We have not looked at Google ad revenue figures in a while, so this really caught my eye. Priceline is Google’s $1 billion customer. From Bloomberg:
…Priceline spent about $1.14 billion with Google in 2012, accounting for 2.6 percent of the search company’s ad revenue. While Google doesn’t disclose spending by specific customers, the company said on its fourth-quarter earnings call that the top 25 advertisers are paying more than $150 million a year, on average.
From the beginning, Google’s mission in addition to the famous “Don’t Be Evil” has been stated as follows:
Our mission is to organize the world’s information and make it universally accessible and useful.
A further elaboration to that mission statement as stated in Google’s S-1 and elsewhere is that:
We will do our best to provide the most relevant and useful search results possible, independent of financial incentives. Our search results will be objective and we will not accept payment for their inclusion or ranking.
And also:
We believe it is important for users to have access to the best available information and research, not just the information that someone pays for them to see.
Fundamentally, then, Google says it believes, deep in its core, that limiting results to paid results are not the best way for users to have access to the worlds’ information. That’s pretty clear in the statements above.
It’s also pretty clear that money and prices are about as universal as something gets in a capitalist world, and thus price information is a central part of “the world’s information.” So, it’s telling that on a Google Commerce Blog post yesterday, Google says that:
First, we are starting to transition Google Product Search in the U.S. to a purely commercial model built on Product Listing Ads. This new product discovery experience will be called Google Shopping and the transition will be complete this fall. We believe that having a commercial relationship with merchants will encourage them to keep their product information fresh and up to date. Higher quality data—whether it’s accurate prices, the latest offers or product availability—should mean better shopping results for users, which in turn should create higher quality traffic for merchants.
The short version of this is that Google is retreating from it’s founding principle, and now claiming that paid search delivers better results. It starts with the former Froogle, but who knows where else that principle could be extended to since the logic is forever extendable.
When companies stray from their founding principles, it means that the companies think they are so entrenched that users will not rebel. That assumption may be correct, which in itself carries certain implications, but the assumption is more often wrong.
This could signal that there is a real opportunity to start from scratch in search.
Google launches its Drive cloud-based storage service today, and enters the ring with Dropbox, iCloud, and others. Two initial questions that Google needs to answer to determine whether this service is heading down the right path.
First, is it going to invest the necessary resources to make the suite of services in the service formerly known as Google Docs usable? (See post here on Google Docs.)
Second, documents that we create — like our email — have some of our most confidential information in them, whether business or personal. Google mines our email to deliver personalized advertising to us; it needs to be clear about whether it is going to do the same with our documents from the start, i.e., now before users start uploading their files and pictures. It’s not good enough to say that everything put onto Drive is voluntarily put on, so all is fair game. (See post here on privacy concerns.)
I am a big user of Google Docs, mostly for personal notes, record-keeping, and brainstorming. I find it super-convenient to be able to access my files wherever I am from whatever computer I have. It is a big improvement from the disks I used to haul around 15-20 years ago.
I recently bought my first iPad. I am excited to no longer have to haul around a laptop, particularly through airport security lines, but it confounds me that Google has no app to make Google Docs user friendly on the device (or on my iPhone for that matter). Given the usage, why not have a few engineers build an app for my tablet?
This is part and parcel of the lack of investment into Google Docs. There is the most basic of functionality that is lacking on the word processor, spreadsheet, and the other components. These deficiencies are no mystery. One can find these shortcomings on all sorts of forums.
It’s been almost 6 years since launch — why hasn’t anyone at Google gotten to these?
The confounding thing, in addition to widespread customer frustration, is that this was a potentially lucrative opportunity for Google. Few have great things to say about Microsoft Office, but it pulls in over $20 billion annually for Microsoft. Wasn’t taking on the MS Office juggernaut the logic behind Google Docs? Why such a lack of attention given the size of opportunity?
I have always been a fan and defender of Google’s innovation, but Google Docs just makes me scratch my head in disbelief. It makes me question Google’s capacity to innovate. Perhaps it links back to the stories of entrepreneurs such as Dennis Crowley, who have sold something to Google (Dodgeball in Dennis’s case), just to see their passions ignored and left to wither at the vine.
I’m confounded at what is happening at Google. Does anyone know?
So who exactly is filling Google’s ever growing vaults?
It seems that perhaps as much as half the magic that is Google can be distilled down to boring old insurance, loans, and mortgages. These categories of keywords, if the analysis of Wordstream below is accurate, account for approximately 46% of Google’s ad revenue over the last four quarters, or a whopping $14.8 billion for these three categories alone.
As a caveat, I am not exactly sure what the percentages in the graphic below stand for (i.e., is it % of search volume), so it’s possible that this number overstates or perhaps understates the revenue from these three categories. For one thing, it’s not clear how display advertising is accounted for. In any event, whatever the number is, it appears both significant as a percentage of total revenue and absolute dollars.
