Is Google Treading Water? Or Drowning?

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I’m not really a stock market betting guy. It’s a game I’ve never been good at and frankly doesn’t interest me. I do keep an eye on several stocks, though, and one of them is Google. It’s been a tough year for them, and I’m sure their larger investors are letting them have it at their current shareholders meeting. The problem is that they have been more or less flat, showing a 1% decline in a period where the S&P 500 has hit nearly 10% growth.

I have extensively documented the factors driving these doldrums. The rapid move to mobile by users when advertisers have been slower to follow has hurt them. They have swapped desktop dollars for mobile pennies in many categories. The irony of that transition will not be lost on newspapers, who suffered a similar calamity a decade or so ago when print dollars became online pennies.

Having conquered search, they went on to miss out on social media. They missed Facebook, Twitter, Snapchat, and a bunch of other upstarts that have been pulling users away from Google properties. They also have a penchant for super expensive, “revenue-free” projects like Google Glass, Fiber, Nest, Driverless cars and Loon. That’s fine and dandy when you are king of the hill and leading the pack, but it’s less cool when you are just another online ad platform. Add to those woes the growth of markets over which they don’t have any sway, like Amazon and eBay. It’s tougher to be a Googler than it was a few years back.

At its core, Google is an advertising platform based around an auction system. The explosion of mobile inventory and the slower rate of adoption by advertisers has driven their click prices down month over month. That will likely improve as the ad world catches up, but it won’t be soon.

They need some game-changing, revenue-rich ideas. To that end, they are moving towards being the marketplace and selling goods and services direct, as opposed to being the forum where advertisers pay to reach the audience. It’s a good idea if they can make it work, but it’s also dangerous as they may end up in competition with their own advertisers.

There is talk of them moving into our local space. The idea is that Google becomes the platform which a local business uses to get jobs, then shares the profit on that job with Google (as opposed to merely buying ads to get customers). It’s huge and potentially game changing. It’s also fraught with friction and would require a fundamental change in how the local economy works.

It’s possible that in spite of having a massive war chest of cash and market leadership in something as fundamental as search, the glory days of Google growth are behind us. If they are, Google stands the risk of being discounted in the same way that newspapers were a decade or so ago. Maybe it is already far too far out, and not waving but drowning.

Kiss the Internet Goodbye?

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I have already commented on the announcement earlier this week that Facebook has set up an index for over a billion Facebook content posts broadly categorized as news, but it prompts an interesting (and perhaps worrying) end game for us to consider. What if the web as we know it is in fact an artifact of the accidental way the web got started? What if it’s going away, and soon? Here’s why:

The web evolved as a bunch of separate web sites loosely linked together. Some of those sites got huge and became their own empires. Many are small and millions are pretty much moribund. As bandwidth availability grew and broadband speeds over cellular traffic became more common, the web developed a class system. Some sites like Google, Facebook and Amazon load super-fast all the time. In the case of Google and Facebook, the sites they link to don’t; they may be slow and clunky or not load at all if the load is too high.

That leads to a very spotty end user experience. Some links load, some don’t. Google has had their own content presented as part of search results for a good while now. It shows up as the “Knowledge Graph” to the right side of the results set for questions with a clear answer. These might be general topics, but they are often time sensitive.

For example, search for Al Capone and the knowledge graph takes you to where he is buried, among other things. If you click that link, it takes you to a results page and Knowledge Graph for Mount Carmel Cemetery. Not only can you find out about that place, but you can also find the opening hours and get directions all without leaving Google hosted pages. Now search for Red Sox. The results set gives you the basic facts: tonight’s game time and where to find tickets, all without leaving Google.

The Facebook announcement that they will be offering what amounts to a news/content search on their site means that very soon, everyone on Facebook (and for some, Facebook is most of the Internet) will be able to search and view a vast amount of content exclusively on Facebook. If I were a news publisher, I’d want to load content onto Facebook before any other place.

The third major factor is the app. Partly in response to the horribly clunky, ad-loaded and hard-to-navigate websites which make up much of the net, we now use apps for almost everything. In many cases the apps may duplicate content available on sites, but they typically load faster and are easier to navigate.

In a world where we can get most of what we need — certainly all the news and shopping we need — on Apps, Google direct or Facebook, why would we want to click away from what we know to be safe, fast-loading and easy to navigate areas to the residual, perhaps vestigial, site-based Internet? The Internet as we know it is dead; it just hasn’t stopped moving yet.

Apple Crawling…

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Did anyone get rich by betting against Apple recently? The short answer is probably no, unless you were lucky enough to pick the short round about Christmas last year. So, if I were to suggest that Apple is planning to take on Google as a search provider, who’d give me $50 against them making that work? Any takers? Didn’t think so.

