Google+ Local, Locking Users Into Google Even Longer

Yesterday, Google rolled out its newest product Google+ Local, a hybrid of Google Places and Google+ that the search giant described as “a simple way to discover and share local information featuring Zagat scores and recommendations from people you trust in Google+.”

TechCrunch pointed out that “the launch of Google+ Local also marks further steps in Google to bring its products together into a single platform: included will also be integration with search, maps and mobile access, and Local will also come up as a new tab on Google+ — so users won’t be lured away to use any of the dozens of other social/local/mobile search services and apps out there already.”

When Google acquired Zagat in September 2011, the search giant was already using its homepage to promote its then new Google Offers product, giving it a massive advantage over competing services like Groupon and LivingSocial. At the time, John Battelle (author of The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture) commented that “If I were an independent publisher who focused on the travel and entertainment category, I’d be more than a bit concerned about how my content might rank in Google compared to Zagat. Just ask Yelp.”

Fellow Google chronicler and commentator Jeff Jarvis hit the nail on the head when he said that the Zagat acquisition “Would bring channel conflict and put Google in the content-creation instead of the content-linking business, competing with the other side of links and raising conflict-of-interest questions.”

Google’s founders also opposed these sorts of conflicts of interest at one point. In a 2004 Playboy magazine interview (featured in its SEC filing), CEO Larry Page explained the problem with portals (i.e., search engines like Google): “That’s the problem,” he said. “Most portals show their own content above content elsewhere on the web.  We feel that’s a conflict of interest, analogous to taking money for search results. Their search engine doesn’t necessarily provide the best results; it provides the portal’s results. Google conscientiously tries to stay away from that.  We want to get you out of Google and to the right place as fast as possible. It’s a very different model.”

As Google’s has expanded from general search into maps, local, travel and business services, its incentive now is to steer users to its own web pages and away from websites that compete for traffic and advertising sales. That’s how Google makes money – or more money than it would if it just sent you to the most relevant site. See, Google’s financial incentives to keep users on its websites are hard to ignore. As Google wrote in its December 2010 SEC 10-K filing, “the operating margin we realize on revenues generated from ads placed on our Google Network members’ websites through our AdSense program is significantly lower than the operating margin we realize from revenues generated from ads placed on our websites because most of the advertiser fees from ads served on Google Network members’ websites are shared with our Google Network members.”

Turns out Google+ Local is just the latest example of Google using its dominance in search and search advertising to keep users on Google’s own pages longer, and make it harder for competing sites to take traffic that might chip away at Google’s dominant share of search and search advertising.