Google and the selling of simplicity

"The incredible success of Google is easy enough to understand - the company built a better mousetrap, and the world beat a path to its door," writes Jonathan Weber in a comment article about Google's expansion. "It has succeeded so well in selling simplicity that the company is now widening its net. It is making a substantial effort to sell advertising in other media including radio, television and newspapers."

Click here to read the full article

The incredible success of Google is easy enough to understand - the company built a better mousetrap, and the world beat a path to its door. Its search results are generally much better than that of other search engines, and it has discovered that relevant text ads next to search results are a powerful advertising medium. The relevance of the ads that Google places on other publishers' websites is far higher than that offered by competitors and thus they get more clicks, and the publisher gets more money. I've seen this first-hand on NewWest.Net.

From another standpoint, however, Google's current dominance of the online advertising world looks anomalous. A large and growing chunk of Google's business involves serving as the middleman between advertisers and publishers and that's a position, in the age of the internet, which is supposed to be inherently insecure. That's especially true when the middleman takes a huge cut. Google is so powerful that it doesn't feel the need to tell its customers how much it is taking, but judging by the company's profits it is a lot.

In theory, cutting out this ravenous middleman should be easy. All a publisher need do is look at the ads showing up on Google Adsense, call the advertiser, and offer them the same link for less. The result? Cheaper ads for the advertiser and more profit for the publisher. But this kind of thing doesn't seem to be happening much - at least not yet. Google has made things simple and effective for the advertiser and they like it that way.

Indeed, it has succeeded so well in selling simplicity that the company is now widening its net. It is making a substantial effort to sell advertising in other media including radio, television and newspapers. Google will use its systems to target and auction ad space, and provide advertisers with creative support as well as buying power. It is, in part, a simplification of the services traditionally offered by ad agencies, which small advertisers cannot afford.

Google's initial foray into selling print magazine pages has reportedly been something of a bust but the company seems undeterred. Certainly, the agency system could use some modernising, and there seems to be a market for offering more and better tools to small advertisers. But will Google enjoy the same competitive edge in this business as it does in the world of search? I'm not sure.

Its online advantage is huge. For all the dramatic growth in online advertising and all the talk of millions of new publishers with blogs and podcasts and YouTube videos, a remarkable 75 per cent of all online advertising revenue is flowing to the ten largest ad-supported websites (with Google, of course, at the very top of the list). Either the consolidation of the new media world has already happened and the leaders have built a position of dominance that will last for some time, or we are still at a very early stage and the 'long tail' of smaller, newer internet enterprises is just beginning to wag. I tend to believe the latter.

Google continues to insist that it is not a media company because it does not produce or own content; it is an aggregator that provides services to the media industry. It would stand to reason that content companies, once they stop bemoaning the end of the good old days and begin re-making their businesses in earnest, will be able to develop some of these services themselves. At the very least, any business carrying the kind of gross margins that Google enjoys will attract - indeed is already attracting -a ton of competition. All kinds of intermediaries will be trying to connect advertisers with relevant media and specific types of consumer behavior.

A popular question on the conference circuit these days is whether Google is a friend or a foe of media companies.  I think it is neither: it is a vendor, one whose services currently command a large premium because they are superior to those of the competition. Will that last forever? I have my doubts.

Jonathan Weber is the founder and editor in chief of NewWest.Net, a new type of regional news and information service focused on the Rocky Mountain West in the United States. He was previously the co-founder and editor in chief of The Industry Standard.