There has been a rumor circling out there for a while that Apple is going to build their own search engine. The challenge of doing that is both simpler and more difficult than it was back in the early days. It’s simpler because the processor power needed to do something that huge is much cheaper, but the scale of the task has ballooned along with the internet.

As Apple inserts themselves into more and more of our lives, it makes perfect sense that they would try to claim at least a part of the search pie. I (like many people) have Apple devices on which I mostly run Google Apps. Since mobile and wearable continue to dominate our interaction with the web and each other, it might be more convenient if we could use a decent Apple search rather than always having to divert to Google.

Apple has given us perhaps the strongest indicator yet by announcing webmaster guidelines around their web crawler or search bot. Just in case you have a life and aren’t familiar with the term, a web crawler is a program that roams over the net following links and indexing the content it finds. You can stop it from indexing all or part of your site by naming it in your robots.txt file. Apple is now telling webmasters which syntax to use to stop Applebot from indexing their sites.

Google and Bing have an enormous head start in terms of familiarity for both users and advertisers, but Apple has a massive user base to which it could immediately propagate its search. It doesn’t mean that people will use it, but if they put it on the home screen, I bet may would at least try it.

The search pundits (yes such things exist) are speculating that this is Apple only looking to build a search for Siri. But why stop there? If you are Apple, with the brand recognition and user base they have, why wouldn’t you go the whole way and jump into search full on? If they are just now announcing their bot, it won’t happen overnight. But in a year — absolutely possible.

Apple Watch Ad Campaign In Full Effect

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Apple is no stranger to robust marketing campaigns and the company is known for its clever advertisements, but no one can deny Apple is pushing into new territory with its media blitz for its smartwatch, which includes 10 short videos demonstrating the Apple Watch’s usefulness. Three of the short videos, which Apple calls “Guided Tour” videos, are available online, and are broken down into different categories based on the feature described, such as Messages, Faces, and Digital Touch. Among the features highlighted in the upcoming videos are maps, Siri, phone calls, music, activity, Apple Pay, and Workout.

The company had previously released a series of short videos, made with Apple’s typical flair and highlight the precision manufacturing involved in the creation of the watch, after the device was first announced last year. Though the launch of the Watch is almost guaranteed to garner significant media coverage, the new reservation-only system will deprive Apple of one of its standard, and most durable PR images that includes lines of Apple fans huddled in lines stretching city blocks, waiting for store doors to open.

It remains to be seen whether or not the company’s marketing blitz and expansion into luxury stores will have an impact on sales. Smartwatches currently hover at 2% market penetration, and nearly half of the smartwatch owners surveyed (48%) had an income below $45,000.

However, Apple entrance into wearables is expected to give the overall market a boost, especially after the disappointing sales of Android Wear. Still, it is not known if the Apple Watch will be a short-term phenomenon, or one that translates into long-term growth of wearables.

The Gamekeeper Turned Poacher Conundrum

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Google is the matrix which much of all online commerce moves through. In cases where people searching for a product or service click on an ad Google gets to collect their fee which can be substantial; in many cases many dollars per click. However there are lots of clicks on Google which they make no money from…and that’s changing.Given that they run the store why would they want to compete with the very people selling in that store. In an announcement today it looks like that’s going to be happening for at least one major category. Initially in California, but soon all over the US when you search on Google for car insurance Google will offer you the chance to put your zip code and Google will comparison shop rates from multiple insurance providers. So even if you didn’t click on one of their ads Google will have a shot at getting the bounty for delivering a customer to one of the carriers in their program. This isn’t entirely new, Google has been offering similar services in Europe for a while…but it’s an interesting perhaps disturbing precedent for US businesses.

There is a range of vertical markets like insurance, education, health and vacations where the fight for customers is conducted at significant expense mostly on the battle ground of Google. For Google to now join the fray not just as the platform competitors buy clicks on but as one of the direct beneficiaries of end user choice is a little weird. Companies unwilling to join the Google list of price shopped providers run the risk of having to pay more to get exposure in the ads area to make up for not being exposed in the Google price shop set. This gives Google another win and if companies don’t like it they can buy their search clicks elsewhere…oh no wait they really can’t since most of the buyers start on Google. To the casual observer it looks a little tiny bit like a monopolistic approach…but since we have already seen that no matter what Google does in the US they are immune from such allegations.

