUR HEARINGS SO FAR ARE FOCUSSED ON COMMERCE AND BUSINESS COMPETITION,
BUT MORE IMPORTANTLY, PERHAPS, THE INFLUENCE ON NEWS AND INFORMATION
THE AMERICAN PEOPLE RECEIVE. 01:22:46 IT'S IMPORTANT WE PRESERVE
COMPETITION. 01:22:50 RIGHT NOW GOOGLE IS THE PRIMARY WAY AMERICANS
SEARCH FOR NEWS AND INFORMATION ON THE INTERNET. 01:22:56 IF YOUR ONLY
SEARCH ENGINE COMPETITOR, BING, WERE TO GO AWAY, GOOGLE WOULD BE THE
ONLY SEARCH ENGINE CITIZENS COULD USE TO FIND THIS INFORMATION. 01:23:06
GIVEN ITS DOMINANT SHARE OF INTERNET SEARCHES, GOOGLE IS A GATEKEEPER TO
INFLUENCE NEWS COVERAGE ON THE INTERNET. 01:23:16 FOR EXAMPLE, THOSE
SEARCHING ON TODAY'S HEARING COULD GET LINKS TO MY OPENING STATEMENT,
YOUR TESTIMONY, OR THE TESTIMONY OF YOUR CRITICS AND THE NEXT PANEL AS
THE FIRST SEARCH RESULT. 01:23:29 PEOPLE SEARCHING FOR INFORMATION ON
PRESIDENT OBAMA COULD GET LINKS TO THE OFFICIAL WHITE HOUSE WEBSITE OR
WEEKLY STANDARD. 01:23:38 YOU WOULD ARGUE, I SUPPOSE, THAT GOOGLE SIMPLY
RETURNS THE MOST RELEVANT FIRST FOR ANY NEWS OR INFORMATION QUERY.
01:23:50 FREE OF BIAS, BUT IS THIS REALLY POSSIBLE? 01:23:52 THERE MUST BE SOME
DECISION WHETHER YOUR STATEMENT OR MY OPENING STATEMENT IS AT THE TOP OF
THE INFORMATION RESULTS. 01:23:58 IS IT REALLY POSSIBLE TO HAVE A TRULY
UNBIASSED SEARCH RESULTS FOR NEWS AND INFORMATION QUERIES? 01:24:06
SHOULD WE BE TROUBLED BY ANY ONE COMPANY, HOWEVER WELL-INTEND, LIKE
YOURS, HAVING HUGE, HUGE INFLUENCE OVER NEWS AND INFORMATION CITIZENS
FIND ON THE INTERNET AND DOESN'T THIS DEMONSTRATE THE ABSOLUTE NEED FOR
COMPETITION AND REAL COMPETITION IN THIS AREA?
Mr. Schmidt
01:24:29 WELL, AS I
SAID EARLIER, COMPETITION. 01:24:32 WE'RE STRONGLY IN FAVOR OF
COMPETITION,THERE'S A LOT OF EVIDENCE MUCH OF THE ONLINE NEWS IS BEING
GENERATED WITHIN THE SOCIAL NETWORKS, SO WE'D WANT TO ADD THAT INTO THE
FRAMEWORK YOU PROPOSED. 01:24:45 WITH RESPECT TO THE RANKINGS AND BIAS,
IT'S ESSENTIALLY A JUDGMENT WHAT COMES FIRST OR SECOND. 01:24:53 IN OUR CASE,
IT WOULD NOT BE POSSIBLE TO EXPLAIN TO YOUR SATISFACTION OR MY OWN WHY
ONE LINK ABOUT THIS TESTIMONY AND MY TESTIMONY WAS ONE HIGHER OR LOWER.
01:25:05 IT'S A COMPLEX FORMULA INVOLVING INFLUENCE AND WHO POINTS TO
WHOM AND THE WAY IN WHICH IT'S EXPRESSED AND SO FORTH USING A DEVELOPED.
01:25:17 PROPRIETARY ALGORITHM. GOOGLE IT'S THE BEST WE CAN DO AND WE DO
OCCASIONALLY MAKE MISTAKES
Michael Lee
01:25:34 ON THE RECORD, UNDER OATH,
DOES GOOGLE GIVE ANY PREFERENCE TO ITS OWN LISTINGS, PLACES OR SHOPPING
RESULTS, ETC., IN ITS OWN RANKING RESULTS?
