Reality Bites Hard

by Steve Baldwin, Nov 24, 2008, 10:30 AM

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I'm one of those odd people who doesn't drive to work but takes the train each morning. Lately I've been having a lot of spontaneous conversations with people about how glum they're feeling, how badly their savings have taken a hit, and whether they'll ever be able to afford to retire, or just drop dead at their jobs the way people did 100 years ago. As the holidays approach, the glumness grows, and as the misery spreads, it's really hard to focus on stuff that we in the interactive ad business took so seriously a mere eight months ago.

To wit, Yahoo. Does anyone outside of a small group of people whose fates are wedded to the world's "most strategically important portal" really care what happens to Jerry Yang or the Yahoo Board when it appears that we're going to have millions of dispossessed elderly people living in tents in the next few years? Sorry, but caring about what happens to Yahoo these days is like worrying about the future of the shipping industry while water laps at the floor of your stateroom on Deck E of the Titanic.

Google is another story. Anyone doing marketing today can't avoid being obsessed by what happens to it, because Google IS the market for doing any kind of targeted, measurable marketing today. Nobody expects Google's next quarter to be rosy, but it will survive even if its investors suffer. The problem for Google is that, as online retailers struggle to survive in a deadly price war, the role that Google plays in setting terms for its marketplace becomes the elephant in the room. Google can deny to kingdom come that it manipulates its market to advantage itself, but according to The New York Times, "prices for text ads related to women's fashion have quadrupled" in the past 18 months. Prices for gift-related items jumped 50% from 2006 to 2007 and are "expected to climb again this year."

Look, Google has a great search engine -- but is it really four times greater than it was 18 months ago? In good times, nobody minds price increases too much, but with the U.S. economy on the ropes, this kind of thing looks more and more like the profiteering behavior of trusts that got Teddy Roosevelt so angry a hundred years ago.

In the next few weeks and months, my bet is that you'll be hearing more from e-tailers who've had it with SEM. They're in a tragic situation right now: keyword prices are so high that they can't even afford to telegraph the fact that they're practically giving everything away. How screwy is that?

Don't underestimate the grief of stressed-out search marketers. In the same New York Times article mentioned above is the sad tale of Delightful Deliveries, an e-commerce outfit that had been regularly spending a large portion (approximately 20%) of its budget on Google clicks. It shut down -- incredibly -- before the holiday buying season had even began. Delightful Deliveries wasn't some bloated inefficient dotcom, but a lean and mean operation that did well for almost 10 years online. Its fate is one of those "canary in a coal mine" events suggesting that the environment for a lot of other online e-tailers has already turned deeply toxic.

Let's round out today's angst-fest with an observation about the way that attitudes can change quickly toward brands that were gold-plated a few months ago. A smart young guy in our office who's very tech-savvy and very pro-Google ran out and bought the Google phone on the day it went on sale. For months he'd been talking up this device, praising its open-sourceness, and heralding its arrival as the end of the bad old phone company monopoly that's crushed innovation for decades. But only after buying the phone did he discover that Google happens to block all the open-source applications he wants to run on this thing. He feels betrayed, angry, and thoroughly disgusted now. It only took two days to turn this guy -- once one of our office's most vociferous Google boosters -- into a Google-bruiser.

When reality bites, it bites hard.

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0 comments on "Reality Bites Hard".

1. M Weidenbaum from -
   

   commented on: November 25, 2008 at 10:58 a.m.

   "Google happens to block all the open-source applications he wants to run on this thing."

   Could you name the applications?

2. M Weidenbaum from -
   

   commented on: December 6, 2008 at 11:07 a.m.

   Hi again. The story closes with this anecdote about a coworker's sudden change of heart about a particular brand. It's an interesting story, something we've all experienced at one time or another, and it'd be helpful to have some corroborative details.

   Since Android's marketplace has pitted itself against the iPhone's app store, and since once determining characteristic of that distinction is the Android market's reported relative lack of filtering, it'd be useful to know what applications have made Android seem, to a previously enthusiastic participant, more rather than less like the iPhone, and thus Google more rather than less like Apple.

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