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Attention Mr. Almunia: Justice Department Evidence Against Megavideo Confirms Adsense Account

December 26, 2013 3 comments

by Chris Castle

Joaquín Almunia, the Vice President of the European Commission in Charge of Competition currently investigating Google’s unsavory business practices in Europe may wish to consider the dark underbelly of Google’s advertising business when deciding whether to give the company an unprecedented third opportunity to settle the competition questions against the global monopolist.

According to evidence released by the Justice Department in the Megavideo criminal prosecution, Megavideo was a Google Adsense customer until at least May 17, 2007:

On or about May 17, 2007, a representative from Google AdSense, an Internet advertising company, sent an e-mail to DOTCOM entitled “Google AdSense Account Status.” In the e-mail, the representative stated that “[d]uring our most recent review of your site [Megaupload.com,]” Google AdSense specialists found “numerous pages” with links to, among other things, “copyrighted content,” and therefore Google AdSense “will no longer be able to work with you.” The e-mail contains links to specific examples of offending content located on Megaupload.com.

While the quotation appears to be carefully worded email relating to Megaupload.com‘s Adsense account, it is unclear whether the government is pursuing the role that Google played in shoveling money to the “Mega Conspiracy” prior to that termination, and whether all accounts that benefited the Mega Conspiracy prior to and after the email were in fact terminated.  Given the numerous examples of Google serving advertising to referring sites that drove traffic to Megavideo, this email quoted by the government actually raises more questions than it answers.

The DOJ also notes evidence that the Mega Conspiracy opened a Google Analytics account for Megavideo to provide data to help the company steal more efficiently, that apparently rose to the level of email exchanges with Google employees:

According to internal e-mails and documents obtained from Google, members of the Mega Conspiracy, including DOTCOM and VAN DER KOLK, began accessing Google Analytics reports for Megavideo.com, Megaupload.com, and Megaporn.com. The Google Analytics account was opened at least as early as November of 2008 under the name “TIM VESTOR,” which is an alias for DOTCOM. Google Analytics provides website measurement tools, such as the number of visits during a specified time period….

A particular Google Analytics report shows that between November 19, 2010, and February 18, 2011, Megavideo.com had roughly 1 billion visits. Less than 13% of these visits were “direct traffic” — meaning visits that were likely generated by the user having directly typed the URL link into the web browser or having bookmarked the URL link. More than 85% of the visits to Megavideo.com were from “referring sites,” meaning the user appears to have clicked a URL link on the referring site that directed the user to Megavideo.com. The top referring websites during that time period were third-party linking sites, such as seriesyonkis.com (more than 110 million referrals) and sidereel.com (more than 60 million referrals).

The reports from Google Analytics for the following time periods reflect similar data: February 19, 2011 — May 18, 2011; May 19, 2011 — August 18, 2011; August 19, 2011 — October 27, 2011….A particular Google Analytics report shows that between November 19, 2010, and February 18, 2011, Megaupload.com had roughly 1 billion visits. Less than 20% of these visits were “direct traffic,” and roughly 80% were from “referring sites.” The top referring websites during that time period were third-party linking sites, such as taringa.net (more than 50 million referrals), seriesyonkis.com (more than 25 million referrals), and multiupload.com (more than 20 million referrals). The reports
from Google Analytics for the following time periods reflect similar data: February 19, 2011 — May 18, 2011; May 19, 2011 — August 18, 2011; August 19, 2011 — October 27, 2011.

It’s not surprising, then, that the government obtained emails from Google relating to this level of traffic as it beggars belief that a Google Analytics customer with this level of traffic was just kind of getting an automated report.

These reports prepared by Google also demonstrates that Google knew or should have known that its terminated Adsense customer was in a business of getting most of its traffic from referring sites–and as Ellen Seidler has documented on Popup Pirates, these referring sites triggered pop up advertising pages that served “Ads by Google” and did so in the tens of millions.  Advertising for some of the biggest brands in the world.

There was clearly an Adsense account somewhere in this mix for these referring sites, even if the Adsense account for Megaupload got to hot to maintain.  It is now clear that Google was preparing reports that detailed exactly which sites were referring traffic to the Mega Conspiracy.

There are two questions that the DOJ has not asked as yet:

1.  What happened to the money that Google made on Google’s share of revenue paid to the Mega Conspiracy before May 17, 2007?  If this is like other instances where Google has profited from crime (as it told the BBC regarding advertising for counterfeit Olympics tickets, for example) and selling human growth hormone, RU486 and oxycontin, the only way Google will give up any of the proceeds from crime is if Google is criminally prosecuted.  So let’s get on that, shall we? and

2. What is the relationship was between Google and these referring sites documented in the Google Analytics statements it sent to the Mega Conspiracy, how were they paid, and did any of that income originate in the US or was the revenue disguised outside of the US (such as in Google’s China operations that played a leading role in Google’s payment of $500,000,000 for violating US controlled substances laws.  Did Google provide any income tax disclosure or filing regarding the income, including for its own share of advertising revenue?  (Actually paying tax might be a bit much to expect, but at least telling the government how much income it was not paying tax on might have happened.)  Was any of this income included in SEC filings and audited financial statements for Google and if not, why not?  What did Google’s CFO Patrick Pichette know and when did he know it?  Or perhaps John Dixon at Ernst & Young?

