Google: Trials of an internet giant

Fast, funky and free, it became the way to search the web. But now it stands accused of censorship, exploitation and violating the privacy of its users

It has been the week from hell for Google. Once the much-loved and unblemished hero of the web, the giant internet group has suffered a series of blows that have exposed for the first time its feet of clay. The company that stood for "freedom of the net" is accused of humiliatingly submitting to Chinese censorship, conniving at the suppression of freedom in Tibet, exploiting the work of American writers and of running what is arguably the biggest porn and violence website in the business. The Association of American Publishers joined Agence France-Presse in suing to protect their copyright, and the US government complained that Google's much-praised satellite maps are too spy-friendly.

And that's not all: Google faces a batch of lawsuits from companies that once benefited from its search engine and which were then consumed by it. It also faces suits from the US government. There are disputes over breaches of copyright, trademark infringement and invasion of privacy. Some of Google's aggressive gambits into new businesses have brought angry responses from incumbents, such as Microsoft and Apple, many of which are now allying to stop the steamroller in its tracks. In media-land last week it was Stop Google time, as newspaper groups began talking seriously about locking their content away from Google's "spiders", which raid their sites many times a day, "stealing" their copy to sell on to someone else.

The biggest worry of all, though, was not commercial: it was the abrupt shift in sentiment among its almost messianic customers, who are suddenly asking awkward questions. Google, founded eight years ago by a couple of geeks (each now worth more than $10bn), had always presented itself as the superb search engine which gloriously spread the internet - and free access to vast amounts of information - across the world. It made finding information simple for even the least computer-literate, introduced speedy access to academic books and papers, the ability to search out the best online bargains and a super-fast email site. And then there was Google Maps, Google Earth, Google Book Search and Google just-about-everything-else.

Google broke all the business rules and ignored all the textbooks. It never spent a penny on promoting itself, but grew by word of mouth and the joy of using its irresistible - and free - systems. As a result, it became the epitome of corporate virtue, the good guy prepared to take on big business, all for the greater good of humanity. Its corporate slogan, as every schoolkid knows, is "Do No Evil", and its concept, pursued with brilliance, captured the world's imagination. One commentator remarked: "As far as the internet ecosystem is concerned, Google is the weather."

But not any more - or not so much. The Chinese episode was in many ways the most damaging blow yet received to its reputation for virtue, integrity and courage. Google's PR machine could have had little idea of the storm it was about to unleash as it made its explosive statement: "In order to operate from China, we have removed some content from the search results available on Google.cn in response to local law, regulation or policy." In other words, Google had agreed to block anything embarrassing to the Chinese regime. For mentions of Tiananmen Square, Tibet or abuse of civil liberties, don't look to Google China.

To be fair, none of its critics seemed to care that Google had actually held out longer against the Chinese than any other media group. Microsoft and Yahoo! surrendered a year ago, CNN is often seen as a Chinese mouthpiece and even Rupert Murdoch, in his search to get his Star TV established in China, sold his highly profitable South China Morning Post for fear it would anger the Chinese. (Even then he had to throw in the towel last year after almost 20 years of trying.)

Google's problem is that the world expects better of it. It had stood up to the US government and championed free speech, but now, in a single move, it has lost the high ground. One freedom of expression advocacy group, Reporters sans Frontières, accused Google of hypocrisy: "They have two standards. One for the US, where they resist government demands for personal information, and one for China, where they are helping the authorities to block thousands of sites." As a result of the cave-in, China now controls the one medium that many thought would elude them. "Google were the only ones who held out," remarked the freedom of speech campaigner Peter Pain last week, "so the Chinese government had to block information itself. But now Google will do it for them."

It seems to Google-watchers that the problems "come not single spies, but in battalions". Its very size and speed of growth already made it a target for those who favour the underdog. The beginnings of the backlash were apparent well before last week, but now it has begun in earnest.

For over a year, media analysts have been warning that, left unchecked, Google has the ability to demolish entire industries wherever it operates: retailers, book publishers (already in dire trouble) and, of course, newspapers and magazines. It would positively wreck the high street as we know it. Google's ambitions, they claimed, knew no bounds, and Google was blithely prepared to prove them right. In recent weeks it announced deals that will quickly grow its new media tentacles, from buying and selling magazine and newspaper ad space to the radio and television advertising market. It has threatened Microsoft (no one will blame it for that), Apple, Sun Microsystems and even the big telephone companies with rival systems and a new way to make internet calls. Google has not yet moved into oil or farming, but other than those no business is out of its reach.

