Almost as quietly as it began, Google celebrated its 10th birthday this past September. Hard to believe the search giant has become an advertising business heavyweight in just 10 short years. Here are some sobering realities to consider when reflecting on Google’s rapid rise to online domination:
• Google began in 1998 with just $100,000 in seed money and four computers.
• Google is now worth over $150 billion.
• The net worth of just one of Google’s founders is nearly as much as the amount of advertising revenue the entire radio industry fights for each year. (Google’s founders are worth approximately 19 billion, while the radio industry is worth around 21 billion.)
Would you invest $100,000 for a shot at $100 billion? If you think the answer is a no-brainer, not so fast. As we look around the industry – while many say “yes” – the answer appears to be “no”. Actions speak louder than words. Cuts trump creativity. Does anybody really believe that Google was built by cutting budgets and people? Might be just one of the reasons Google has enjoyed revenue growth while the radio industry as seen steady declines.
THE GOOGLE DIFFERENCE
Recently Jim Cramer of CNBC’s Mad Money interviewed Google CEO Eric Schmidt. During the interview, he asked when we could expect to see advertising on the front page of Google? Take a look at this exchange:
Cramer: Why can’t you sell "as presented by Anheuser-Busch" […on the google home page]?
Schmidt: We absolutely could. Some number of billions of dollars.
Cramer: Why not do it?
Schmidt: People wouldn’t like it. We prioritize the end user over the advertiser.
Cramer: You’re willing to throw away a half a billion dollars in revenue?
Schmidt: Absolutely… We’re not going to sell it.
Cramer: If I’m a shareholder, what kind of attitude is that?
Schmidt: You want those users to come back?
Later in the interview, Cramer was grilling Schmidt on why Google doesn’t provide earning estimates on a quarterly basis like everyone else…
Cramer: People feel you don’t provide enough guidance, management shepparding.
Schmidt: We don’t provide any guidance.
Cramer: That’s because —
Schmidt: We don’t want to get in the way of running the business. If we started giving quarterly guidance the company would focus on the quarter rather than trying to change the world.
(CNBC – 8/15/08) Read Entire Transcript http://www.cnbc.com/id/26218897
Whether building a user base or targeting advertising dollars, Google has been a shrewd player in the business world. Google’s rise to online dominance happened not merely by being a neat online tool, but through a number of key strategic moves as a business.
For example, some of you may recall that Yahoo (the dominant search engine back in 1998) was indexing hundreds of thousands of web sites by hand, using humans to review and categorize web sites in their directory. By contrast, Google relied on an automated spider-crawling process to index millions of web sites in their search database by keyword.
Still very much an internet pup, Google struck a deal with Yahoo to become a secondary search engine of sorts for Yahoo users – in other words, if a visitor didn’t find the site they were looking for within Yahoo, their search automatically reverted to Google. Seemed to make perfect sense to Yahoo – they couldn’t possibly index as many web sites by hand as Google indexed with spiders.
The one thing that Yahoo missed? They were now exposing their millions of Yahoo users to their competitor. After years of such exposure, Google’s primary user base expanded to rival other big engines like Yahoo, AOL, and MSN. So, when the time came to renew the partnership with Yahoo – Google said no thanks.
Another example? Rather than build a giant audience and target big advertising dollars, Google built a system to allow any business with any budget to advertise within Google… $10, $15, $30 at a time. Rather than go after a handful of big dollar spenders – they went after millions of little dollar spenders. Google took a “radio” approach to online advertising. And it paid off big time.
These types of moves helped to make Google the dominant place for online search – to the tune of 65% of the search market.
WHAT TO WATCH FOR
We’ve all have heard it one way or another – Remerge has said in on several occasions – in the ad world, the last battlefield is local. As a radio operator, you have what Google wants… local advertisers. Knowing this… how wise is it for a local radio operator to be striking deals with Google for remnant spot sales? Should you be seriously considering Google’s radio automation software? When you visit radio station web sites, do you notice how many stations use Google’s search tool within their sites? Hmm… all of these tools seem pretty good short term, don’t they?
This isn’t simply a story of an internet company achieving the American dream. This is a story of a media company (Google) expanding its reach, and using very calculated measures to obtain a larger and larger share of the pie. So, is Google really out to help radio or really out to help themselves? One has to wonder.
Don’t get me wrong – there is a lot radio can learn from Google, particularly how Google spends less time looking at the bottom line and more time looking at the horizon. They invest rather than cut. However, at the same time, radio can learn a lot from Yahoo, one of Google’s early victims… er, um… sorry… partners.
And in the ironies of ironies – things have gotten so bad for the one time giant Yahoo, they are now trying to strike an advertising deal with… wait for it… Google! Don’t believe me? Google it.
–Chuck Francis, Remerge Media