Google Does Yahoo-Style Math
July 23, 2008
Not long ago, a Yahoo guru opined that building a Web search system cost about $300 million. I made a feeble attempt to point out that if that were indeed true, Yahoo would have accomplished the task and not collected search engines the way my mother adds to her collection of knickknacks. Similarly, Microsoft would not have bought Powerset, Fast Search & Transfer, and football-field sized data centers. I think the Yahoo math in that essay which you can read here was 1 + 1 = 3 bazillion. A bazillion is a technical term favored by the mathematical challenged. You can read about Yahoo math here.
Now, Fortune, sponsor of the Brainstorm Tech conference that featured the Beavis and Butt-head analysis I noted yesterday, offers another number. This time the number is $100 million and the person doing the calculation is Google’s employee #12, Marissa Mayer, high wizardette of the Googleplex.
You can read Fortune’s own take on this calculation here. I cannot do justice to the Fortune writer’s discourse. I can remark that Google News was a project that showed off some flashy Google technology circa 2001. Google News’s developer was, based on what I learned in my research, was Krishna Bharat. In 2006, Google News became official. In the last seven years, Google News has expanded, making it easy for me to see what’s shakin’ in France or a score of other countries.
Google’s technology spiders a subset of important news sources. The system “discovers” the important stories. The front page or splash page is automatically generated with follow on stories appearing in a cluster of related links. There have been some hiccups. These have ranged from major media outlets reminding Google that a newspaper accepting a feed from the mothership should not appear at the top of the news stack for a story. Google fixed this with some “human intervention”, which is now a key distinction of Google’s intelligent software; that is, a human makes sure the numerical recipe doesn’t add too much sugar and not enough salt to the output. The service also provided me with a good example to tell traditional publishers that unless some rethinking of their news operations took place, digital news would erode the traditional news base. I started yapping about this in 2001, but then and now, traditional publishers prefer to talk with my partners not me. I guess I’m too blunt for the white shoes and panama hat set on sultry summer days. Gee, the truth is the truth and the earnings of Time Warner (Fortune’s owner) supports my 2001 insights I suppose.
Now to the magic number.
Google News is a demo; it is not a revenue producer. I provide some information about the technology Google uses for this service in The Google Legacy and Google Version 2.0. If you want to know more, click here. The technology in Google News is darned impressive and generally unappreciated by users and competitors alike. By the way, do you wonder what Mr. Bharat has been doing since 2003, the most recent technical paper on his Google official biography page? (He’s been busy, but he is remiss in updating his research activities. For a peek, check out US20080097833.)
How do I know this? Do you see any ads on this page? As my Wall Street pals tell me, “Google’s revenue comes from ads.” So, no adds means no revenue on public facing Google pages. There’s not even a link to Google Enterprise that I could find.
“Why,” I ask, “are there zero ads on Google News?”
If my research is correct (which it may not be), the reason may be tie back to those traditional publishers. Not even Google can figure out how to divvy up a $0.83 click among the contentious, cantankerous publishers whose headlines are presented on the Google News page. A misstep can trigger another $1 billion lawsuit. Not even Google wants more of these old media new media face offs. I read here that Google even has a deal with the Associated Press, a forward looking outfit if there ever was one. Too many lawyers undermine one’s ability to do math, I have heard.
After seven or eight years, Google News’s presents an ad free face to me. Your mileage may differ, of course. And, according to the Fortune write up, Google wants to handle consumer health records in the same way; that is, traffic generation; to wit:
Mayer said that’s the way Google thinks about monetizing digital consumer health records. The company is one of many working to make it convenient for people to store and access their medical records online, a move that proponents say will improve health care by empowering consumers. But Mayer said that after some internal discussions, Google brass decided not to put ads on health record pages.
I think the strategy is for Google News and the other Google services to pull traffic to Google’s information amusement park. Overall traffic is a net benefit as long as Google can manage the costs associated with scaling to handle the hoards of visitors, buyers, and gawkers.
What strikes me as weird as why Google feels compelled to use Yahoo math–that is, making up a number–to justify its 10-year old business strategy. The top line revenue and net profit reveal the underlying math and the wisdom of Google’s approach. What’s a $100 million to Google. I can’t even get my Bowmar calculator to calculate the percentage because the zeros overflow the display.
Yahoo math from Google I don’t need. Agree? Disagree?
Stephen Arnold, July 23, 2008
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