I have a slightly different take on this theory. First off, I don’t think Google is particularly focused on killing off third-party platforms – I think Google is generally focused on competing with anyone and anything online. Indeed, throughout Google’s history, the company has done a pretty good job of attacking other Internet players. I believe Google’s attack strategy started in the early days as a battle against Yahoo and AOL (by building a better search engine, better email, better news, and better maps), moved on to eBay (Google Checkout vs. PayPal, Google Shopping vs. Shopping.com, and Google Talk to beat Skype), then to Microsoft (Google Docs vs. Office), then Apple (Android vs. iPhone, Chromebook vs. Mac, Google Play vs. iTunes, Chromecast vs. Apple TV), and now Facebook (Google+).
Along the way, the company has also made tons of investments in ad tech, mainly as a way to have control over what data advertisers see and to diversify revenue away from just search clicks. Examples include: Google Analytics (analytics), DBM (DSP), DCM (Ad serving), DS3 (campaign management), GTM (tag management), Wildfire (social media), Teracent (creative), Channel Intelligence (feed management), and a dozen other tools I’m probably forgetting.
Put another way, if you want to have a digital business, you’re going to have to compete against Google. And given that Google now controls a lot of SEM, SEO, display, and email inventory, you’re also going to have to play nicely with Google as well. It’s a classic case of “co-opetition.”
Given Google’s massive engineering resources and deep pockets, you might assume that Google can own any category it decides to enter. Yet as much as Google has had great success penetrating some new markets, it has also had failures along the way. I look at Google’s expansion successes and failures from two lenses – a B2C (consumer) and B2B (business) lens.
On the consumer side, Google has won markets with two simple concepts: Build a product that is “good enough” vis-à-vis the competition, and then give it away for free or at a deep discount. Gmail beat Yahoo! Mail because it was better and free, Android has taken market share from iPhone because it is good enough and much cheaper, Chromebooks are way cheaper than PCs, and you can bet that Google Fiber (Internet service) will be better and cheaper than whatever your cable company wants to sell you. (Note that Google+ has not taken off, because Facebook is already free and the functionality of Google+ doesn’t seem to offer much of an incentive for consumers to switch.)
The business side is a tougher play. Businesses care about three things: price, value, and trust. Google Analytics, for example, is much cheaper than Omniture (free versus tens of thousands of dollars a month) and is good enough for the majority of companies out there, but it requires businesses to “open the kimono” to Google by sharing all of their data. Big companies pay for Omniture in part because they just don’t trust Google with their data. The same is true – and will continue to be true – for campaign management tools. If a company is already hesitant to share Web analytics data with Google, you can be sure that they won’t jump at the chance to also share revenue and offline conversion data with Big G. Indeed, I spoke to the CEO of a third-party tag management company who was overjoyed to hear that Google has entered the tag management space. “It validates the market and will push many companies to go with someone other than Google,” he told me.
The other trust issue Google has in the ad tech space is that some advertisers will always wonder where Google’s allegiances are – with Google’s profit or with theirs. Having the Google tech stack manage your (largely Google) online advertising is sort of like having the IRS file your taxes for you. I’m not insinuating that Google would purposely manipulate your ad spend to drive incremental profit for Google, but whenever you have a publisher managing your spend on its own platform, there’s definitely the potential for a conflict.
For a lot of small advertisers, the “good enough” theory will apply; Google Analytics (for free) combined GTM (for free) with DS3 at a substantial discount over third-party campaign management tools may be a great solution. For bigger advertisers – especially those who have products or services that compete with Google – there will always be valid competitive reasons to stick to third-party tool providers. So will Google take away some market share from third-party tools? It seems likely. Will there continue to be a growing need for third parties? Absolutely.