Saturday, September 10, 2005

Geico v. Google Settlement Raises Concern About Google's Ad Model

The settlement resulted from a trademark infringement suit from GEICO, the auto insurer that is part of Warren Buffett's empire. Basically, GEICO claimed that advertisements of competitors popped up whenever users searched its name on Google's site. Shouldn't GEICO get a piece of the ad revenue? The implication is that, under the alleged conditions, the GEICO name has effectively driven some of Google's ad revenue, since other companies have benefited from GEICO searches.

Actually, it had become quite a confusing case. Late last year, it appeared that Google had scored a major victory when the U.S. District Court judge in Virginia said that the company could continue its search-engine practice, although the same judge indicated that GEICO had the right to collect damages from Google.

Google had few options. If it proceeded with litigation -- and lost -- it would be damaging to its core business, as other companies continually direct search revenue. In addition, a negative outcome would have set a costly precedent, since other companies would have then tried to obtain payments from Google. This would have delivered a serious blow to its margins and might have forced it to raise its advertising fees, thereby putting it at a competitive disadvantage. Source: Motley Fool


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