Mr. Schmidt
01:25:49 I WAS CONFUSED
ABOUT YOUR EARLIER QUESTION IS THE WORD
PREFERENCE
.WE HAVE A
PRODUCT
CALLED UNIVERSAL SEARCH
, AND UNIVERSAL SEARCH CHOOSES HOW TO
ORGANIZE THE PAGE, AND SO THAT DECISION INCLUDES MANY COMPONENTS IN THE
NATURAL SEARCH. 01:26:04 IT WILL, FOR EXAMPLE, WHEN WE THINK YOU'RE LOOKING
FOR A PRODUCT, WE WILL POP OUT THIS PRODUCT SEARCH, ESSENTIALLY
INSERT
THAT YOU SHOWED EARLIER. 01:26:15 IF YOU GO THROUGH THAT PRODUCT SEARCH
THING THAT WE PUT OUT, IT ACTUALLY IS, AS I POINTED OUT, TAKES YOU TO OTHER
SITES THAT WANT TO SELL PRODUCTS, SO THE ANSWER IS WE GIVE PREFERENCE, BUT
WE GIVE PREFERENCE IN THE CONTEXT OF OUR BEST JUDGMENT AS TO THE SUM OF
WHAT THE PERSON WANTS TO DO.
Michael Lee

01:26:36 YES, I THINK THAT HELPS
ANSWER THE QUESTION. 01:26:38 IT GIVES PREFERENCE TO THOSE IN THE CASE AFTER
CAMERA, NOT TO YOUR OWN CAMERA SALES, BUT TO ANOTHER PAGE WHERE YOU'RE
MAYBE ADVERTISEMENTS.
Mr. Schmidt
01:26:48 SELLING IN THAT CASE, I DON'T
ACTUALLY THINK THERE'S ANY ADVERTISING COMPONENT INTO THAT DECISION, BUT
I TAKE YOUR POINT.
Michael Lee
01:26:59 OKAY, IN PREPARING FOR THIS HEARING, I WAS
UNCERTAIN AS TO WHAT MIGHT BE THE FULL EXTENT OF MY CONCERNS REGARDING
GOOGLE'S CURRENT PRACTICES, BUT SOME OF MY FEARS, I HAVE TO SAY, HAVE BEEN
CONFIRMED AS A RESULT OF OUR CONVERSATION. 01:27:17 I'D JUST LIKE TO
SUMMARIZE, MR. 01:27:18 SCHMIDT, WHAT SOME OF THOSE CONCERNS ARE.
01:27:38
MY CONCERNS RELATED TO THIS ARE REALLY THREE-FOLD. 01:27:43 FIRST, THIS
PRACTICE SEEMS TO ME TO LEVERAGE GOOGLE'S PRIMARY SEARCH DOMINANCE, TO
GIVE ITS OWN SECONDARY SERVICES AND LISTINGS IN UNNATURAL AND
EXTRAORDINARY ADVANTAGE. 01:27:57 NO OTHER SPECIALIZED BUSINESS OR SEARCH
SITE CAN HOPE TO COMPETE ON ANYTHING CLOSE TO A LEVEL PLAYING FIELD WHEN
GOOGLE USES ITS SIGNIFICANT MARKET POWER TO DISADVANTAGE ONLINE
COMPETITORS. 01:28:10 SECOND, THIS SAME PRACTICE THAT I DESCRIBED PRESENTS A
CLEAR AND INHERENT CONFLICT OF INTEREST. 01:28:18 RATHER THAN ACTING AS AN
HONEST BROKER OF INFORMATION, GOOGLE NOW HAS A STRONG FINANCIAL
INCENTIVE TO CHANNEL USERS TO ITS OWN LISTINGS, REGARDLESS OF THEIR
QUALITY. 01:28:30 AS GOOGLE VICE PRESIDENT MARISSA MAYER NOTED, TO THE
DEGREE WE, MEANING GOOGLE, HOST CONTENT, WE ULTIMATELY HAVE A MONETARY
INCENTIVE TO DRIVE PEOPLE TO THOSE PAGES, IF THOSE PAGES HAVE ADDS ON THEM
01:28:42 FINALLY, I WORRY THAT THIS PRACTICE HARMS CONSUMERS, MANIPULATING
ALGORYTHMIC SEARH RESULTS VIOLATES CONSUMERS' EXPECTATIONS AND BY
UNFAIRLY DISADVANTAGE COMPETING SERVICES, IT MAY ULTIMATELY REDUCE
CONSUMER CHOICE AND STIFLE INNOVATION. 01:28:58 AGAIN, MR. SCHMIDT, I'M
TROUBLED BY WHAT WE LEARNED TODAY ABOUT GOOGLE'S PRACTICES, AND I HOPE
YOU WILL TAKE SWIFT ACTION NECESSARY TO RESOLVE THESE CONCERNS.
