With search war stalemate, Google branches out

Google certainly spent a lot of time on search in 2009, but had more pressing issues with the U.S. government and building next version of its smartphone OS.

Google continued to lap the competition in 2009, but found itself jousting with a formidable foe: the U.S. government.

Scrutiny from federal regulators played a role in almost every major story that involved Google this year, from its continued domination of the search and search advertising markets, to its battle with authors and publishers over the effects of the Google Book Search settlement, to CEO Eric Schmidt's role overseeing both Google and Apple as a director. At year's end, no major federal action had been taken against the company, and Google showed no signs of slowing down its innovative engineers with plans to move into operating systems and possibly consumer electronics.

Google's settlement with groups representing authors and publishers technically took place in 2008, but the battle over its propriety raged throughout 2009. And the year will end without a clear decision regarding how Google will be allowed to display portions of out-of-print yet copyright-protected books that it has scanned. However, a second final settlement drafted in consultation with the Department of Justice was approved in November.

Opponents accused Google of trying to corner the market on digital books, while the company insisted it was doing the world a favor by improving access to books. A final hearing on whether to approve the revised settlement is scheduled for February 2010, meaning this story isn't done just yet.

Google will end the year about where it began when it comes to search market share: around 65 percent of the U.S. market, according to ComScore. Microsoft's launch of Bing, a revamped version of Live Search, was definitely noticed in Mountain View, but Bing seemed to take more share from Yahoo than it did from Google as the year progressed.

Not all was rosy for the Google economic engine: the company was forced to lay off employees for the first time due to the prolonged economic slump in the advertising market. Still, Google appeared to weather the storm far better than its competitors, and once the dust had cleared opened up its checkbook for strategic purchases such as On2 Technologies and AdMob.

It was a banner year for one of Google's most important side projects. Android, its mobile operating system, started to gain traction among the phone makers of the world, and led to a landmark deal between Google and Verizon to develop "a family of devices" based on Android.

However, late in the year, Google was reported to be planning to sell consumers a phone of its own: the US$199 Nexus One, given out to Google employees at a holiday party. The company has not yet commented on whether the Nexus One will be its first consumer electronics product, or just another developer phone sold to a limited audience.

Android began setting itself up as a main contender to Apple's iPhone, which is probably why the government raised an eyebrow at Schmidt's role as a director at both Apple and Google. For a while, Schmidt shrugged off the controversy, but eventually stepped down from Apple's board after acknowledging that the overlap between the two companies had become too great.

That decision came after Google decided to shake up the computer market with plans for its own operating system--Chrome OS--based on its Chrome browser. Chrome OS is not expected to arrive on Netbooks until late next year, but the company showed off its novel approach to operating system development late in the year during an event for the media. Chrome OS is designed as a lightweight, fast operating system that runs nothing but Web applications; that might appeal to some, but it's still not clear if the masses are ready for such a product.

And while cloud computing through products like Chrome OS may be the future, the current cloud situation can be stormy from time to time. Google suffered a prolonged outage in May that knocked out traffic to just about all of its services, and sporadic Gmail outages frustrated users on several occasions.

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