The Shoe On The Other Foot
It hurts when you can’t manipulate the market like you used to. At least, that’s the message I’m getting from this article in the SMH.
With nearly 10 million visitors a month Google is the most visited website in Australia. Nine out of every 10 searches made on the internet is through Google. Those eyeballs translate into an estimated 90 per cent share of search advertising – the fastest growing area in online advertising as the number of advertisers using the service soars close to 50,000 in Australia. Google’s revenue is estimated to be $700 million and fast heading towards $1 billion as more advertisers divert their budgets into a medium that delivers them measurability and sales leads. Soon Google will have the ability to sell and serve richer display brand ads on 62 per cent of Australian websites. A suite of products from maps and mobile phone applications to computer operating systems, video traffic on YouTube and cheap telephone calls only helps rust consumers onto the Google brand.
The more time we spend on the internet, and hence on Google, the more money it makes. All of which is making the Australian media, already grappling with the structural changes the internet has wrought on it, deeply uncomfortable. Now it is plotting its revenge; how it goes about exacting it is another thing altogether. But while Google’s monopoly of information is not in doubt, to date there is scant evidence of Google using its muscle to distort the market, only a fear that it might do so in the near future. That has not stopped a growing chorus of voices expressing concern at Google’s dominance, but such is the might of Google, few are prepared to go on the record. Telstra’s Sensis, News Limited, Ninemsn and Microsoft all declined to publicly air their grievances because some of them still do business with Google.
One that did, though, is the man who arguably has the most to lose from Google’s continued dominance and the most to gain from its downfall: Rohan Lund, the chief executive of Yahoo7!, Google’s main competitor in search.
He says all he can see is a future where the Google Death Star, as he dubs it, will reign supreme. “There needs to be a conversation in industry and government about Google’s role in the market and what this means for business and consumers both now and in the future,” Lund says, adding that Google may now be Australia’s largest media company by reach and profit.
”Commentators in the US are concerned that Google has a 60 per cent share. Let’s not forget that in Australia that climbs to nearly 90 per cent share, even after the Yahoo! and Microsoft search businesses join forces.”
I’m going to digress a bit and talk about the example set by the music industry.
Once upon a long time ago, Robert Fripp the guitarist from King Crimson folded up his band in 1975. There were many reasons to his decision, but one of the ones he discussed was the nature of technology pointing in a different direction to the way the music industry was structured. Through 1975-1980, Robert Fripp expressed the view that the music business with big Rock bands going on tour was a dinosaur and only small intelligent units were going to survive the technological changes.
As such, he saw his own band as an unwieldy contraption that was not going to survive and proceeded to build a catalogue of albums as a solo musician working small partnership. When King Crimson returned, it was as a stripped-down 4 piece with a more technology-driven approach.
Since then, Robert Fripp has been shown to be right. As technology changed, the music industry was found to be a dinosaur as small intelligent units – mp3 players and pirated music files destroyed the business model of the record labels. The key of course was distribution. Which is why this bit caught my eye:
”Distribution is key. Once you start locking up distribution your reach gets bigger, then the revenue per search gets bigger and then as that gets bigger the more you are able to pay others to lock up distribution,” says Lund, who has spoken out despite pleas from Google for him to remain silent on the matter.
It doesn’t matter what you sell, whether it is advertising space or little discs that make music when placed in a player, distribution of your product and service is the most important aspect of any business.
If anything, the advertising industry should be in more shock than the media that provides competing ad space. If you had a small business providing a very specific service, then it is far more effective to place an ad through Google than it is to place it in any media outlet. If you had a meager advertising budget, the place you should put that money is Google. Everything else is relatively speculative compared to the certainty of Google Ads.
The fact of the matter is, there are numerous companies on the planet that do offer very specific goods and services that can now reach a wider target through the internet and especially through Google.
Another way of putting it is that the advent of technology has made sure that the media advertising space has been found out to be overpriced for the effectiveness they possess. The only good that advertising space in Newspapers and Free-to-Air TV can achieve would be branding and specific announcements, while carefully targeted adverting all takes place through the internet – and in particular through Google.
But even with branding ads, Google has something coming:
Google has yet more weapons in its armoury. Later this year when it turns on its DoubleClick ad serving platform – which it bought for $US3.1 billion in 2007 – it will be able to serve up display ads, such as banners, pop-ups and videos, to advertisers who are looking to do brand ads online. To date, Google’s focus has been on selling search keywords to advertisers and text ads to small businesses. DoubleClick, which serves and measures the effectiveness of display ads to half the websites in the world with more than 1 million unique monthly visitors, delivers Google advertisers from the big end of town. It also pits it once more against its key customers; the publishers and the media-buying agencies who each year earn their bread and butter from a market worth $500 million a year. Google insists it is not about to cut their grass and that its priority in Australia is on building search advertising revenues. It adds that, even it it wanted to, it doesn’t have the skill sets of either a publisher or a media agency to undertake such a task.
But, as one internet advertising veteran, who asked for anonymity, says: ”What worries them [the media] is the sheer volume and quality of data about customers that Google will own and how that can be used in other advertising models. There’s a real danger that Google does everything that they do only they’d do it much better and more efficiently.”
I would hate to be in the print ad or TV ad business going forwards. It’s like working for Kodak Film in an age of digital photography by the masses. And I keep thinking Robert Fripp had it absolutely right – technology has slain the dinosaurs.