What Does Google Want to Be When It Grows Up?
Competition with Microsoft or Yahoo! aside, one does have to wonder just what kind of company Google intends to be five or ten years from now. It's obvious that Google is no longer the simple search technology company it was when Larry Page and Sergei Brin created their first search application in their Stanford University dorm room. As I've pointed out throughout this book, Google might look like a search company, but it generates virtually all of its revenues from selling advertising spacewhich makes Google a media company, similar to traditional newspaper and magazine publishers, but using 21st-century technology to deliver its ads and surrounding content. But will Google remain dependent on ad sales in the futureor is something else in store for the folks at the Googleplex?
It's tempting to look at everything Google is doingfrom personalized searching to video downloads to wireless Internet service (see the sidebar later in this chapter)and conclude that the company is simply working to refine its ad delivery technology. In essence, Google is working to (1) provide more settings to deliver its ads and (2) deliver ads that are more relevant to consumers. The former goal is met whenever Google rolls out a new product or service, each of which provides more ad space and more ad viewers. The second goal is met as Google refines its search technology and applies that to serving up content-relevant advertisements. The more of you that use Google's products and services, the more ads it can sell; the more it knows about you, the more relevant (and thus more profitable) those ads will be.
For example, look at Google Book Search. On the surface, it appears to be a highly useful service for consumers, if not slightly altruistic in its goal to provide access to a vast literary history. But it's really just another way to serve up those "sponsored links" that appear on all of Google's search results pages; each new user that queries Google Book Search is one more target for Google's advertising.
Consider, also, Google Desktop. Yes, Google makes it easier to find data stored on your personal computer, but by finding that data, Google also learns a lot about you. And the more Google knows about you (via the email messages you receive and the files you store), the more targeted it can make the ads that it serves to you. Personalized services equal personalized adsand personalized ads just happen to be more effective, and thus more profitable for Google.
So it's important for Google to continue to develop its search and personalization technologiesnot necessarily to improve users' search experience, but rather to attract more users and better target the ads that the company sells. It's also important, of course, for Google to continue to offer an effective and attractive search experience; if Microsoft or Yahoo! were to somehow eat into Google's share of online search, it would reduce Google's advertising base, and thus affect the company's ad-driven revenue stream. Being the best at what it does ensures a steady stream of advertising consumers, after all.
But is there growth left in the Internet-based ad market? The answer to that question is a definite yes. U.S. companies still spend more ad dollars on the traditional Yellow Pages than they do on online advertising; the Internet ad market accounts for less than 5% of overall ad spending. So there's plenty of growth left in Google's core businessnot even counting the ad dollars to be had outside the U.S.
And the Internet may be only part of Google's future. Is it possible for Google to apply its technologies to other media besides the Internet? Google's Larry Page seemed to think so when he said "We're excited about taking the properties of search-based advertising... and applying that to the video space." Imagine Google serving up context-sensitive ads during your favorite television programs. Don't laugh; Google recently announced that it was entering the market for web-based video advertising, serving up "click-to-play" ads to its network of websites. It's only a short step from video ads on the web to similar ads on network TV.
So what kind of company will Google be when it grows up? My guess is that it will be much like it is today, except more so. More products and more services, not all of them directly search related, all of them offering more opportunities to deliver highly targeted advertising. More Google in more channels, more services in more media, more ads served by the Google advertising juggernaut. And better ads, because Google will know more about its users over time. The more of your life you hand over to the Googleplex, the more Google will know what you like, what you don't like, what you do, what you don't do, what you buy, and what you don't buy. Google will serve up increasingly relevant advertising, advertising targeted not only on your historical reading and viewing and buying patterns, but also on what you're currently doing. Activity-relevant advertising cross-indexed with past buying patterns should make for ads you might actually pay attention toand certainly ads for which Google can charge companies top dollar.
You see, it's not all about the search, it's about the dollar. And Google knows that the best way to get advertisers' dollars is to attract more and more consumers with better and better products and services. The more that Google does for you, the more eyeballs it attracts to its adsand the more eyeballs, the more advertising revenue. You get the picture.
|
Whether you think of Google as a search technology company or an advertising company, here's a development that might have you scratching your head: Google is becoming a provider of wireless Internet service. In fact, Google is pursuing this direction in a number of different ways.
First, Google is partnering with EarthLink to offer city-wide WiFi service to the cities of San Francisco and Mountain View, California. It's an expensive proposition for Google; the infrastructure involved in the San Francisco rollout will cost upwards of $15 million.
How will Google make money on this type of project? It depends. San Francisco residents will have the option of paying $20/month for an ultra-fast 1 Mbps connection or of receiving free 300Kbps service. Users of the free service will be subjected to local advertisements on the web pages they view; Google, of course, makes money from selling the ad space.
So city-wide wireless Internet service is just another way to expand Google's advertising reach, in this case via the use of highly-profitable targeted local ads. As Google CEO Eric Schmidt recently noted, local advertising is an "increasingly meaningful contributor to revenue, and much more is coming." How is that coming? At least partly from Google's serving up free WiFi in selected cities.
The second way that Google is getting into wireless Internet service is by bidding on the Federal Communications Commission's auction for the 90MHz radio spectrum. Google is bidding against Time Warner and various cellular providers, which seems a bit odd at first. But several observers have speculated that Google is looking at the wireless spectrum as an alternative way to reach its users.
AT&T, Verizon, and other phone companies that provide DSL Internet service have been making noise about charging content owners and distributors, such as Google, additional fees to carry high-bandwidth content over their networks. Any Internet content owner not paying this toll would find their content relegated to second-class status.
By building its own access network in the wireless spectrum, Google could deliver its service directly to endusers. This would let Google neatly sidestep any access delays and avoid paying additional access charges. It's all about reaching the consumer directlyall the better to serve up those ads.
|
|