Every company contains the seeds of its own destruction, and it may be that even Google, the miracle of the new media age, has reached the tipping point in the past week. Yahoo! and other rival search engines are getting their acts together and working to out-Google Google with new products and even better sites. From Korea comes the news of a new rival, NHN Corp, which has profits of $86m against Google's $1.7bn, but which has seen off Google in its local market, delivering far more relevant search results. "NHN's user-friendly approach outshined its rivals," said an analyst from Samsung Securities in Seoul. Other local sites are trying to outshine it too, pinpricks in the skin of the giant, but between them adding up to a significant threat.

Until a few weeks ago, Google seemed on track to achieve a mission of world dominance in areas that went way beyond the traditional internet. Its stock market debut in 2004 was the most successful in history and the performance since has been even more breathtaking. Its shares started life on the Nasdaq exchange at $179 each, valuing the company at nearly $100bn - more than the entire American motor industry. Wise old Wall Street hands, who had seen too many bubbles grow and burst, shook their heads in disbelief - no company, they reckoned, could possibly sustain such a valuation on the basis of a mere $4bn of sales. But for every soothsayer of gloom, there were a dozen Google buffs who scrambled into the most successful market debut the world has so far seen. The shares moved up - and up, through $200 and $300 to an extraordinary $471. Even then there were projections of it hitting $600, and one broker projected a price of $1,000. He still does.

And then it stopped. The shares dropped 8.5 per cent in one day last week, knocking $20bn off its market value, the first real setback since the launch. Its fans say it is only a breathing space before the next dizzy climb, and maybe it is. But there are plenty of others who say reality is catching up, it has made too many enemies and has simply grown too unwieldy and arrogant. In other words, Google has experienced, in just a matter of months, the same phenomenon that overtakes all market leaders over decades. Now it has become the number one target for all the littler guys.

By an odd irony, on Thursday General Motors, for many years the biggest company in the world and the symbol of American business and capitalism, announced record losses of $8.6bn and sought relief from a pension fund deficit that totals an unpayable $64bn. The phrase "What's good for General Motors is good for America" has long lost its resonance.

After GM, IBM was the big threat, its control of the emerging computer sector giving it a power far too dangerous for one company. The theory was that IBM engineers were developing computers which in turn would design even bigger computers and eventually create its own form of Big Brother. Two years ago what remained of the IBM personal computer business was sold to the Chinese for a pittance. Even Microsoft, the big bad bogey as recently as two years ago, has run out of steam - and threat. It too produced disappointing profit figures caused by glitches in the global launch of its new Xbox 360 video game system. Bill Gates, too, is fallible.

To Google it must seem that, after the magic honeymoon, the world is ganging up on it. Almost every area of its business is being challenged, every potential victim fighting back, every competitor gearing up and new ones emerging.

The company is still a mighty force, both for good and for evil. But the gloss is off. After last week, Google will never be the same again.

Ivan Fallon is the Chief Executive of Independent News and Media (UK)

How it works

1. Google is used by 82 million people a month, many of whom have it as the internet home page on their laptop or home computer. Keywords are typed into the Google search page: in this case, those being sought are 'China' and 'democracy'

2. The search speeds off to the nearest Google server, which may be in the same country or on the same continent. Google employs 4,183 people. Many of them are engineers who help to service an estimated 100,000 computers at 30 data centres around the world

3. The server sends the query - 'China' plus 'democracy' - to the Google Index, a database containing details of all the web pages on the company records. Instead of using huge mainframe computers, Google stores information a fragment at a time on thousands of linked machines, similar to ordinary PCs

4. The index identifies the pages it needs, and goes off to look for them. Google does not search the internet. It searches one of several copies of the internet which it makes for itself and constantly updates. Each copy contains more than eight billion pages and is stored, again a fragment at a time, on thousands of linked computers

5. Google's copies of the internet are made using its web crawlers, pieces of software that roam all over the net and send what they find back to the company. The pages are evaluated, indexed and ranked according to which words occur where, and how many other sites are linked to them

6. Google generates a summary of each page. It also uses more than 100 criteria to give the page a relevance rating between one and 10. A list is produced, to which Google attaches advertisements bought by companies that want their products to appear beside certain key words

7. The results appear on the Google search page, back at the original computer, usually within half a second. This one took 0.08 seconds to produce 30,600,000 results. Google keeps permanent records of all the searches made