Google braces to pay at least $500M in ad probe

May 11, 2011 By MICHAEL LIEDTKE , AP Technology Writer

Google Inc.'s lucrative online advertising system is facing a U.S. Justice Department investigation that is expected to cost the Internet search leader at least $500 million.

The disclosure made by Google on Tuesday in a quarterly report to the serves as the latest reminder of the intensifying regulatory scrutiny facing the Internet's most powerful company.

European regulators have opened a wide-ranging probe into whether Google unfairly manipulates its search results to favor its own services and rigs its ad system to drive up prices. The Texas attorney general also has been looking into complaints about whether Google's search recommendations stifle competition.

The SEC documents filed Tuesday provided few details about the nature of the Justice Department's inquiry except that it involves how Google's automated system has been treating some unnamed advertisers. Google's ad network, which primarily delivers short alongside search results and other Web content, is the main way the company makes money. In the first three months of this year alone, Google sold $8.3 billion in advertising.

Google, which is based in Mountain View, declined further comment late Tuesday.

Dealing with the Justice Department's ad investigation apparently won't be cheap. In its SEC filing, Google said its management decided earlier this month to set aside $500 million to cover a possible settlement.

That move resulted in a charge that lowered the first-quarter earnings that Google announced in mid-April. With the change, Google's net income fell from the previously reported $2.3 billion, or $7.04 per share, to $1.8 billion, or $5.51 per share.

Even before the revision, Wall Street had panned Google's first-quarter results because of rapidly rising expenses that are outpacing the company's revenue growth. Google's has fallen 6 percent since the original first-quarter earnings came out while the technology-driven has gained 4 percent during the same stretch. Google shares closed Tuesday at $542.66.

Investors also have been worried whether all the regulatory scrutiny will make it more difficult for Google to counter emerging competitive threats from hard-charging rivals such as Facebook. The Internet's largest social networking site has built an audience of more than 500 million users that is attracting more advertisers and creating a trove of content in walled-off social circles that can't be indexed by Google's search engine.

The Justice Department has previously raised concerns about Google's market power in court filings. The agency objected to Google's attempt to win the digital rights to millions of out-of-print books, helping to persuade a federal judge to deny a settlement that would have granted the company's wishes. The also demanded concessions before approving Google's $700 million acquisition of airline fare tracker ITA Software last month in an effort to preserve competition in the online travel market.

News of the latest investigation also could cast a cloud over a developer's conference that is holding in San Francisco. The conference is scheduled to conclude Wednesday.

Explore further: Alibaba surges in Wall Street debut

not rated yet
add to favorites email to friend print save as pdf

Related Stories

Google's 3Q lobbying costs eclipse $1 million

Nov 04, 2009

(AP) -- Google Inc.'s quarterly lobbying expenses eclipsed $1 million for the first time during the summer as the company tried to build on its dominance of Internet search and expand into other markets.

Google's 3Q proves company can afford big spending

Oct 14, 2010

Google Inc. is still spending money like the recession is a distant memory, but investors can't complain too much as long as the Internet search leader keeps expanding its advertising empire like it did in ...

Texas opens inquiry into Google search rankings (Update)

Sep 03, 2010

(AP) -- Google Inc.'s methods for recommending websites are being reviewed by Texas' attorney general in an investigation spurred by complaints that the company has abused its power as the Internet's dominant ...

Microsoft skewers Google in EU antitrust complaint

Mar 31, 2011

(AP) -- Microsoft Corp. escalated its attack on Google Inc. by complaining to European regulators Thursday that its fiercest rival is an Internet bully that abuses its dominance of online search and advertising.

FTC looking into Google's AdMob acquisition

Dec 23, 2009

Web search and advertising giant Google said Wednesday that the US Federal Trade Commission (FTC) is seeking more information about its proposed purchase of mobile advertising company AdMob.

Would a Google purchase of Yelp draw regulatory interest?

Dec 21, 2009

Google Inc.'s reported plans to acquire local-listings service Yelp may face difficulties, with regulators attuned to the Mountain View, Calif.-based company's established dominance of the Internet-search and advertising ...

Recommended for you

Alibaba surges in Wall Street debut

3 hours ago

A buying frenzy sent Alibaba shares sharply higher Friday as the Chinese online giant made its historic Wall Street trading debut.

Alibaba makes Wall Street debut

8 hours ago

Alibaba made its long-awaited Wall Street debut Friday on the heels of a record stock offering that opens the door to global expansion for the Chinese online retail giant.

Alibaba IPO to boost employee fortunes to $8 bn

10 hours ago

Employees of Chinese e-commerce giant Alibaba will see their fortunes swell to nearly $8 billion as the company prepares a massive US stock offering that could be valued at $25 billion.

Alibaba mega IPO caps founder Jack Ma success tale

13 hours ago

When Jack Ma founded Alibaba 15 years ago he insisted the e-commerce venture should see itself as competing against Silicon Valley, not other Chinese companies. That bold ambition from a time when China was ...

User comments : 1

Adjust slider to filter visible comments by rank

Display comments: newest first

bugmenot23
not rated yet May 11, 2011
They should go after Facebook first