GOOGLE was the darling of the 2000s. From its humble beginnings in California’s Stanford University in the late 1990s, Google managed to become a verb in less than a decade. It is now already thought by many to be “the next Microsoft”. Over the last five years, its share price has increased by 450 per cent, while the company has expanded, providing new products from an office productivity suite to self driving cars.
While the profits are still flowing, however, the company is beginning to come into the same problems that dogged Microsoft. The EU has just begun a probe into whether or not Google is abusing its market dominance by privileging its own ventures in search rankings. Once an incredibly in demand employer, the firm recently had to raise wages by 10 per cent just to hold onto staff. Clearly, Google is suffering.
As Clem Chambers, the CEO of ADVFN, a financial data website, put it: “With Eric Schmidt on a PR rampage destroying Google’s ‘do no evil’ mojo, it’s no surprise that the regulatory antibodies of the world are starting to be on alert for Google.” Is it about time for traders to be alert and go short too?
Certainly the probe does not look good. Greg Sterling, an expert on Google, reckons that the EU probe goes to the heart of what Google does. “Google’s algorithms are what make it competitive” he says. If it is forced to make them publicly available, it may lose its edge – CFD traders would be wise to watch the proceedings very carefully then.
For the moment, they probably needn’t worry too much, however. According to Mark Tricker, a partner with Norton Rose at their Brussels office, this is a very difficult case for the EU. At best “it could be over by the middle of next year, if Google settles”, he says. If not, it could take years to resolve. In the mean time, the innovation and profits should keep flowing.
But with the spectre of action hanging over the company, Google’s halo is a little darker than it was. Regardless of what happens, there will be interesting times ahead for traders.