I’ll admit that I am completely biased for Google. Â I was a fan in ’99 for the leanest and meanest search engine you ever did see (remember when Netscape was a portal?!). Â I was a fan of tight little ads with no images. Â It took me a little while to see Gmail as a contender, but now I live on it. Â For work, we use Blogger internally, Google Reader to autoblog, Gmail for large-file distribution, YouTube for video distribution, Labs stuff for RSS presentation, etc. Soon, we’ll be using Domain Apps to allow all users to have a free email account (100 times better than the one we have been offering up to now).
So I was a little surprised to find myself in a conversation last week (it was a Friday, which might explain things) with my boss about Google. Â She’s an old-school newspaper pro, so you can guess she doesn’t always have a lot of faith in the internet (she likes things she can control), having watched it rip apart the classifieds business, the ad business and soon the news business itself. And I get that. When the next big thing comes along and I can’t figure out how to port RSS feeds and email to it, I’ll be in the same boat.
Her point was that Google, while being an amazing disruptive revolution, it can’t last. Â Google’s money is made of the backs of ad sales, right? (Last number I saw was something in the double-digits that started with a “9.”) But you can’t sell ads unless you have people to see them. Â Ads that started on a search engine (because it was popular) spread to other areas like Gmail and Reader, and your website (you put the ads on your site to make some extra money).
But at some point, all those sites will realize that Google makes a lot of money bundling all these sites up as places to serve up ads. These sites get pennies for ceding tracks of their web space. I mean, aside from the big 100 blogs, who really sees any money from AdWords? Â Sure, there’s a check for $25 every quarter, but… you’re not thinking of quitting your job to blog.
And you blog because you consider yourself an expert on something. Â Knitting, web strategy, taking cute pictures of your cat, etc. And what happens when you begin to value that expertise better? Â That little check from Google isn’t going to cut it. They will revolt.
What we see now is consolidation of the blogs (Huffington Report, Gawker Media, etc) who can get just big enough to justify selling ads themselves instead of relying on Google to do that work for them, thus getting a much higher return.
Like craigslist, Google undercuts the competition with lower rates, broader use and higher return in order to disrupt existing technologies. Â Instead of paying $50 for an ad in the local classifieds, you put it on craigslist for free (and I’m a huge fan of craigslist, as I met my girlfriend that way). Instead of a magazine ad campaign, you buys AdWords for a fraction of the price. My boss wonders if there’s a level to which you can’t undercut the competition. How do you compete with craigslist?! (No really, newspapers would pay for the answer.) There’s no way to be cheaper and more global or easier.Â
Her point concluded with the idea that business run on being able to always start a new way of doing things that undercuts existing processes (see: industrial revolution, assembly line/job specialization, or Microsoft). But what if we’ve reached the limit of that ability? How does Google grow? How does it find other businesses to undercut as it seems like there aren’t any left?
It was an interesting point, that I would counter with the idea that that’s probably how it felt to Detroit in the 1970s just before the Japanese showed up and showed them everything they knew was wrong. Or Microsoft monetized software (at the time it was kind of a stupid/genius move). Or Google started to give tools away for free.
There’s always something more, right?