As Willy Sutton said “Go where the money is.” According to these numbers, Twitter, Facebook, and every other startup looking for an advertising-based business model for their own oceans of gold should be sending every free hand that they can find to knock on the doors of advertisers in the insurance, loans, and mortgages spaces.
With the limited launch of Google+ last week, I wanted to link back to a couple of earlier posts. First, I wrote about how there is a certain Facebook inevitability that is assumed in the market and community today, and while I wouldn’t bet against Facebook, it also is not correct to discount for the possibility that Facebook is not inevitable in valuing Facebook. I explore potential points of vulnerability in the post linked to in the previous sentence. Second, I noted that one should be willing to make “big bets” to create Facebook alternatives, and one option (among many) is creating a service that allows more flexibility in organizing multiple and different social graphs.
I am not one of the fortunate few with a Google+ invite, and consequently I have no idea how compelling or not compelling its social network is, but at the very least, some competition will force Facebook to continue to bring its A game.
I think that a market worth spending some time exploring to identify an opportunity is the display advertising market (and Internet advertising market generally). Earlier I had posted estimates from Google that display advertising was currently a $20-$25 billion market, headed to a $100 billion market size. This is the space in the huge region between advertisers and publishers. With a market size that big, there can be a variety of opportunities that come from hanging around, finding a game, and taking some shots in the shadows of Google or Facebook; the theory being that a gold boom creates all sorts of primary and subsidiary opportunities (including buying and melting jewelry and selling into the boom) . There are some firms that I have run across that are achieving incredible revenue growth that are otherwise under the radar and do not carry flash whether in founder or funding pedigree. I will spend some effort in a series of posts trying to break down and understand the potential spaces in this advertising technology ecosystem.
For some overview, Comscore’s recent numbers show Facebook’s impressive lead in ads published in the US market.
| Top 10 U.S. Online Display Ad* PublishersQ1 2011
Total U.S. – Home/Work/University Locations Source: comScore Ad Metrix |
|||
| Total Display Ad Impressions (MM) | Share of Display Ad Impressions | ||
| Total Internet : Total Audience | 1,110,448 | 100.0% | |
| Facebook.com | 346,455 | 31.2% | |
| Yahoo! Sites | 112,511 | 10.1% | |
| Microsoft Sites | 53,592 | 4.8% | |
| AOL, Inc. | 33,454 | 3.0% | |
| Google Sites | 27,993 | 2.5% | |
| Turner Digital | 18,050 | 1.6% | |
| Fox Interactive Media | 11,697 | 1.1% | |
| Glam Media | 10,207 | 0.9% | |
| CBS Interactive | 9,208 | 0.8% | |
| Viacom Digital | 9,051 | 0.8% | |
Luma Partners has a widely distributed “Display Advertising Technology Landscape” slide that I have embedded below which divides up the advertising tech space into a number of segments:
In my experience with Twitter thus far, what I have found most useful is the sharing of links from users who I don’t know but admire (Vinod Khosla, for example) to interesting items that they are reading or have written. A person’s feed provides an insight into the person’s mind and a compass to interesting reading.
I find less useful most of the random chatter that people post, however much I admire them. Most people are less witty in their observations than they think! There ends up being too much “clutter” to sort through, which is perhaps the greatest frustration, and for my use case, means that I “unfollow” accounts that I would otherwise follow, where it appears to me that the ratio between interesting and uninteresting content is not worth it to follow in real-time, despite the occasional killer post.
However, even where the content created is too much to manage in real-time, it can be a tremendous resource to look back on such posts even when I don’t follow an account when I have a specific interest that I would like more information on. After the fact, I may want to get a sense of the Twitter universe’s opinions on an event or a movie or a recent issue. It seems to me a tremendous use case as a search database — an alternative or supplement to other search engines. For some issues, particularly recent or current issues, I think the utility of the results may be better than core Google. Given that utility, I would love to know what if anything Twitter is doing or has done in “paid search.” Isn’t this a natural revenue model to monetize by either jumping into search in a more serious way and complementing it with paid search or selling to a search engine who can monetize the content?
Twitter and its users have created a stocked pond of content; it’s time to fish in it.
Amanda Hesser has a piece on Google recipe searches (approximately a billion searches a month) and the resulting impact of those Google results on how people are cooking today. As discussed previously, users overwhelmingly stick to the first page of search results, and thus, for many users, what is returned on the first page of results is what matters. According to Hesser, the higher results in Google are those sites with a lot of metadata on ratings, calories, cooking times, and pictures. Hesser says this hurts the smaller cooking blogs and cooking sites, which may have the better recipes, in favor of larger sites or content factories that play the SEO game better. Hesser suggests that the best approach would be seeing which recipes generate the most comments related to page views, have the most FB likes, and are shared the most. This sounds right, although I am not quite sure how Hesser knows this is not incorporated into the search algorithm.