Al Franken
01:29:24 MR. SCHMIDT, LET'S SHIFT TO TALK ABOUT MOBILE SEARCH, BECAUSE
CLEARLY DIRECTION OF THE INTERNET HAS GONE TO MOBILE AND SEARCHES WILL
BE GOING TO MOBILE. 01:29:37 I UNDERSTAND GOOGLE CONTROLS ABOUT 97% OF
MOBILE SEARCH. 01:29:42 YOU ARE THE DEFAULT SEARCH ENGINE ON ALL APPLE
PHONES, IS THAT TRUE?
Mr. Schmidt
THAT IS CORRECT
01:29:50 OKAY, AND YOU ALSO
OWN ANDROID, WHICH IS THE LARGEST MOBILE OPERATING SYSTEM, AND THIS TYPE
OF DOMINANCE ULTIMATELY MEANS THAT YOU CONTROL WHAT CONSUMERS USE
WHEN THEY PURCHASE AN ANDROID PHONE. 01:30:10 NEILSEN RELEASED A STUDY
LAST WEEK THAT STATED FIVE OF THE SIX DOMINANT APPS ON THE ANDROID DEVICE
ARE OWNED BY GOOGLE, ONLY FACEBOOK MADE IT INTO THE TOP SIX. 01:30:23 I HAVE
NO DOUBT TO THE FACT GOOGLE OFTEN CREATES SUPERIOR PRODUCTS, BUT THAT
ISN'T THE ONLY REASON. 01:30:38 WHAT COMES PRELOADED ON A PHONE IMPACTS
WHAT APPS LOSE IN THE BATTLE FOR CONSUMERS FOR ATTENTION. 01:30:47 ANDROID
DEVICES COME LOADED FOR GOOGLE MAPS, GOOGLE PLACES, GMAIL, AND NOW
GOOGLE PLUS?
Mr. Schmidt
01:30:56 THEY DO NOT.
Al Franken
01:30:57 DO MANY OF
THEM? 01:31:00 DO A LARGE --
Mr. Schmidt
MY NOT-TOO-PRECISE ESTIMATE SAY ON THE
ORDER OF 2/3 COME WITH IT PRELOADED.
Al Franken
01:31:11 SO IF AN EQUIPMENT
MANUFACTURER THAT MAKES ANDROID PHONES FOR YOU DOESN'T WANT TO
PRELOAD GOOGLE APPS ON ITS DEVICES, CAN THEY DO THAT?
Mr. Schmidt
01:31:23
ABSOLUTELY.
Al Franken
01:31:30 IF I AM A CUSTOMER AND WANT TO USE YELP INSTEAD
OF GOOGLE PLACES, IS IT EASY FOR ME TO DE DELETE GOOGLE PLACES ON MY
PHONE?
Mr. Schmidt
01:31:44 GOOGLE PLACES IS ESSENTIALLY A RESULT FROM A
SEARCH RESULT, YOU DIDN'T USE GOOGLE SEARCH, YOU WOULDN'T HAVE GOOGLE
PLACES AT ALL, AND YELP IS AVAILABLE INDEPENDENT OF THAT. 01:31:58 I'M TALKING
ABOUT AS AN APP. 01:32:00 IT'S NOT AN APP. 01:32:01
GOOGLE PLACES IS NOT AN
APPLICATION ON ANDROID, IT'S A RESULT FROM SEARCH
.
Al Franken
01:32:11 SO
WHAT APPS, WHAT GOOGLE APPS, ARE THERE?
Mr. Schmidt
01:32:14 GMAIL, CHAT
APPLICATIONS, THOSE SORTS OF THINGS. 01:32:17 OKAY. 01:32:20 AND AGAIN, TO HELP, I
THINK WHAT -- IF I MAY, I THINK WHAT YOU'RE GETTING AT IS -- I THINK WHAT YOU'RE
GETTING AT IS --
Al Franken
TELL ME WHAT I'M THINKING.
Mr. Schmidt
01:32:33 NO, I WAS
JUST TRYING TO BE HELPFUL. 01:32:37 YES, I KNOW. 01:32:40 MANY ANDROID PARTNERS
COMBINE GOOGLE SEARCH, GMAIL, CHAT, AND A FEW OTHER APPS INTO A PACKAGE,
AND I BELIEVE WHAT YOU'RE THAT CASE WE DO A REVENUE SHARE WITH THEM ON
THE GOOGLE SEARCH.
