Google Yahoo: A Contrarian’s View
September 21, 2008
In high school, I would get into trouble by asking, “What if we look at this idea from a different point of view?” My high school teachers were kindly but not too eager to listen to a question and then a suggestion that their world view was out of kilter. I am not sure why I developed this habit of mind, but I learned when I got to my first real job at Halliburton (Nuclear Utility Services), I discovered that the nuclear physicists and mathematicians that made up 80 percent of the unit liked my approach. Instead of ignoring me or putting my desk in the hall as my high school teach Miss Sperling did, these guys and gals would light up light up like white LEDs and dig in, intellectually speaking.
After reading Randall Stross’s analysis here, I felt he was on the roight track for 180 degree thinking, but he was hitting the snow covered peaks, ignoring the basalt layers on which his big idea rests. Then I read with enjoyment Michael Arrington’s “Why the Google Yahoo Ad Deal Is Something Fear.” You can read that essay here. Not only did I enjoy his writing, several of his points resonated with me. Nevertheless, my contrarian approach levered both of these astute gentlemen’s comments into several ideas that are rotated a few degrees from each’s positions.
First, the barn is on fire. It’s burning fast. The horses gone. The hay is burning fiercely and the Harrod’s Creek fire engine aided by fire engines from elsewhere can’t douse the flames. So the fire fighting professionals hose some bushes, squirt water on the roof of an adjoining building, and watch the barn burn. My view is that Google was ignored in the period from 1995 to 1998 when Messrs. Brin and Page were fooling around with BackRub. Then in the period from 1998 to 2004, some smart money urged the Googlers and their small cohort of former DEC / AltaVista.com, Bell Labs, and Sun Microsystems’ colleagues forward. When the IPO loomed, Google settled with Yahoo for about a billion dollars. Yahoo realized that Google had learned from early GoTo.com, Overture.com, and other ad efforts. Instead of reinventing the stone wheel, Google had vulcanized a Michelin radial. Clumsy metaphor but if you have a stone wheel and your friendly competitor has Michelins you have limited choices. Yahoo sued and elected to keep using stone wheels. The result is that Yahoo has the kind of choice that BF Goodrich gives NASCAR teams. Use our tires or don’t race. Works in auto racing, and it is working in online advertising.
Who wants to stand in front of this and slow down this bullet train?
Second, Google really doesn’t “sell” advertising. Like the local utility monopoly or the local water company, you can sign up for power and water or spend your money drilling a geothermal hole, erecting solar panels, and buying Evian by the truck load. Google is a service, and if the users and the advertisers did not want to make whoopie, there’s not much Google can do about it. In fact, legislating to company dependent on Google traffic that it can no longer advertise is probably one of those remarkable opportunities to explore the law of unintended consequences in detail. I don’t know about you, but I have yet to meet a government paenl or regulatory committee who has a solid grasp that Google is a giant digital computer. Ad matching and users searching are just applications. If Google removes these functions, develoeprs can use Google’s APIs to build their own systems and Google can charge a fee and take a piece of the action. The result? No changes and maybe even more money for Google because there is a great deal of interest in tapping into Google traffic.
Third, advertising is a poor word for what Google does. Here’s an example. A doctor specializes in cardiac care. A Google user plugs his or her health data into Google via a form. The user tells Google the name of the doctor, provides contact informatin for the doctor, and then tells the doctor that the doctor will be notified if something happens to the Google user. Now the guy or gal has an Android phone and has a heart attack. Google’s I’m feeling doubly lucky patent that I described in a couple of talks in 2007 notices that the guy or gal is experiencing an irregular heart beat and a declining body temperature. The Google alerts an EMS truck, emails the guy’s or the gal’s doctor, and puts the data in the guy’s or gal’s medical record. Sound far out? It’s not. In this small ecosystem, Google has many ways to monetize its service. It can charge an insurance company to perform the service. It can charge the user to update his or her information. Google could charge the doctor to be included in a larger knoweldgebase of preferred cardiologists. But this is not advertising; it’s a directory or a knowledgebase. If you want to pick nits, Google can charge a fee for inclusion. But Google is charging cardioologists in this example for using its system–just like LexisNexis, just like mobile phone companies, and just like utilities.
You probably will rebel at my three chunks of basalt; to review:
- It’s too late. Google is a monopoly and a supranational company. How are you going to regulate a service that is beyond buying a space ad in a magazine or a 30 second spot on the World Cup final. You can’t. The game is in the third quarter. The GOOG has a big lead.
- It’s not advertising. The fact that people perceive what Google does as advertising is not the reality of the Google infrastructure and its platform flexibility. Google runs an auction for services rendered. It’s not a traditional agency, newspaper, or anything for that matter. You watched it evolve into something that most people call a search engine. Hello, Google is not a search engine anymore than it is an advertising system. It is a new type of outfit, and existing vocabulary does not stretch to cover its bumps and curves.
- It’s not based on mass activity; it’s focused on highly particular services. Just because most people don’t know about the “I’m feeling doubly lucky invention” or other Google creative functions does not mean that these innovations are dreams. Google has some potent functions that are essentially ignored except by a small group of analysts.
To sum up, I’m not picking fights with Google, regulators, Mr. Arrington, or Mr. Stross. I am doing what I have been doing since I stumbled into an America high school in central Illinois. I am thinking about the received wisdom by flipping the problem around. Google is not the problem. The problem is the majroity’s perceptions of Google. I may not be right, but I am on the right track. So is Google, and it has momentum. In the present economic climate, who wants to stop a company that is actually generating revenue, building its brand, and delivering services with which its customers are reasonably happy. Banks, airlines, and newspapers should be more like Google and less like the dinosaurs each is. Agree? Disagree” Use the Comments section of the Web log to educate this addled goose.
Stephen Arnold, September 21, 2008
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