According to the Wall Street Journal, some companies such as Yelp, WebMD, and TripAdvisor have complained recently that Google has been favoring its own local sites over the sites of these firms. Google has responded by arguing that it is simply trying to provide the best experience for its users. The firms argue instead that Google is favoring its own local businesses when displaying search results.
The spat represents a classic example of the conflicts that emerge from vertical integration. Hmmm... you might wonder how I could use the term vertical integration to describe a "virtual" firm such as Google, that has no manufacturing plants or brick-and-mortar retail stores. Well, vertical integration involves any strategy in which a firm chooses to bring multiple steps of the value chain in-house. In this case, Google has in some sense "vertically integrated" by launching its own local sites, which it then "markets and distributes" to the world through its search business. As a result, Google now finds itself competing with its own customers, and when that occurs, accusations of favoritism are not all that rare. Many vertically integrated firms have to navigate these types of conflicts; some do it more effectively than others. It will be interesting to see how Google handles this situation.