Richard Blumenthal
01:33:02 AGAIN, I WANT TO EMPHASIZE I'VE
REACHED NO CONCLUSIONS, AND I WILL BE SUBMITTING OTHER QUESTIONS IN
WRITING, BECAUSE WE MAY NOT HAVE TIME FOR A THIRD ROUND, AND I'M SURE THAT
YOU WILL BE HAPPY TO BE RELIEVED OF THAT SPOT, BUT I'VE BEEN TRYING TO THINK
OF THE ANALOGY HERE TO WHAT THE ORDINARY CONSUMER CAN UNDERSTAND AS
WHAT GOOGLE DOES, AND AS I SAT HERE, YOU KNOW, THE RACETRACK ANALOGY,
YOU RUN THE RACETRACK, YOU OWN THE RACETRACK, FOR A LONG TIME YOU HAD
NO HORSES, NOW YOU HAVE HORSES, AND YOU HAVE CONTROL OVER WHERE THOSE
HORSES ARE SEEM TO BE WINNING. 01:33:51 AND I THINK WHAT A LOT OF THESE
QUESTIONS RAISE IS THE POTENTIAL CONFLICT OF INTEREST. 01:34:02 TO USE A SORT
OF PEJORATIVE BUT NOT NECESSARILY TO BE CRITICAL, BECAUSE YOU MAY HAVE
GREAT PRODUCTS, AND YOU PUT THEM FIRST, AND YOU MAY REGARD THAT
PLACEMENT AS A SERVICE TO CONSUMERS, BUT INEVITABLY, THAT WILL STIMULATE
THE KIND OF CRITICISM THAT HAS BROUGHT YOU HERE TODAY. 01:34:25 SO IT WON'T
SURPRISE YOU,
Mr. Schmidt
01:34:32 OKAY, SO DISAGREE WITH YOUR ANALOGY
COMPLETELY,
I PREFER TO THINK OF THE INTERNET AS THE PLATFORM, AND YOU
CAN THINK OF GOOGLE AS A GPS. 01:34:40 IT'S A WAY OF GETTING THERE
. 01:34:41
ONE OF THE MOST IMPORTANT THINGS RESPECT TO ALL THE COMPLAINTS TO SAY
HERE IS, AGAIN, WITH FORTH,
GOOGLE DOES NOTHING TO BLOCK ACCESS TO ANY
OF THE COMPETITORS AND OTHER SOURCES OF INFORMATION.
01:34:57 WE
ENCOURAGE IT, AND INDEED IN ALL THE ANSWERS, WE SHOW ALL THE OTHER
POSSIBLE ANSWERS. 01:35:03 WE TRY TO BE INCLUSIVE AS POSSIBLE, SO FROM MY
PERSPECTIVE, WE NEED TO BE ABLE TO BE FREE TO GET TO WHAT WE THINK IS THE
BEST ANSWER TO THE QUERY, AND IF WE CAN DO THAT WITH NO CLICKS, ZERO CLICK,
THAT'S BETTER FOR THE CONSUMER. 01:35:25 I REALLY GENUINELY BELIEVE THAT. ?
Richard Blumenthal
01:35:28 BUT TO RETURN TO MY ANALOGY, THERE'S NO ALLEGATION
THAT YOU NECESSARILY EXCLUDE THOSE OTHER HORSES. 01:35:35 TO USE YOUR
ANALOGY, THERE'S NO ALLEGATION THAT YOU WOULD NECESSARILY MISGUIDE A
CONSUMER TO GO IN THE WRONG DIRECTION ON INTERNET, BUT THERE IS
SOMETHING DIFFERENT WHEN YOU OWN A PLACE AND THE DIRECTIONS HAPPEN TO
PUT THE CONSUMER AT THE PLACE YOU OWN AS OPPOSED TO SOME OTHER PLACE
THAT IN APPEARANCE, OBJECTIVELY, MIGHT RESULT IN THAT CONSUMER GOING TO
ANOTHER PLACE, AND, YOU KNOW, I REALIZE THAT WE'RE OVERSIMPLIFYING A VERY
DIFFICULT AND COMPLEX AREA, BUT AGAIN, I INVITE YOUR COMMENTS AND
DISAGREEMENT.
Mr. Schmidt
01:36:20 AGAIN, I THINK THAT THE MOST IMPORTANT
THING FOR US TO DO IS TO COME UP WITH THE QUICKEST ANSWER THE BEST, AND
THIS IS THE BEST WE KNOW HOW TO DO, AND WE DO, IN FACT, HAVE THE CONCERNS
THAT YOU'RE DESCRIBING IN OUR MINDS AS WE MAKE THESE DECISIONS, BUT WE
ARE, AND HAVE SAID THIS FOR YEARS, WE REALLY DO TEST THIS STUFF AND BELIEVE
IT'S THE BEST CHOICE FOR THE WE RUN THE COMPANY FOR THE BENEFIT OF THE
CONSUMERS, NOT THE OTHER WEBSITES.
