Google Is an Advertising Company

Monday, 29 August 2005

So there’s been a lot of Google in the news this week, including this story in the NY Times where a bunch of Silicon Valley veterans hint that Google might be the new “evil empire”.

Towards the end of the article, though, there’s this paragraph:

For the moment, at least, Google is aiming for that most coveted position in technology: a platform that, like Microsoft’s operating system, is so popular that outside software developers write programs, and Web developers build new Google-related services, that render the Google home page indispensable to the personal computer ecosystem.

I strongly disagree with that. I agree that the central tenet of Microsoft’s success is that they have developed platforms, not just products — but where is Google creating a platform for third-party developers?

There are people writing hacks to hook Google Maps up to other software. And there are a ton of third-party search tools that simply redirect you to Google for web search (e.g. the toolbar search fields in Safari and Firefox). But that’s not a platform. What makes something a platform is that you can’t take it away without the stuff that’s built on it falling down. A Windows application doesn’t work without Windows. A developer can take the time to port a Windows app to other platforms, but you can’t just move a Windows app from Windows to any other platform.

Likewise from the users’ perspective. Big organizations can’t “just switch” from Windows, because they need their Windows software. Platforms are solid, because they are entrenched.

Just because lots of developers are integrating Google search into their applications doesn’t make Google search a platform; it’s just as easy to hook up to Yahoo for search. In my opinion, Yahoo even offers a better API for search than does Google, and their search results are pretty close in quality.¹ (I use Yahoo’s search API for the site search on Daring Fireball.)

For all the speculation that Google’s goal is a “web OS” that supplants Windows as the lowest-common denominator platform for getting on the Internet, and for all the talk that Microsoft (and, in particular, Bill Gates) sees Google as a serious threat to their monopoly-powered golden-egg-laying geese, I just don’t see how Google is building a platform for developers that even vaguely competes with Windows.

“Follow the money” is as good a way as any to define a company: the point of business is to profit. This is why Apple is not, and has never been, a software company: their profits come from hardware sales — computers, and, now, iPods. Microsoft is a software company: their profits — billions of dollars every quarter — come almost solely from software.

Judged by their profits, Google is an advertising company. They don’t profit from search, they don’t profit from software. They profit by selling ads. This isn’t to belittle them — I think Google is a terrific company, and they are profiting handsomely from ad revenue ($369 million last quarter). They’re market leaders because their ads are better for everyone — they’re far less obnoxious than traditional web advertising (so they’re better for users), and yet they’re also more effective and cheaper (so they’re better for advertisers). And their software is, in many ways, ingenious.²

If Google has a platform, it’s an advertising platform, not a developer platform. I’m not even saying Google should have a developer platform — I’m just saying they don’t. Any software that uses Google as a back-end for web search could be modified to use Yahoo or MSN by changing a few lines of code. Google Desktop might be popular, but it’s nowhere near as cool as Yahoo Widgets (a.k.a. Konfabulator) in terms of acting as a developer platform.

Plus, if Google is such a threat to Microsoft, why is it that all of their non-web software only runs on Windows? (Cf. Scott Rosenberg’s post from last week: “Google’s Windows-Only World”.)

Business-wise, Google’s software is just an excuse to show ads. Google’s search results and apps like Gmail serve the same purpose as the editorial content in magazines and newspaper. Google may or may not become a direct threat to Microsoft in the future, but in the here and now, the entrenched monopolies that ought to feel threatened by Google are newspapers. Newspapers, especially local small- and medium-market newspapers live off the revenue from classified ads. But because most towns have only one major newspaper, classified ad prices are artificially high. Google is primed to burst into this market, with targeted local ads that are cheaper for advertisers and easier for users to find what they’re looking for or interested in.

This all goes for Yahoo, too — their profits come from advertising, and they’ve been breaking into local markets long dominated by newspapers, such as movie theater show times and job listings.

Google-vs.-Microsoft may well be the battle everyone wants to see; but the battle that’s actually going on, for real, today, is the obvious one: Google-vs.-Yahoo. And what’s weird about this is that the Yahoo-Google rivalry is a good one — ignoring it to focus on a purely-hypothetical-at-this-point Google-Microsoft rivalry is like ignoring astronomy to gab about flying saucers.

See Also

• Robert X. Cringely: “Has Google Peaked?”:

  But what if everyone is mainly wrong? What if search and PageRank and AdSense are Google’s corporate apex. Most companies would be content with that, but Google isn’t supposed to be like most companies. But what if they are? I hear a lot of talk about Google doing deals for video and music distribution, but where are those deals? So far it is all just talk.

  I hope Google does pull off a couple more spectacular product feats, but I won’t be all that surprised if they don’t. It will take the company another five years just to mature the businesses they already have.

• Danah Boyd: “Why Microsoft-Only Development Is Foolish Business Logic”:

  Companies keep competing on a product-by-product basis, forgetting that they need to be competing on a paradigm level. And forgetting that they need to be competing collectively, not individually. By creating a product that only works on Microsoft, you solidify Microsoft more than you compete with them. You may be competing on a product level, but in the long run, you’ve done Microsoft more good than harm and you’ve just made your competition more difficult. You’ve given people another reason to stay on Microsoft. Why? How can this possibly be good business logic?

• David Pogue: “Google Gets Better. What’s Up With That?”:

  Ever heard the old joke about the two psychiatrists who pass in a hallway? One says, “Hello there.” The other thinks, “I wonder what he meant by that?”

  In high-tech circles, that’s pretty much what people are saying about Google these days. If you hadn’t noticed, Google is no longer just an Internet search tool; it’s now a full-blown software company. It develops elegant, efficient software programs - and then gives them away. In today’s culture of cynicism, such generosity and software excellence seems highly suspicious; surely it’s all a smokescreen for a darker, larger plot to suck us all in. What, exactly, is Google up to?