Apr
18
So long, and thanks for all the advertising revenue
Filed Under Netlife, Uncategorized | Leave a Comment
Google reported a 30% increase in profits yesterday, and for some reason people still seem surprised.
For fuck sake, it’s not that hard:
* Google earns most of it’s profits through advertising sales.
* Google has no serious competition in the 21st century advertising market.
There are two kinds of companies that can compete with Google: First there are IT-based companies, like internet pure-players, that not only understand the technology behind creating modern marketing and advertising opportunities, but most of all understand the absolute necessity of continuously developing and innovating those products. Alas, the only major players motivated to take on Google, Microsoft and Yahoo, are struggling with an ever greater adversary: themselves. But hey, at least they’re trying. Of course we still have sleeping giant AOL, but they’ve been sitting on their early lead for so long god knows if they’ll ever wake up again.
But the most important group that should take on Google are those who’s business traditionally largely depends on advertising, the old media companies like publishers and broadcasters. They still hold a major share of the market, have an extensive sales network, and the best connections to the major advertisers and media agencies. However, be it out of fear, ignorance or downright stupidity, they utterly and completely refuse to adapt their activities to the new interactive media that have been emerging since the 90’s. Information technology is seen as a commodity, and technology driven innovation as something way too scary and uncertain to invest in.
“That is not our core business” is the standard excuse. Bzzzz, wrong. Their core business is getting and holding the consumers’ attention, and reselling that attention to advertisers. If you’re no longer able to capture the publics attention, and certainly not able to accurately measure it and offer targeted advertising opportunities based on that data, you’ve got fuck all to sell. Sure, there still is and always will be a significant market for passive (mass-)entertainment, but that market is shrinking, getting increasingly fragmented and becoming more accessible for newcomers (say hello to Google Television, coming to a HD-screen near you somewhere this century?).
By the time new technology has become a commodity, the lion share of the market exploiting that technology has already been taken. Hence, Google. You can buy search engine technology off the shelve. It won’t help you compete against Google’s search ads, though.
Sure, every now and then these companies ‘invest’ in new media by simply buying an internet start-up, sometimes even a good one at the right time. But because of their total lack of understanding of that type of business, they usually manage to kill off everything that makes that acquisition valuable, and in the process chase away all of the talent and eventually the users, in a space of three to five years. Often well before they’ve found a way to monetize their latest new toy.
What they absolutely, positively never invest in is the technology itself. They only care about the finished product. Well, in today’s world there is no such thing as the ‘finished’ product, just a continuous process. Get with the program.
Ironically, they are actually helping Google by getting rid of potential emerging competition (after all, Google itself emerged in a market dominated by the likes of Yahoo and Altavista, and would probably not be what it is today if somebody had actually been prepared make Brin and Page an offer they couldn’t refuse), like a bunch of deranged serial killers taking out their frustrations on Google-surrogates. This may not even be such an inaccurate analogy, since their dislike of the technology industry sometimes seems to border on barely concealed hatred.
The bottom line is: Google has no competition, because those who should be competing with Google for advertising $$$ rather commit ritual suicide then to admit something as insignificant as a Silicon Valley IT company is eating their lunch.
Disclaimer: I’ve spent a wonderful but frustrating 20 months working for a major broadcasting company, and it pains me to see so much talent, creativity and potential for a new breed of totally awesome cross-media products (the kind an IT-company like Google could never produce) being wasted because they believe ’synergy’ means telling the techies where to put the pretty pictures. This more then slightly taints my perception. Sue me.
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Nice bitz
