The search giant has the power to make or break the media, Julian Lee writes, but the industry seems powerless to kill off the beast it helped create.

They call it fear of Google, or FOG for short. That feeling in the small hours when you sit bolt upright in bed in sheer terror at how much your livelihood relies upon an algorithm. That the traffic to your website, the clicks that result in sales leads, indeed your entire presence in cyberspace, hinges on a search engine - the formula for which is as closely guarded a secret as Coca-Cola's recipe.

That formula can change any time and you won't even know it, until, that is, your company's ranking on Google's all important home page sinks like a stone to the bottom of a well. Or rises to the top.

Now FOG is creeping over to the media and advertising industries, which are experiencing the same symptoms; a cold realisation that Google's power threatens to eclipse their business models and put them out of business. The irony is that the media helped create the monster now giving them nightmares and there is little they can do to stop it.

With nearly 10 million visitors a month Google is the most visited website in Australia. Nine out of every 10 searches made on the internet is through Google. Those eyeballs translate into an estimated 90 per cent share of search advertising - the fastest growing area in online advertising as the number of advertisers using the service soars close to 50,000 in Australia. Google's revenue is estimated to be $700 million and fast heading towards $1 billion as more advertisers divert their budgets into a medium that delivers them measurability and sales leads. Soon Google will have the ability to sell and serve richer display brand ads on 62 per cent of Australian websites. A suite of products from maps and mobile phone applications to computer operating systems, video traffic on YouTube and cheap telephone calls only helps rust consumers onto the Google brand.

The more time we spend on the internet, and hence on Google, the more money it makes. All of which is making the Australian media, already grappling with the structural changes the internet has wrought on it, deeply uncomfortable. Now it is plotting its revenge; how it goes about exacting it is another thing altogether. But while Google's monopoly of information is not in doubt, to date there is scant evidence of Google using its muscle to distort the market, only a fear that it might do so in the near future. That has not stopped a growing chorus of voices expressing concern at Google's dominance, but such is the might of Google, few are prepared to go on the record. Telstra's Sensis, News Limited, Ninemsn and Microsoft all declined to publicly air their grievances because some of them still do business with Google.

One that did, though, is the man who arguably has the most to lose from Google's continued

dominance and the most to gain from its downfall: Rohan Lund, the chief executive of Yahoo7!, Google's main competitor in search.

He says all he can see is a future where the Google Death Star, as he dubs it, will reign supreme. "There needs to be a conversation in industry and government about Google's role in the market and what this means for business and consumers both now and in the future,'' Lund says, adding that Google may now be Australia's largest media company by reach and profit.

''Commentators in the US are concerned that Google has a 60 per cent share. Let's not forget that in Australia that climbs to nearly 90 per cent share, even after the Yahoo! and Microsoft search businesses join forces."

Last month Yahoo signed a global deal with Microsoft to combine their forces to take on Google with Microsoft's new search engine, Bing. Despite 2 million Australians a month using Yahoo's search engine, its share of paid search advertising remains static, forcing the company to look to other areas, such as mobile, for growth. It faces being trapped in a vicious cycle where if it can't get enough people asking Yahoo the questions, then it can't attract the advertisers and the internet-browsing public continues to turn to Google where it can get more relevant answers.

"There are plenty of media and ecommerce players out there feeling very nervous about the Google Death Star. I'd be stunned if government isn't thinking the same way," Lund says.

It is not. The Australian Competition and Consumer Commission said it ''had nothing to add on the matter'' and government loves Google. The Communications Minister, Senator Stephen Conroy, made multiple references to Google in his recent paper on the national broadband network.

The Treasury never blinked when in May the Herald revealed that the company was siphoning off hundreds of millions of dollars in revenue from its Australian business to a subsidiary in Ireland. For the year ending December 31, according to documents filed with the Australian Securities and Investments Commission, Google's revenue was just $90 million when the real figure could be as much as 10 times that.

Last year the NSW Government awarded Google the contract to provide a customised version of its email service, Gmail, to 1.5 million students. Google has also done deals with computer manufacturers such as Dell and browser companies such as Mozilla to embed its search engine into their products.

