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Paid-search giant Google (NASDAQ: GOOG) has been sued by AMR Corp.'s (NYSE: AMR) American Airlines over an advertising dispute, according to the Associated Press. The suit alleges that Google would sell American Airlines-trademarked keywords to rival airlines. In doing so, Google obviously managed to seriously offend the management at American.
It's interesting that Google refused to settle with American before the case went to court. It proves that Google is aware of these practices and feels they can justify them.
I'd assume that Google refused to settle based on a previous legal decision -- this one related to Geico, a segment of Berkshire Hathaway (NYSE: BRK.A). This case was very similar to American's. Geico was angry because other insurance companies had been allowed to purchase advertising under the term "Geico," a trademark of the company. In this case, the judge decided that Google's procedures were actually legal.
Despite the popularity of Google's search engine, one has to wonder if advertisers or publishers are ever going to seriously put their feet down against Google's practices. Google collects more than half of the AdSense program's revenues for itself and remains incredibly secretive, even to its best publishers. As this case displays, Google also has controversial practices with advertising customers -- practices that could come back and haunt this company in the future.
I'd argue that the company's earnings multiple of 40 and powerful growth estimates from analysts don't reflect the potential risks involved in the company's sometimes-deceptive practices.
Disclosure: Kevin Kelly is long Berkshire Hathaway (B).
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Reader Comments (Page 1 of 1)
8-18-2007 @ 4:26PM
Lissa said...
Google tries to market itself as a goodie goodie but it is not. from the lame "we will open to the public at our ipo that did not happen to the we are the panultimate advertising vehicle" I have allowed google ads on my websites and oddly enough..have made no money despite averaging 100k hits a day... hmmm
There is no real way to see how many people get on a site click an advertisement etc... You have to take their word for it.
I did an experiment and had all 500 of my employee/consultants go to one website, and click on an ad, surf the resulting site and report back. These are 500 people from 500 different places across the country. I wrote google to tell them of the experiment. I also told them that according to them I had 3 hits.... That is soooo shady. I also looked at the ads on my websites and they were all of larger companies that had nothing to do with my website content. Now I know why I never made much advertising with google.
You would do better just letting the spiders find you and promoting yourself. My IT / tech sites were full of high interest credit cards and dating services. I had to remove them : between complaints from site visitors and no moolah for me - whats the point? Now I sold ad space to 10 relevant companies. Know what, they actually get business from my viewers! And I made 7k last month whereas last year I made zilch from googlie goo. Go to google and do a search.... something specific and see the crap that comes up. They better start paying those h2's more money.
But... uhhhh...Wait until we sell our stock first please.