This is the first in a multi-part series on Google and antitrust. 

Part 1: Competing in Web search against Google would be extremely hard

Part 2: How Google favors its own products

Part 3: Looking at the good and bad effects of monopolies

Disclosures: I worked on AOL Search from 2004-2007, where Google was our algorithmic search partner. Any assessments of financial models are based on publicly released information and not any specific information I had access to regarding the terms of the AOL-Google deal or our negotiations with Google and Microsoft. My brother is currently employed by Google and I have many friends there. I went to high school with Google CEO Larry Page.

In today’s hearings before the Senate Judiciary Subcommitte on Antitrust, Competition Policy and Consumer Rights, Google tried to dissuade the committee from the notion that Google is a monopolist.

In space after space, Google has used the dominance of its search engine to promote its own products. A few examples: local, finance, product search, images, YouTube, Google Offers. I expect we’ll see tighter integration of Google Offers and Flights into the core search experience within the next year.

Competing against Google in Web search is extremely difficult

Eric Schmidt made the claim several times that competition is one click away. That’s absolutely wrong. Search on the scale of Web search is an incredibly hard problem that requires several thousand engineers, significant capital investment to crawl the entire Web and return results at blazing speed and global reach. You can’t solve Web search today with 2 engineers in a garage.

And that’s just Web search. To have a competitive product, you’d need maps, stock quotes, news, weather and all of the other things that Google has incorporated into its results over the years.

For the sake of argument, let’s say you could. The next step would be getting people to try your search engine. That’s hard for two reasons: brand and distribution.

I’ve done A/B testing with search results. If you took a set of results and changed nothing but the logo, the results with the Google logo were perceived by users to be better. That’s how powerful Google’s brand is.

Google got its initial breaks in terms of distribution when search was a nascent space and companies like AOL and Yahoo! didn’t know how incredibly lucrative the space would turn out to be. With ingredient branding on search on AOL and Yahoo!, Google was able to develop its own brand as the place to go for high quality search. Deliberately or not, Google used the quarterly revenue focus of its distribution partners to its advantage, letting them clutter their own experiences with lots of irrelevant ads while keeping Google.com relatively sparse.

Let’s assume somehow you’ve built the best search engine, solved the brand problem and convinced distribution partners that you had a better product. The next challenge is paying them enough to displace Google.

Search advertising is a network-effects business. Because it relies on an auction model, generally the greater the number of participants, the higher the price. Search advertising is time consuming for the advertiser — many advertisers can accomplish their business needs just using Google AdWords. There’s no need for them to also buy on bing. As a result, Google can afford to offer more revenue to distribution partners. Even if you were willing to take a loss and give distribution partners more money than you take in, Google’s higher take means they would still offer partners more money.

Solved that problem? Next, there’s the challenge that many of your potential distribution partners have lost a lot of their share. Among the distribution partners that helped build Google: AOL is hardly worth talking to as AOL Search traffic continues to plummet. MySpace? Um, OK.

I’ve always viewed Google’s YouTube acquisition as more of an insurance policy on the rest of Google’s search business, not as a video service acquisition. What Google was doing in 2005-2006 with the AOL Search renewal, YouTube acquisition and the $900 million search deal with MySpace was locking up eyeballs. If any of those distribution deals had gone to Microsoft, search might be very different today.

Facebook is the only company I can think of that has a real shot of challenging Google at search.

What consumers want

Schmidt also made the claim that Google is delivering what consumers want. There’s a lot of truth to that. If I enter “HPQ” in the search box, the most likely thing that I’ll want is the stock price for HP. If I enter an address, I probably want a map of it. If I enter “weather,” I probably want the weather where I am right now. It is a benefit to the consumer to have that answer right on the search results page.

Google’s innovation in maps has been phenomenal. I was working at AOL (Mapquest’s parent company) when Google Maps came out. I remember the emails from the head of Mapquest telling AOLers not to worry about Google Maps because no one would ever want such features.

In the case of Maps, Google delivered a much better product than Mapquest. The fact that Mapquest continues to exist at all is a testament to the power of consumer inertia. It’s also a testament to the power of brand.

And Schmidt is right in saying that trying to gather such results in real time from various sites would be technically extremely challenging.

But there are also many cases where what Google delivers is not what consumers want. I recently returned from SMX East, a search engine conference. Every time I searched for it and clicked the agenda link, I got the 2010 agenda, not the 2011 agenda. Searches for my own name return inexplicably return my Google+ profile instead of my blog, Twitter, Quora or many other presences that I actually tend to.

Is it possible to create a search engine that addresses these things? Sure. But these are not easy challenges. And although Google continually evolves its algorithms, it seems that big changes to solve such issues aren’t a priority. The recent big changes in Google’s algorithms to reduce the prominence of low-quality content written primarily to rank on Google, known as Panda, came about only after Google was practically shamed into addressing the content farm issue.

Part 2 will look at how Google favors its own products and ties new products into existing products.