May 5th, 2009
GOOG's dirty little secret . . .
Google is great at developing the technology to power Internet search, in terms of its algorithms, the design of its data centers, and the hiring of the world’s top engineers.
Google is founded and run by engineers, and this culture remains very strong within Google. It’s engineers have helped to make Google into a great search services company.
The way it funds its search services is by becoming a media company — it publishes pages of content with advertising. Google is great at search but it’s terrible at monetizing content. It’s text ads for example, require massive amounts of traffic to be effective.
And contextual advertising is a red herring. It still takes massive numbers of views before a text-ad gets a click from a viewer. This is an incredibly inefficient system.
Google is great at search, but it is terrible at advertising.
Here is an extreme example:
The UK Guardian recently reported that the co-writer of the Rick Astley song “Never give you up” was expecting a fat royalty check from YouTube for more than 154 million views of the video. Google sent him a check for 11 pounds ($15).
This is a massive failure by Google to monetize 154 million views.
Google has a lousy value recovery mechanism for content. It’s good enough for Google because it has a low cost server-and-software business model; but it’s a disaster for a media business that has to create original content instead of harvesting it for free.
Google is blamed for media industry woes
The problem the media industry is facing in its transition to online business models is often blamed on Google. Jim Spanfeller, president and CEO of Forbes.com, today accused Google of violating its “do no evil” policy.
Google makes for an easy target but it is a figurehead for a much bigger problem. It’s not just Google that has a a poor value recovery mechanism for content — the entire Internet has a horrendously poor value recovery mechanism for content.
I’d love to see lots of Google’s top engineers working on this problem. The reason we don’t is that this is a far tougher problem than search.
And it is surprising that Google’s top engineers aren’t working on this problem. Because if media companies fail, there will be a lot less content. That means a lot less search. What’s the point for searching if there is little new on the web?
Whoever creates or discovers a more efficient value recovery mechanism for content will have solved the single most important problem facing the future of the Internet. This is the Gordian Knot of our times. Where is our Alexander?
Tom Foremski reports on the business and culture of Silicon Valley at the intersection of technology and media. He also writes at Silicon Valley Watcher. See his full profile and disclosure of his industry affiliations.
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