There’s a term for this…what is it again?  Oh, yes.  A Racketeer Influenced Corrupt Organization a/k/a how they sent  Michael Milken to prison and bankrupted his company for a lot less evil.  If the U.S. government is not going to pursue this investigation, Mr. Almunia is perfectly positioned to do so–why would he want to give an unprecedented third chance to a company that does not come to him with clean hands?

As the DOJ tells us:

On or about September 2, 2007, via Skype, VAN DER KOLK said to ORTMANN, “we’re modern pirates :-)”. ORTMANN responded, “we’re pretty evil, unfortunately”, “but Google is also evil, and their claim is ‘don’t be evil.’”

It takes a conspirator to know a conspirator.

Google to EU: Hey idiot! We’ll tell you just how dominant we really are and you’ll like it

October 10, 2012 Comments off

Adult bullies are in a special class–they were born that way and stayed that way, and they have been practicing how to get away with it for years.  And then one day–they become rich and powerful.  And some of them are called Google.  (See the Eric Schmidt’s description of the monopolistic tech oligarchy or “Gang of Four” cartel in conversation with AllThingsD’s Kara Swisher and Walt Mossberg.)

What is common to all of these adult bullies?  They are accustomed to getting away with it.  And for all of its benefits and “innovation” what Google is really best at is getting away with it.

Getting Away With Ethics Problems:  Google got away with having their former worldwide head of lobbying Andrew McLaughlin planted in the Obama White House while getting messages from Google lobbyist Markham Erickson that pretty clearly violated lobbying and White House ethics rules.  This one was about a meeting that Erickson had with IPEC Victoria Espinel that apparently didn’t go to his liking:

Andrew McLaughlin was allowed to exit quietly, and Markham Erickson is now the head of the American Bar Association’s technology law committee.  Gee, how would we ever know whose side he’s on?

Getting Away With Illegal Drugs:

Google advertised illegal drugs in search from the beginning of the company until last year when Google executives authorized using the stockholders’ money for the payment of a $500,000,000 fine to keep from being personally indicted.  Google board members and executives, including Sheryl Sandberg (now a helmer at the Facebook debacle), are being sued by stockholders.  Of course, any Google user–regardless of age–can still use Google’s autocomplete to “buy oxycontin online no prescription cheap.”

If Sheryl Sandberg’s experience is a guide two words of unsolicited advice for Marissa Meyer and Susan Molinari:  Separate counsel.  You’ll need it.

Getting Away With Monopolist Bad Behavior

Google has proven that it is willing to spend any amount of money to get its own way–including what stockholders think is misappropriating company money to avoid personal liability.  Nowhere is this axiom more fully proven than Google’s current struggle against the competition laws of the European Union in its desperate attempts to avoid sanctions planned by Joaquín Almunia, Vice President of the European Commission responsible for Competition Policy.

The issue in the EU is the same as one of the issues forcefully argued on a bipartisan basis by our own U.S. Senate Antitrust Subcommittee:  Google cooks its search results to harm its competitors and to favor Google’s own products.  This is not the only threat to Google running roughshod over the Internet, but it is one of the significant problems.

The Financial Times reports that Google has proposed a solution to hard wiring Google products in search results: keep the search results the same, but brand Google’s own products (which inevitably means branding on the first page of search results which is where Google’s own products mysteriously appear).

Google has made a bid to avoid an antitrust war with Brussels by offering to label information from its in-house services that are included in its search results pages, according to people familiar with the search giant’s submission.

Under the proposal, Google would put its brand on any of its own maps, stock quotes, airline flight details or other pieces of information returned with search results. It is an attempt to resolve regulators’ fears that Google is unfairly squeezing out other specialist information services on the web.

However, the idea has drawn complaints privately from some of the company’s fiercest competitors, who said Google could still rob rivals of online traffic by promoting its own services more prominently than others.

If you have dealt with Google, you know the “hey idiot” tone they frequently take, sublimely oblivious to the fact that sometimes it actually does hurt to ask.  Particularly if what you are asking for insults the intelligence of the other side.

So think about this branding idea:  If you were to accept this proposal as a solution to hard wiring Google’s products in search above its competitors, you would also have to ignore the fact that the entire point of the complaint is that Google purposely uses its monopoly position in the market to harm its competitors (and ultimately consumers who are prevented from receiving information about competing products).

In other words, you’d have to fall for two very Google tactics.  You’d have to believe that the bright and shiny object they want you to look at is a solution.

And you’d also have to fall for the rope-a-dope.  Google thinks that they can fool the EU into arguing about these bright and shiny objects while Google delays the outcome of the monopoly negotiation yet again while Google rakes in monopoly profits every day of delay.  In fact, at this point the entire investigation may have paid for itself.

The FT quotes Professor Ben Edelman who sums this up nicely:

“Google would still be able to put its competitors on page 35 [of its search results], so any solution would have to go much further,” said Ben Edelman, an associate professor at Harvard University and critic of the company’s search and advertising practices.

And yes, Google really does have enough hubris to believe that they could trick Joaquín Almunia  into falling for this bunk.

Senators Blumenthal and Franken summed it up at the recent U.S. Senate Antitrust Subcommittee hearing:

Senator Richard Blumenthal from Connecticut [told Google’s Eric Schmidt:] “You run the racetrack, own the racetrack, you didn’t have horses for a while but now you do and your horses seem to be winning.” To which his colleague from Minnesota, Al Franken, joked: “Google might be doping the horses.”

Literally, in Google’s case.

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