Hesser’s piece got my attention. Recipes found on the Internet have been at the heart of my learning to cook and then expanding my recipe base over the last 12 or so years. My process is as follows. Having a dish in mind that I would like to learn to cook, I will look at a number of recipes online, and by comparing and contrasting, along with my own knowledge of cooking and others’ comments, I will make a judgment on what looks like the best recipe.
Sometimes this is on AllRecipes, Epicurus, or the Food Network; sometimes it is on a random blog. My favorite go-to recipe is found on a decade old personal web page of apparently a former CS student at UVA that has nothing to do with food other than a couple of recipes. Even if I search directly for a recipe for “pav bhaji,” it will not appear until the 3rd page of search results. Given this, I doubt many people are finding this recipe, and there is probably virtually no chance that someone will stumble onto this recipe in a more serendipitous fashion (i.e. when just looking for something great to cook as you might when browsing one of the major recipe sites).
The other thing I do a lot is tweaking recipes. If I look at ten recipes, I may hone in on one recipe, but I may find something interesting in a different recipe (particularly if I find the same ingredient in several recipes) that I may use to adjust the recipe that I have chosen.
My takeaway is that recipes are an example of where some other method than search may yield better results. As Hesser says “the most relevant recipe is the best recipe” rather than having to do anything with associated metadata that may or may not appear on a site. Given the number of searches for recipes, this seems like an area that is bound to be a target of the content mills compromising the efficiency of search.
In a better approach, I would love something that helps make the culling and sorting process more efficient, and perhaps does something similar in its algorithm to return better recipes, whether for a particular dish the better recipe is on a major web site or on a random personal page. I also would love something that can suggest possible tweaks to a recipe that I could consider. I am sure there are a number of other such recipe-specific features that would be helpful. Clearly a tasty opportunity here for someone!
Bill Gurley has a super-interesting post about how to view Google’s non-search ventures such as Android and Chrome. His thesis is that the “castle” is search (and the related advertising) — the source of 95% or more of Google’s revenues. Google has often been criticized in connection with its non-search ventures for not generating revenues. Gurley’s take is that not generating revenues is part of Google’s plan as a way to protect the search business.
Until this point, I basically agree. But I take slight issue with the metaphor with which he compares these non-search businesses to “moats” and to a “scorched earth strategy” where google is scorching the earth for 250 miles trying to prevent anyone from approaching the search advertising castle.
I have several comments on these metaphors, which I think suggest Google’s position is more invulnerable over time than I think it is.
First, it’s perhaps subtle, but I think Google’s Android/Chrome/other strategies are about laying bridges across potential moats set up by others that otherwise might keep users from approaching Google’s castle rather than about building moats to keep competitors out (I see how the distinction can get blurred in terms of Apple and Microsoft). Google is rightfully worried, as Gurley mentions, that without its own browser/mobile offering that it’s easier for a user to be steered away from Google’s search. By providing its own competitive solution, Google builds a bridge to its castle over such moats for those who choose Chrome or Android. I don’t think this is a revolutionary strategy. Companies in other industries who find or believe themselves without adequate distribution to customers will build their own distribution outlets or channels. In retail, this is how many brands operate by creating their own stores. Google is essentially protecting its distribution opportunities through products that otherwise would be dominated by strong, not necessarily friendly companies (Apple in mobile, and Microsoft in browsers).
Second, in reading this, I thought of Microsoft with Internet Explorer and what the government alleged Microsoft did to Netscape. There, the government claimed that Microsoft saw Netscape as a potential challenge to the operating system and thus it pursued its multi-pronged strategy around Internet Explorer. I don’t see that story here at all. The Apple iOS and Internet Explorer are under no threat to be vanquished from Android and Chrome, in the same way that Netscape was, nor by creating these products does Google lock up search for itself.
Third, the search advertising “castle,” I would argue, is vulnerable despite Google’s “moats” or “bridges.” If someone starts a better search engine, or perhaps more likely a non-search business that redefines how content is organized and found from the variety of “post-google search” projects that people are working on, users can and will move on at least some of the time. Chrome or Android cannot stop that. People’s choice to use Google and the resultant success has been incredible, but my belief is that Google’s position in search is more vulnerable than Microsoft’s position in operating software (or at least was back when the Netscape episodes were taking place). It’s just that much easier to type another web address in your browser or download another app. I don’t buy that there is a “unbreachable moat” or that Chrome or Android raise barriers to entry to competing with Google. If there is a better product, it is more likely to find its way to users than a competitor to Windows OS could back in the day.
Fourth, Gurley says that this is “the greatest legal destruction of wealth in history,” because it devalues competing products. I don’t really see it. I’m still paying a premium for my iPhone and its associated iOS despite some cheaper Android phones in the market, so there is still money to be made in these markets despite Google “giving it” away. In terms of browsers, the “free” price had been set long before Chrome entered.
This was a brilliant post that got me thinking and does shed light on why some of the criticisms of Google’s non-search ventures miss the point.
takingpitches 