Al Franken
01:36:58 I THINK TO CARRY YOUR
ANALOGY JUST ONE STEP FURTHER, YOUR METAPHOR, THAT YOU MIGHT HAVE BEEN
SAYING THAT YOU THINK GOOGLE MIGHT BE DOPING THE HORSES. 01:37:08 IS THAT
WHAT YOU'RE SAYING?
Richard Blumenthal
I DIDN'T SAY THAT
Amy Klobuchar
01:37:29
HAVE YOU THOUGHT ABOUT HOW MORE TRANSPARENCY AND IF THERE'S OTHER
THINGS YOU CAN DO TO EXPLAIN TO PEOPLE WHY THIS IS HAPPENING AND WHEN
THERE'S GOING HAPPENING AND WHEN THERE'S GOING TO BE A CHANGE?
Mr. Schmidt
01:37:40
WE DO A LOT OF TOOLS FOR WEBSITES SO THEY CAN UNDERSTAND HOW
THEY ARE RANKED AND THE CHANGES WE HAVE MADE
. 01:37:46 WE DON'T, IN MY
VIEW, DO ENOUGH, SO I AGREE WITH YOUR QUESTION THERE. 01:37:53
THERE'S A
LIMIT TO HOW MUCH TRANSPARENCY WE CAN PROVIDE
, FOR TWO REASONS,
ONE
,
OUR ALGORITHMS ARE VIEWED AS QUITE PROPRIETARY, OUR INNOVATION BY OUR
GREAT SCIENTISTS AT GOOGLE, AND THE
SECOND
, IF
WE'RE COMPLETELY
TRANSPARENT HOW THE ALGORITHMS ARE WORKED
, WE'LL BE
HEAVILY GAMED
BY SITES THAT TRY TO SPAM US
. WE HAVE EXPERIENCES WHERE PEOPLE WOULD
LATCH ON TO SOME BEHAVIOUR AND ESSENTIALLY MANIPULATE THE SEARCH
INDEX01:38:21 TO P
RODUCE A REALLY FALSE ANSWER, WHICH OFTEN IS THE BUTT
OF JOKES.
01:38:28 THERE'S A LIMIT TO HOW TRANSPARENT WE WISH TO BE WITH
RESPECT TO OUR ACTUAL RANK ALGORYTHM
Amy Klobuchar
01:38:39 JUST ONE LAST
QUESTION HERE. 01:38:44 YOU KNOW, ONLINE USERS ARE IN MY WAYS YOUR
CUSTOMERS, BUT ALSO THE BUSINESSES THAT ADVERTISE CUSTOMERS, SO DOES
GOOGLE NEED TO BE CAREFUL THAT THE PRIVACY AND PROTECTION OF THE WEB
USERS DOESN'T COME INTO CONFLICT WITH THE BUSINESS INTERESTS OF THOSE
THAT ARE ADVERTISING ON THE WEB, AND HOW DO YOU RESOLVE THAT CONFLICT?
Mr. Schmidt
01:39:02 WE DEBATE THIS QUITE A BIT. 01:39:05 WE HAVE A VERY DETAILED
PRIVACY POLICY ABOUT HOW WE BEHAVE WITH USERS' DATA, AND THERE'S BEEN A
NUMBER OF BUSINESSES SUGGESTED TO US OVER THE YEARS THAT WOULD, IN OUR
VIEW, MISUSE PEOPLE'S PRIVATE DATA, SEARCH HISTORIES, AND SO FORTH, AND
WE'VE SAID NO TO THOSE. 01:39:23 IT'S VERY, VERY IMPORTANT THAT THE HISTORY OF
PEOPLE'S SEARCHES, WHERE THEY ARE, WHAT THEY DO, IS NOT USED WITHOUT THEIR
PERMISSION IN THESE ADVERTISING PRODUCTS, AND
I THINK YOU'LL FIND THAT
GOOGLE WILL BE ONE OF THE EXEMPLARS OF THAT PRINCIPLE
, AND AS THIS
BECOMES A BIGGER THING FOR MANY, MANY COMPANIES, A LOT OF PEOPLE WILL
FACE THIS QUESTION.
Al Franken
01:41:47 WE'RE GONING INTO TRANSITION TO THE
SECOND PANEL,WE'RE GOING TO TAKE A BRIEF RECESS.