Can Google's search engine find profits? (1999)
zdnet.com
zdnet.com
Interesting to think about in light of Peter Thiel's lecture for "how to start a startup" at Stanford. He is correct that the narrative has changed. Contrast the above quote with the one Thiel used in his lecture from Schmidt, which basically said "Google is not a search company, it's an ad company," or some variation thereof.
Saying that google is an ad company is a mistake. Just because that's where the revenue, the sustenance comes from as a primary source. But that revenue exists because of google's market domination in search and other services. If google stopped being a search company their ad revenue would dry up overnight. Saying that google is an ad company is like saying that a particular software dev. is not a "software person" but a "burrito person", because they happen to eat burritos a lot.
At the end of the day google's revenue comes about because they provide something of value to their users, and advertisments are a way to monetize that value effectively. No different than broadcast tv or radio. But it's the value which is the foundation of the company, the revenue is merely a consequence of that value. Thinking that the revenue stream is an intrinsic part of the company is a mistake that has doomed many companies before. Think about newspapers, I'm sure many of them thought of themselves as advertising companies to a substantial degree, and when that revenue dried up because the value of the newspaper changed, many of them were left wondering what to do, many of them have already gone out of business, many more still will. Hopefully google won't make the same mistake and alienate its users more than it has already or ignore competition before it's too late.
Does it make Google an advertising company? Yes by the bottom line, no by this strategy. It just happens it's the best way to monetize what they have so far.
Analogy: would you define 1905 Einstein as a patent clerk or a scientist?
You can look at things from a distant POV with too few details just like you can look at it from a perspective that's too close, to many details. There is no method apart from using your faculties that can replace having good faculties and the ability to apply perspective.
Ok lets see it's mission is to organize the world's information and make it universally accessible and useful.
Therefore Google is an information organization company. More than search, it's also monetizing the effort of getting all the information into proprietary databases and keeping them up to date.
Google Maps, Google Places, Google Search, etc.
Then they monetize it by advertising, as well as running their own commerce - app stores and the like. And they also give businesses Analytics, Email, Docs and other Apps that they have now unified with Google+ as well as Google Checkout for payment processing.
Now Apple, Google and Amazon compete in phone OSes, payment processing platforms etc.
If Google is a search company, it holds 2/3 of the market. If it's an ad company, its revenues are equal to ~1/10 of global ad spending. Therefore, if Google doesn't want to be seen as a monopoly, it is in its interest to have the public face of an ad company, even if it views itself internally as a search company.
Which to me is an interesting, subtle point.
Their revenue comes about because they provide something of value to advertisers: users.
Yes, search results are valuable, but not valuable enough to charge for them - unlike ads. It's chicken-egg, but their value is not simply in providing search results.
Google's first stab at selling advertising began in July 1999. When Jeff Dean arrived from DEC [...] Brin and Page told him that they needed an ad system. But they had no idea what a Google ad should be. Some at Google - including the director of technology, Craig Silverstein - thought that the whole effort was a distraction and that Google should outsource its ad system to some company more accustomed to waddling in the much of Mammon. "I was like, 'We're not an advertising company, we're a search company - let someone else worry about the advertising,'"says Silverstein. "It was good they did not take my advice."
-- 'In The Plex' by Steven Levy
Google started selling advertising in December 1999. At that time, "Google expected to make most of its money from licensing" its search technology, although it was hoped that "advertising might one day account for 10 to 15 per cent of its revenue." (In 2013, advertising accounted for 91% of Google's revenues.)
AdWords was launched in October 2000. Schmidt joined as chairman in March 2001, and became CEO five months later.
Imagine they had launched adwords with more basic tools: less granular targeting and such. Imagine that their revenue had gradually climbed to $1bn by now, enough to employ a battalion of the best engineers they could find and focus on search. Investors (those delivering truckloads of cash in the article) would still have called it a big success.
They probably wouldn't have built or bought all the expensive speculative stuff like self driving cars, android, wave & youtube. Would the search engine be worse? Would it be better? Would they have been able to maintain their lead in search?
As a side note, I'm not sure if this was posted as an ironic response to the growing bubble talk of the current boom but unlike in the late 90s, the challenge for most startups today is not finding a business model but rather achieving enough scale to apply one of the many proven business models successfully and sustainably.
The Wayback Machine has it though: http://web.archive.org/web/*/http://zdnet.com.com/2100-11-51...
A few years afterward CNET began to transition many sites including news.com and zdnet.com over to suffixes ending in .com.com; I vaguely recall being told that it was to enable CNET-network-wide cookies without that era's browsers pitching a fit. (Note the Wayback Machine indexed it as zdnet.com.com only after 2002.)
Eventually I helped (I was not alone but was the most vocal) to make the switch away from news.com.com to news.com, which made more sense and served readers better. Of course I've since left to found http://recent.io/, but thought I'd inject a little history as someone who worked at CNET Networks during part of that .com.com time.
I think ABC/ESPN did something in a similar timeframe maybe for the same reasons. Strangely that choice seems to have persisted to the present.
> (Note the Wayback Machine indexed it as zdnet.com.com only after 2002.)
I can’t find a link to the article from the web from before that date, and can’t figure out precisely what the original URL was, in that case.
Nice to be in a world before business model.
I wonder if this is/was true? Bezos seems to have made investments in many other companies like Uber and Twitter (http://blogs.wsj.com/digits/2013/08/05/a-stroll-through-the-...)
It's too bad they couldn't come up with anything better than advertising.
Much more than just using it as a revenue source, Google more or less invented modern advertising.
It's about being best of class for being a video repository that actually has the huge majority of the videos people want.
http://news.investors.com/technology-click/051914-701377-goo...
However, I often think there's room for more directly paid search as opposed to side-funded with advertising. Afterall, companies pay for (re)search all the time. They pay for their own employees to do research and write reports. They pay marketing companies for research, etc...
Do people really need a search result of just web addresses back in 0.1s, when they could get not just the address, but the actual information they need in 30s? I'd pay for a service that could do that.
Now more than ever, Mr. Hagen. Now more than ever.
Come to think of it, I'm rather glad for those irrational investors back in '99, without whom Google might not exist.
Any headline which ends in a question mark can be answered by the word 'no', but will someday be answered with 'yes'.