• by Mark Naples , January 20, 2006

Last week, I got in trouble with some readers because of my column's headline, which read "Did Google Bamboozle Us?" (this was not the headline I'd suggested to my editor, which was "On Building a Brand--and What's Next") Anyone who actually read the column could see that in no way did it imply that Google has misled consumers or influencers in building its brand; quite the contrary. I think Google's marketing--especially its corporate and search engine product marketing--has been nothing short of genius from the start.

The major thrust of my column last week was simply this--too many people who examine how Google built their brand start at the wrong point in the company's marketing genesis. Instead of writing about how important it was that the company had "built a better mousetrap," what smarter marketers need to know is how Google managed to convey that this was, indeed, the case. The point is that whether it's true or not that Google's engine produces better results, Google had to convince users that its results were better. How it pulled that one off is the juicy stuff, for my money.

Remember--it's not important that the results have never been more than marginally better. What's important is that consumers and marketers think they're better. Perception is more important than reality when it comes to marketing. That is, it's more important--unless the reality is so far beneath the perception that it is harmful to the brand.

Adherence to this compelling characteristic in all its marketing is also how Google has managed to build a brand that can penetrate so many other business lines. By winning the perception battle among its search engine competitors, Google was then able to claim an intellectual high ground that everyone has been scrambling to catch up with since.

It's also how its stock can be trading at a still ridiculous 445, down from a high of 475 last week. Equities with price-to-earnings rations of 50 would be considered high-risk. Just prior to the bursting bubble of 2001, the PE ratio for the S&P was at what was then considered a relatively high 30. Analysts looking in their rear-view mirrors late that year said that meant stocks were relatively expensive in explaining the spring market adjustment. This is all just a point of reference. Google's PE ratio is presently about 98.

How can this be? How can some of the same analysts be calling for a price target of 600? It's because they fully expect Google's brains to find other fallow ground to exploit with their tremendous development capabilities. By now, even a subversive like me might think it's true that Google's just got more smart folks working at their HQ than anyone else. How else could they have they built their technology gains from search into so many other product lines? But wait--if you take a step back and compare, say Gmail's launch with Google's recent, underwhelming video launch, you might think twice about that one.

This is where the analysts calling for a $600 price target on Google stock really make me wonder if its 1999 all over again, at least for this one company's stock. Google has monetized SEM like nobody else, and they've taken the arbitrage business into a more evolved mode with Adwords while promising to redefine classifieds with Google Base. Gmail has been a major success (see my Valentine column on that launch from May 13, 2004), and Google Desktop has as well.

But Google still derives fully 99 percent of its revenue from search.

Each of these products has its own defining characteristics. But each depends very, very much on the dual compelling characteristics that I wrote about last week. The first characteristic is that Google is simply smarter than anyone else, so their technology has to be. The second is that Google will do no harm.

This second one will become far more vital--and tenuous--as the company expands its product lines. When Google chose to launch Gmail on April Fool's Day, I just couldn't believe what a master stroke that was. They created more buzz from the launch date than they did with the prospect that users having their private e-mails would become targets for advertisers. Remember how many people simply didn't believe that the search leader had launched an e-mail product that provided 2GB of memory?

It took longer for most privacy advocates and others to begin to understand what this was about, as it did for Microsoft to provide as much memory for Hotmail users. Speaking of Microsoft, remember when so many people in our industry thought of Bill Gates as a bad guy, and the company as some evil empire that wanted to rule the world of information? Think about how that perception fit so snugly despite the fact that Microsoft never spoke of accessing personally identifiable information for its enterprise tools and how the company, after all, gave away the Privacy Protection Protocols free with v6 of Internet Explorer.

I wonder if either of the White-Hat Google Guys will use their wealth to do so many good works that they'll be named Time magazine's "Person of the Year," as Bill and Melinda Gates were for 2005, along with Bono. I'm not off on a broad tangent here. I'm merely pointing out that when it comes to marketing, perception in the present will sell a lot more than any future reality. If Google strategists are going to continue leveraging the same compelling characteristics that have brought them to their lofty perch today, they've got their work cut out for them.

Now that the U.S. Department of Justice is attempting to have Google disclose how much of its search engine traffic is pornographic in nature, Google's fight to maintain its "white hat" identity may be up against its most serious challenge, even before any scrutiny of its dMarc Broadcasting acquisition can shed any light on the company's plans for penetrating other types of media. Remember what happened to Cisco's stock price when it was revealed how many of its clients were in the porn industry?