Bubble banners and search clicks
Type "How can Google make more money?" into the world's biggest search engine, and the top result is from Google's corporate-philosophy page.
The headline on that link: "You can make money without doing evil." That not-so-relevant result illustrates, to some extent, the crux of Google's challenge today, which is to find ways to improve results -- or make them as relevant as possible -- so that people find both search results and the accompanying advertisements useful. (Note: The result may actually be very true and relevant to some, but that's another story.)
After 18 months in which Google's RevForce unit -- a team of astute, maybe even elite, scientists -- tweaked and engineered the company's advertising system to produce the most relevant results, the Google team apparently has hit a plateau in its monetization efforts. (Or these bright guys just got tired and have opted for 50% playtime rather than 20%. They are human, after all. I think.) In essence, these engineers squeezed have the optimal number of dollars from each search query, judging from the concession made by Google's chief financial officer, George Reyes, this week that the company now has to "find other ways to monetize our business." The environment Google is in today reminds me of Yahoo in 2001. Just what area Google thinks holds the most revenue potential -- ads on images, ads on offline platforms, fees for services on mobile devices, fees for hosting blogs, premium services for hosting videos, delivering video and music, or facilitating transactions -- has to be the No. 1 question at Google's analyst day Thursday. Keep this in mind: Today, Google receives 97% to 98% of its revenue from paid-search advertising. How should Google monetize?
Google has prospered by delivering on the promise of technology. You SHOULD be able find anything you want on the internet. They did the best job of making it possible.
One of the next frontiers is delivering entertainment content electronically. You SHOULD be able to find and download any movie that we ever made (and digitized). You should be able to search for "Here's looking at you kid" and find Casablanca (or was that African Queen?), and then watch it on your PC or TV.
They should be able to work out licensing to deliver any movie. On my cable TV, I can get some movies, but the selections are limited and change weekly. Why? Why can't I get whatever I want? I'll pay!
It requires licensing and storing massive amounts of content, and working out ways to get it on your TV, not just your PC (a Google box for your TV? Google services provided to the cable companies? Or, gasp, a Google internet TV?)
Does this monetize what they already have? Not exactly. But I believe it's true to the secret of Google's success: boldly doing what is begging to be done, no matter how apparently mind-boggling the task.
Posted by: Jeff Y | March 02, 2006 at 01:39 PM
It appears as though it was a good and soothing analyst day at Googleplex. Some good headlines will come out of this one. We'll need you again Bambi, once the euphoria returns, it will be a good time to steal the spotlight with a few good contrarian articles.
To answer your question, from the conference, it appears they did an about face and now claim there is plenty of room left for monitization. Btw, I read your recent co-authored article on MarketWatch...Schimdt did indeed say he wanted to make Google a 100 billion dollar company, but i'm not sure he stated it was a 2006 goal, but i could be wrong.
Posted by: Mike | March 02, 2006 at 06:28 PM
Jeff, I think you're absolutely right about the entertainment frontier. And I think Steve Jobs thinks there are a lot more out there just like you. For about $600 Apple will sell you a box that you can plug into your TV and stereo that will play audio CDs and movie DVDs; if you've got a Mac in your house that's got a wireless card in it, it will find it and let you play whatever's on that, too - all from the comfort of your sofa using a tiny remote control.
As you point out, the search part is routine these days; it's the licenses that are the challenge. If you've got a broadband connection, right now iTunes can supply you with massive amounts of music and music videos; some TV shows; some sports; and it looks to me like Apple is working hard to license movies.
[No, I'm not getting paid by Apple - but I do own their stock, and I'm pretty excited about what they're doing!]
I think the Pixar-to-Disney sale was the foot in the door Jobs needed to break the license logjam and start to enable your vision. I also think new kinds of "free" (meaning ad-supported) content via broadband will be huge, and Google's role will be to index it.
- Gary
Posted by: gh_isoar | March 06, 2006 at 10:03 PM