In a post on Searchblog three weeks ago, John Battelle characterized Google's launch of a Wikipedia-like service named Knol as Google's attempt to own the "second click" -- the click after the search click, which the company already owns. It's a wonderful characterization. It is wonderful because it captures in a very simple way what is fundamentally different about how Google thinks and how most media companies think. Watch this space carefully. John marks the move as the unveiling of Google as an unambiguous media company. I think that he is right, and that is the first step in a new war -- the fight for the second click. Media companies talk about audiences and engagement. Google talks about clicks.
When you ask Google strategists whether or not it is a media company, they invariably answer no. "We are a technology company," they proclaim. This ignores, of course, that more than 99% of Google's revenue that comes from advertising. When you ask if they compete with media companies like The New York Times and CBS, or information sites like Wikipedia and craigslist or commerce sites like eBay or Amazon, they say "No." They say that they help media companies monetize their audiences. They say they help users find information sites. They say that they help commerce companies cost-effectively find customers.
On all of these counts, they are absolutely right. Of course, what they don't say is that once they have monetized all of the first clicks that they can, they need to start chasing second clicks. They need growth. Wall Street and their stock price demand it; paying off their heavy capital investments demands it. They need more clicks -- many more clicks. It is their sustenance. It is how they survive. If they can't find more in search, or more on contextual network sites, they need to create their own. Plus, the more "second clicks" they own, the more money they can keep -- and the less they have to share.
Google quite correctly points out that it is not a content company. It does not create the underlying content that feeds its searches and powers it AdWords ads or that attracts valuable audiences to the Web sites that power its AdSense ads. No. Google doesn't compete with media companies the way that they understand competition. It does not compete with them head-on. It does not try to beat them in content creation. It does not try to beat them in content packaging (though, with its Google News and its recent attempts to syndicate video content packaged with ads, it is starting to). Rather, Google beats them by owning what makes their content and packaging valuable -- their monetization, which today means clicks and tomorrow will mean everything from post-click transactions to driving brand favorability. If this was World War II, Google would be letting media companies find comfort building their Maginot Lines' slow moving battleships, while it is establishing air superiority and building fast-moving mechanized armor. Media companies fight for content. Google fights for marketing spend. Who will likely own whom in the end? Who will control the money?
How might the fight for the second click play out? I think that there will be several significant events in this battle over the next year or two. They are:
Europe. Google is the 800-pound gorilla in search in the U.S., but it Dominates search in Europe with a capital "D." This will certainly lead to critical regulatory fights (note the pending EU review of proposed Google/DoubleClick merger) and probably bring more transparency to the entire Google business and strategy. Ironically, regulatory scrutiny in Europe may bring more sunshine on Google in the U.S. and more awareness of the likely long-term consequences for its partners as its business model matures.
Privacy. As more and more audience attention is directed to social networks and video and other sites without intuitive vertical commercial context, Google will need to leverage more and more information about the person, and not just about the search or the page. It will need to deliver more personal ads and information and us more and more behavioral information. This can be a minefield. Just ask Facebook. Just ask Google (note their efforts late last month to link Google Reader with Google Talk behaviors to their social tools.
Brand advertising. The core of Google's current business model is ultimately simple. It aggregates the maximum number of clicks and it monetizes those clicks for the maximum value possible. Now that it is moving into display and brand advertising, it will find the going far less simple. It will be defining, aggregating and delivering media value for brand marketers driven by different and complex business objectives, whether it is driving consumer awareness of a new product offering, driving purchase intent or conquesting a competitors' customers. This is quite different than what Google does today. Attempting this transition, while maintaining focus on the clicks that pay the bills, will be quite a challenge.
Big Google media purchase. Yes. I believe that Google will buy a media company. Maybe it won't be a classic offline media company. Maybe it will be something more data-driven or more tangential --like a financial services data company such as Bloomberg, or a couponing company like Claritas, or a networking company like Salesforce.com or LinkedIn. But they will go there. They will have to. They need more clicks.
Is Google the Evil Empire? I certainly don't think so. Please don't get me wrong. I think that Google is a wonderful business, one that is crucial for our market. Without Google, hundreds of thousands of Web sites and content creators would have no monetization, no money. Without Google, the average user's search experience would be less than it is today (or would be so "integrated" into the Windows desktop, it would be as hard to find as an old deleted email in Outlook). Google has been an extraordinary innovator and will make media companies much better from the competition. But make no mistake -- it is a competition. What do you think?
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There is a big difference in the 21st century when it comes to market capitalization and buying power, than there was in the late 20th century. Can I interest anyone is a bottle of bubble fluid?
Why is it important? Simply, many of the Fortune 1,000 companies will advertise with GoogleClick on campaigns with smaller budgets. Even your own AOL Company, Advertising.com told me, that they will likely not work with advertisers with less that $100,000 budgets or advertisers with short term promotions in the future. The clicks that I was getting through AOL/Advertising.com, I will likely be getting from GoogleClick in the future.
Google have not directly said, but they appear ready and willing to open up the high quality ad market to the thousands of quality contents providers that is not currently available. I also believe that GoogleClick will consider working with the smaller ad networks as well. While this might drive the CPM rate down, they will more than make up the difference in volume. So if Google and GoogleClick moves in this direction, I am all for it.
Craig McDaniel
Where Google needs to be careful though is in how it uses or abuses it's relationship with it's users. They've built their reputation based on relevancy and popularity, while carefully managing the revenue growth. When aggregators were playing arbitrage games between Yahoo and Google and making substantial revenue for Google, Google intelligently monitored the impact on the user and when things got out of hand, they changed the rules despite the losses.
Linking businesses with users and users with businesses will continue to be the relationship that will fuel Google's growth. But it will have to continue being user focused. Privacy will be critical for users, and they need to tread lightly or they could lose (See Facebook and their Beacon).
Google has been good at not knee jerking for the sake of wall street....so far. Let's hope they continue to recognize the long term effects of their actions when making decisions and understand the financial value of attracting, engaging and retaining users. This is a whole new world that is running on different rules.
I think there will be some surprises in the EU regulatory process. We'll see....