Google, the Jitterbug & Salt Licks: You Are the Product
Google has built quite a company by doing business with consumers. With a current market cap of close to $185 billion and income last year of almost $22 billion, Google is bigger than Amazon, Nike, the oft-maligned Haliburton and Pepsi. And it’s nipping at the heels of Coca Cola. But how can that be? How can a company that gives it’s products away to consumers become so big and make so much money?
The answer reveals a disturbing truth: In Google’s world you are not the consumer. You are the product.
The traditional business model casts you and I as the consumer. Companies offer products and services. If you and I see value we pay and then consume them. Companies make a profit, consumers get value and investors realize a dividend.
Google’s business model is different. Google serves well-made offerings to you and I for free. We gather around those offerings, congregating under Google’s tent, while advertisers pay Google to ‘consume’ us.
If you don’t believe me, just follow the money. Does Google make its money by giving away web searches, directions to Aunt Mabel’s or videos of baby Charlie biting his brother’s finger? No. Google makes its $22 billion a year by selling advertising. But, it can’t sell advertising if there’s no one to advertise to.
This model isn’t new. Media companies have been doing something similar for decades. They produce their offering, usually in the form of entertainment or news, serve it via print, television or radio and we congregate. Advertisers then pay to get access to us.
What makes Google different is their offering is free and they don’t pay a nickel to create it. Google’s news, search results, financial info and videos are created and financed by someone else!
If Fox News wants to run a story that they think will attract lots of readers, they have to pay journalists, photographers, fact checkers and editors to get the scoop and publish the story. That costs thousands for a piece that will fill 500 words on their site.
What does Google pay to run the same story? Nothing. They have an algorithm that searches the net, finds the Fox story—along with 15 other stories just like it—and then aggregates it on Google News. We do a search, get the Fox story for free while receiving messages from advertisers. Google makes money while Fox foots the bill.
In addition, Fox News, CBS, the Wall Street Journal, People Magazine and your local paper all have strong competition. If we don’t like what they offer we have many alternatives.
Where else can you get free high quality maps, searches, news, videos, email, language translation, voice mail, operating systems, internet browsers, images, stock quotes and spreadsheets all under one roof—other than Google? Who keeps Google in check by providing an alternative? No one.
Isn’t Google good? Their unofficial motto is, “Don’t Be Evil,” so why should we worry?
Look at Google when big money is on the line. When they moved into China the oppressive communist dictatorship insisted that Google filter its searches. This blocked the population from having access to politically sensitive content; content that would undermine the Chinese government.
Did Google fight back in favor of the people? No, they capitulated. And why should Google help? The people of China are not its concern. As long as Chinese citizens use Google’s offerings then Google is happy because people equal product and product equals potential profits.
If Google is willing to use people that live under a repressive regime for financial gain, how safe are you and I?
Google wants to put all books online, they’ve amassed satellite imagery of the world, and Google Wave is an all-encompassing discussion that makes Twitter and Facebook look like the Jitterbug. Are we ready to trust Google with every aspect of our lives?
Big game hunters know that the easiest way to find game is to get it to come to you. Hunters employ many tricks to make that happen, but one favorite is the salt lick. Hunters hang a big block of salt on a tree and then move off and hide within shooting range. Game seek it out and will lick the block for the mineral supplement. And when they do—blam! Hunters can take game all day long using a salt lick and for that reason it has been outlawed in many places; it’s just too easy.
Google’s offerings are the salt lick of commerce. We know there’s a cross-hair on our back, but $22 billion in revenues says we don’t really care, just as long as we can get a free lick.
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Interesting...glad you mentioned the public company factor; so many people "hate" a company for it practices & fail to realize they answer to the shareholder. Have to ask, with their near-Midas Touch ability, if you were a shareholder, would you still be concerned about those issues?
You also recognize their ability to "gather people under the tent" & the products available within the tent. They will most likely continue their digital sprawl & their deep pockets certainly adds to their arsenal and ability to foster incredible breadth as well. With that, do you see that as an opportunity to benefit yourself by simply becoming a shareholder? Would you pass up the opportunity to let them make you money as well? (IMO GOOG stock is this generation's Berkshire Hathaway)
I rely on Google to deliver the largest portion of qualified traffic possible to my online properties; that traffic ultimately provides our customers with a great solution. Those "solutions" employee hundreds of people. Those people help drive the economic benefit several layers deep.
I'm not sure if my stance would put me in the fan-boy class - but I'm good with whatever they do as long as they keep letting me play in their sandbox. And their stock goes up;)
BTW - cheers to you for a thought provoking post riddled with more great analogies than a search for "Blogging analogies" would produce!
Looking forward to reading more of your posts...
Eric, thanks for reading this post and for a great reply! As an investor or an advertiser, Google can't be beat! As an entrepreneur, I'm all for the free market and I use Google and promote Google to my clients. That said, there is an ignorance with the average consumer that is worrisome. Folks just assume Google will give away great products and services and that they would never do any harm. They assume too much because they (we) are trained to think that everything is made for the consumer's benefit. I'm not anti-Google, just anti-ignorance.
There's an interesting book on Google called "The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture," (2005) which an interesting look on this aspect of the Google model. The book credits Google with realizing what no other competitor really did, that WHAT we search for is itself a very valuable commodity.
China put Google in a very difficult place. On one hand their central mantra was to never tinker with results; on the other hand, NOT going into China meant 1) giving the market to competitors, and 2) not offering China all of the natural intellectual robustness that comes with large volumes of data. So, do you NOT feed the starving if you run out of gourmet food, or do you offer as much as you can believing that there will come a future day when gourmet food is again available? Personally, I think they made the right choice.
Jeff
Hi Jeff—thanks for taking the time to read and comment.
Your position on Google's entrance into China is one way of looking at it. If we were talking about a humanitarian effort I would be quick to agree. The issue I have is they are a publicly traded company which by nature has to be driven by the profit motive and deliver returns every three months. That to me is great, but couple that with the public's perception that Google gives it all away for free and that it will not be evil and people are Google's product and it gets a little disturbing. We're handing over a huge amount of power, in the form of information, to a firm that is driving revenues by selling us.
Regarding China, if Google wanted to it could have made a big stink and put pressure on the Chinese government to liberalize their policies. But, why would they do that? If they did they would have been shut out of a huge emerging market and their shareholders would have been furious.
Regardless, time will tell how good or evil Google is. I'd just like to see more checks and balances in place to keep them honest.
Do you mean distended because everything is going to crash and we'll starve or because we consume too much?
I mean the starving kind. I was probably exaggerating, though. I mean, they can't let us descend into abject poverty, because we're wealth generators. We need to be at least healthy enough to pump the pedals that turn the wheel that produces the juice that runs the machine that makes the money. Their wealth grows when they "invest it" in us.
What the heck am I talking about?
Frightening...
I wonder, though, if some day Google won't find a way to charge us for the "service" they provide. Wouldn't that be something? We would be the product *and* the customer.
I mean, couldn't we say that right now about cable TV?
Sorry, I'm very cynical about the money topic these days. Everything humans value will get more and more expensive. Perhaps we should all be getting fitted for distended bellies soon.