''Distribution is key. Once you start locking up distribution your reach gets bigger, then the revenue per search gets bigger and then as that gets bigger the more you are able to pay others to lock up distribution,'' says Lund, who has spoken out despite pleas from Google for him to remain silent on the matter.

At present there would be little public support for a backlash against Google, which provides an ever expanding suite of free products to internet users. Google has succeeded where Microsoft - which not so long ago was the centre of anti-competition investigations - failed, in creating a quirky fun brand with strong consumer appeal.

But while the lines between Yahoo!7 and Google are clear cut - they are rivals - the same cannot be said of its relationship with publishers. What started out as a marriage of convenience with the media enthralled by the lure of its glamorous new partner, now threatens to descend into a bitter divorce.

On the one hand News Limited and Fairfax Media are Google's biggest customers, each year paying millions of dollars to it for search terms to deliver them traffic for their websites - anything from cars and houses to jobs and holidays. Ads on Google drive up to 20 per cent of their traffic. Publishers also get a cut of the revenue from the little text ads that appear at the bottom of the page and which are sold on the relevancy to the adjacent story, a program known as Adsense. Each month Google directs a billion clicks to newspaper websites worldwide and last year it paid out $US5 billion ($5.9 billion) to Adsense media partners.

But as it stands, the ledger is firmly on Google's side. As one publisher, who declined to be named, put it: ''Google is a drug. It's addictive. The thought of giving it up is scary.'' Along with FOG, ''turning off Google'' is a phrase often muttered in media circles. Most are contemplating it but in an environment where he who gets the most clicks wins, no one has the guts to do it. Yet.

The uneasy relationship between Google and the media came to a head last month when Google began putting real estate listings up on its popular Google Maps service, pitting it directly against its biggest customers, Fairfax Media's Domain and the News Limited controlled REA Group, the owner of Realestate.com.au. In retaliation, both Fairfax and News threatened to pull their search advertising budgets from Google, fearing that at stake was a category that commands $144 million of annual classified advertising revenue.

The REA Group chief executive, Greg Ellis, continues to rattle his sabre, clearly encouraging others to join him. The Australian internet market should not underestimate the significance of Google's entry into the classified space, he says. Since Google parked its tanks on his lawn he hasn't even had a phone call from Google discussing how the two companies can do business, he says. "Historically Google's partnership offering is for local companies to provide Google with their content. Google does not offer any meaningful branding or reporting associated with the listings. This is not a mutual partnership approach. The approach is 'provide us with a list of your customers and then buy our keywords to drive traffic to your listings'."

To make matters worse, says Ellis, the keywords at the top of Google's map search product for real estate are taken by Google itself. "REA is currently reviewing its customer relationship with Google. It will be interesting to see the classified market's response when our decisions become public,'' he says.

Fairfax's tone towards Google has also changed in recent weeks. Nic Cola, chief operating officer of Fairfax Digital, talks about Google as being like ''a friendly King Kong''. ''They can pick you up and crush you without realising it.''

But he says to describe Google as a partner would be wrong. ''They are a big supplier but they are also now our biggest competitor. They talk to the same people as us for advertising … they are bringing out products that directly compete with us. But I would certainly not characterise them as partners.''

The faultlines in Google's relationship with the media began to appear earlier this year when Rupert Murdoch launched his tirade against Google and other online news aggregators, which link to news articles while selling search terms or ads on pages that provide the links. One of his chief lieutenants, Robert Thomson, the editor of The Wall Street Journal colourfully described the company as ''parasites or tech tapeworms in the intestines of the internet''.

At the same time in Australia it became increasingly apparent that Google was breaking away from the mainstream media and pursuing its own path. Earlier this year it pulled out of the top-tier membership of the industry body, the Interactive Advertising Bureau. It already refuses to share its revenue figures with auditors Pricewaterhouse Coopers, who each quarter report an aggregated industry revenue figure. Media executives say both acts are a sign that Google intends to pursue what appears to be an isolationist policy.

