Market Overview

Google's Biggest Controversy Turned Out To Be A…

Hoax? Scam? Something that will cost the company billions?

Google (NASDAQ: GOOG) has been in the hot seat this week following the revelation that the company was involved in a campaign that, as Search Engine Land and numerous others pointed out, could be in violation of the company's own policies against sponsored links. It's an ironic twist of fate considering the hassle websites go through to meet Google's requirements, which sound as if they were written by lawyers.

The issue surrounds at least one blogger who was apparently paid to hype Chrome (Google's rising Web browser) in some capacity. This led to an amusing discovery by SEO Book, which on Monday reported that a simple search term – “This post is sponsored by Google” – led to 400 pages that were presumably produced in conjunction with an ad campaign designed to promote the Chrome brand.

Since then, the number of search results retrieved from “This post is sponsored by Google” has more than tripled. At 7:00 a.m. EDT this morning, there were 1,320 results. (One hour later, that number dropped to 1,270 results.) The top post came from Computerworld, whose headline read: “Do evil: 'This post is sponsored by Google Chrome' SEO spam.”

This morning, The Guardian published an article entitled, “Google shoves Chrome down search rankings after sponsored blog mixup.”

“Awwwk-ward: Google Chrome pay-for-post promo misfires,” CNET wrote in its headline.

Meanwhile, The Daily Mail led with an intriguing headline of its own: “Google caught paying bloggers to promote its Chrome browser... breaking its own rules.”

This sounds like an awful lot of bad press. But is it? Or did Google just get exactly what it wanted?

Over the past few months, Chrome has found its way into a handful of media headlines. The best news came when it was revealed that the Web browser had finally topped Firefox. I'm always surprised when I see people using Firefox instead of Chrome. Both are great browsers, and I use both at work every single day. But the majority of my surfing is with Chrome because it moves faster, is more stable, and can handle more tabs without freezing or crashing. Thus, when Chrome began to overtake Firefox, it sounded like good news.

Chrome also became a hot topic when it was revealed that, despite the browser's growth, Google still valued Firefox enough to renew its default surfing deal with Firefox – this time paying (according to AllThingsD) nearly $300 million per year for three years.

Nothing, however, can promote a brand like a good-old-fashioned controversy. While Google has told TechCrunch and other publications that it is innocent in this debacle (Google blames an ad agency), I do not believe that the company was foolish enough to make this mistake.

Let's not forget who we are talking about. Google is a company that uses data to support everything it does. In February 2008, the New York Times famously reported on a Google exec who stressed over something as minute as the color blue. The company tested 41 shades of blue to determine which consumers would refer.

In March 2009, Google's visual lead, Douglas Bowman, made waves when he publicly announced why he was leaving the company for a new job at Twitter. “When a company is filled with engineers, it turns to engineering to solve problems,” he wrote on his blog. “Reduce each decision to a simple logic problem. Remove all subjectivity and just look at the data. Data in your favor? Ok, launch it. Data shows negative effects? Back to the drawing board. And that data eventually becomes a crutch for every decision, paralyzing the company and preventing it from making any daring design decisions.”

Bowman concurred with the aforementioned New York Times report, saying, “Yes, it's true that a team at Google couldn't decide between two blues, so they're testing 41 shades between each blue to see which one performs better. I had a recent debate over whether a border should be 3, 4 or 5 pixels wide, and was asked to prove my case. I can't operate in an environment like that. I've grown tired of debating such minuscule design decisions. There are more exciting design problems in this world to tackle.”

That's the kind of corporation Google has become. Bowman said that he can't fault Google for its reliance on data, and I can't either. By placing so much emphasis on data – and most importantly analytics – the company has made billions.

But that is precisely why I think Google knew exactly what it was doing when it decided to commission Unruly Media. According to The Verge, a Google spokesperson claimed that the company “never agreed to anything more than online ads,” and that it has “consistently avoided paid sponsorships, including paying bloggers to promote our products.”

Well, of course Google would say that now! In guilt or innocence, this is Google's only defense.

However, while critics think that Google was attempting to pull a fast one, I think the company was fully aware that it would get caught. Google went through with its ad campaign anyway, likely knowing that the eventual backlash would multiply the hype surrounding Chrome.

Thus, while this controversy could have (and probably should have) angered and chased away some advertisers, it will likely have no negative effect on Google's ad revenue whatsoever. But it has clearly made Chrome a top news story for the week.


ACTION ITEMS:

Bullish:

Those who believe that a good controversy could help Google might want to:

  • Go long Google. The company is in it to win it, and if anyone can concoct a controversy that raises the value of its enterprise, it's Google.
Bearish:

Those who prefer tech companies with a slightly less controversial approach may want to consider:

  • Microsoft (NASDAQ: MSFT), which still leads the Web browsing market (by default) with Internet Explorer, has a growing cloud business, and continues to encroach on Google's primary territory with the launch of its own search engine, Bing.
  • Yahoo! (NASDAQ: YHOO), which has a controversial executive team but a rather generic marketing campaign.
  • Apple (NASDAQ: AAPL), whose browser – Safari – is one of the least controversial available.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Follow me @LouisBedigian

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