Another flashpoint looms later this year when Google will be able to track and serve up ads based on people's behaviour as they move around the internet, a technique known as behavioural targeting but which the industry prefers to call interest-based advertising. By studying people's behaviour on the internet it can then serve up an ad at the most appropriate moment in the ''path to purchase''. For example it can be assumed that a person who is browsing a lot of car websites is in the market to buy a car. Ads for individual dealers or invitations to test drive can be served up to that computer address - along with many others like it - at the beginning of the purchasing journey and move on to car refinancing products towards the end of it.

But while individual publishers might have a view on consumer behaviour on their own websites, they don't have that universal view that Google has, given it covers 62 per cent of Australian websites. Publishers are now faced with a choice; play with Google or against it. Either they block Google's technology from serving up ads to their readers or let Google in and take a cut in the ad revenue generated.

Google has yet more weapons in its armoury. Later this year when it turns on its DoubleClick ad serving platform - which it bought for $US3.1 billion in 2007 - it will be able to serve up display ads, such as banners, pop-ups and videos, to advertisers who are looking to do brand ads online. To date, Google's focus has been on selling search keywords to advertisers and text ads to small businesses. DoubleClick, which serves and measures the effectiveness of display ads to half the websites in the world with more than 1 million unique monthly visitors, delivers Google advertisers from the big end of town. It also pits it once more against its key customers; the publishers and the media-buying agencies who each year earn their bread and butter from a market worth $500 million a year. Google insists it is not about to cut their grass and that its priority in Australia is on building search advertising revenues. It adds that, even it it wanted to, it doesn't have the skill sets of either a publisher or a media agency to undertake such a task.

But, as one internet advertising veteran, who asked for anonymity, says: ''What worries them [the media] is the sheer volume and quality of data about customers that Google will own and how that can be used in other advertising models. There's a real danger that Google does everything that they do only they'd do it much better and more efficiently.''

And yet media and advertising agencies appear to be strangely acquiescent in the face of Google's dominance. Google is now a must-have on an advertiser's media schedule, to the extent that some advertisers are prepared to pay top dollar at auction to secure the vanity top spot in Google's listings. The fact that the margins agencies can earn from charging advertiser clients for planning a Google campaign are higher than in other areas of online advertising might have something to do with it. As Google grows so do they.

The managing partner of the media agency OMD, Leigh Terry, says Google is collaborating more with media agencies than, say, two years ago when it tried to bypass the agencies to go directly to clients. Why wouldn't Google collaborate when, as one media executive, puts it: ''Someone is selling your advertising and you don't have to pay them a cent to do so.'' Indeed the relationship is a very lucrative one for both parties. The world's second largest marketing services group, WPP, is Google's biggest customer, spending $US900 million with it each year and accounting for about 4 per cent of Google's total revenue. Search also happens to be the fastest growing revenue stream for WPP.

Yet Terry concedes there is some concern at Google's dominance: ''Being big is okay but being dominant is another thing altogether. The concern that I have is that if they change something then it can quite quickly skew the results and a site can do less well.''

A key area that does spook agencies and advertisers is the Google algorithm - the secret recipe, which determines the rise and fall of a website in Google's rankings. The company regularly makes changes to it but does not feel inclined to tell people, yet the ranking of a company's website on Google's page can mean the difference between staying in business and going bust.

One that fell victim to such a change was the Sydney-based online training company Braincorp International. It was an effective user of what is known as search engine optimisation - where tweaks in the website's code and intelligent use of keywords on a site improves the volume or quality of traffic to it. Braincorp used to get about 200 sales leads a day through Google; that dropped to 10 a day when, without warning, Google changed its algorithm. The company went into liquidation in January. The tweaking of Google's algorithm was understood to be a significant factor.

This sometimes arbitrary approach was very publicly played out a few years ago when Google punished BMW for abusing ways to boost its position in the search engine results and effectively handed down a death sentence by demoting the car manufacturer's presence on the internet.

Google's senior competition counsel based in California, Dana Wagner rejects the notion that the playing field in Australia is not level. ''We operate in a very competitive space.'' Advertisers have plenty of options - both online and in other media - and are constantly shifting their dollars around. ''We are a drop in the bucket, with overall advertising spend, it's 2 or 3 per cent. Our sales people are always trying to convince people to spend more money on Google. There is lots of activity on the net and in the world of advertising … we are just one of them.''