Suing Google

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Google is a fierce and capricious God, swift to anger and once angered impossible to placate. A rash of recent law suits speaks to this issue very clearly.  The problem is this: Google has long complicated and exhaustive rules for publishers displaying their ads. Those rules allow them to ban any publisher for pretty much any or no reason and once banned that publisher can has no chance of getting paid on the ads it had generated revenue on.

The Poster Child for this problem is Pubshare.com. These guys racked up over a million dollars of Adsense revenue which Google refused to pay because Google claimed that they had breeched their Ts and Cs. Pubshare is suing to get paid. Part of the problem is that Google has allowed various of these publishers to accumulate a very large exposure before shutting them down and refusing to pay. One might think that given the level of attention and automation common at Google they might have some robots tasked to look for just these problems. Google has long since made it more or less impossible to syndicate their actual search ads but AdSense (meager tho it often is) has represented a way for sites of all sizes to generate some revenue in addition to what ever banner inventory they may have.

These kinds of cases are understandably devastating to the businesses involved but of minimal concern to Google because their Ts&Cs essentially grant them all the power they could possibly need. The problem Google has is that the law of the land may not agree with that power and this kind of horrible publicity is likely to make some people with really good traffic to think twice before putting all their revenue eggs in the Google basket. For now the judge involved is letting the case continue it will be interesting to see where it ends up.

Hold the Front Page

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Google is locking Spanish publishers out of its popular Google News service in response to a new Spanish law that imposes fees for linking to the headlines and news stories on other websites.

Besides closing Google News in Spain, Google Inc. also is blocking reports from Spanish publishers in the more than other 70 other international editions packaged by Google News. Google News’ exile of Spanish publishers begins Dec. 16, a couple weeks before the start of a Spanish intellectual-property law requiring news publishers to be paid for their content, even if they are willing to give it away.

That means people in Latin America, where Spanish news organizations have sought to boost their digital audiences, won’t see news from Spain via Google News. Also set to disappear are reports in English from Spanish publishers like Madrid’s leading El Pais newspaper.

The lost access to Google News will likely make it more difficult for people to keep afloat on what it is happening in Spain. Spanish publishers also may lose a valuable source of traffic to their websites. Google says its main search engine and other services generate more than 10 billion monthly clicks that send Web surfers to other news sites throughout the world. Google News accounts for about 10 percent, or 1 billion clicks, of that worldwide volume.

Spain’s new law is designed to create a new source of revenue for the country’s publishers, who, like most of their peers around the world, have been hard hit as more readers and advertisers have abandoned printed editions for digital alternatives during the past decade.

The shift has hurt news publishers because digital ads aren’t nearly as lucrative as print ads. But the linking fees could now backfire if the lost access to Google News diminishes the traffic to Spanish news publishers, making it even more difficult for them to sell digital ads.

Even though Google News doesn’t display ads, it still helps Google make more money by deepening people’s loyalty to its products. The ads that Google distributes through its other services and other websites, including those run by news publishers, account for most of the company’s projected revenue of $66 billion this year.

Quietly Understated

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For all its crazy tourism, I kind of like Times Square. Back when I used to visit Manhattan every other week, I’d always stay at the Marriott Marquise and pick up half price theater tickets at the Times Square discounted tickets booth. Were I to do that next week, I’d either be inside or watching the world’s largest and most expensive video ad. It completely wraps the marquise, is the size of a football field and costs $2.5 million a month to rent. Google will be the first customer. No doubt we will be treated to the massive version of the cute ads we have come to know (not love) from Google. If that’s all we get that will be a shame. I used to visit the Comcast tower in Philadelphia quite often and the lobby area of that building is simply breathtaking. They installed a massive (and massively expensive) video wall which was about an inch thick and two stories high all around the interior of their enormous lobby. They didn’t run Comcast commercials rather than ran spectacular video sequences like sun rise from outer space, 20’s style biplane dancing acts or a trip over Niagara Falls. It was amazing and spectacular, I used to arrive early for meetings just to watch the show.

With a quarter of a million pedestrians passing the billboard and the kind of world-wide exposure that generates this is the perfect opportunity for Google to literally wow the world….we will see if they take that chance with both hands.

 

The Vision Thing

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Companies have mission statements…they used to be widely mocked as marketing nonsense but they have become pervasive. For as long as I can remember Google’s has been to “organize the world’s information and make it universally accessible and useful” their unofficial mission statement has always been “don’t be evil.”  Many would argue that they have done a pretty good job of delivering against their official version and at least recently a much less great job of delivering against their informal one. In any event Google has changed as it has grown and it now does a great deal more than just organize the world’s data…and that’s apparently leading to some concerns in the Google-Plex.  In a recent interview King Larry himself admitted that the company had outgrown its mission statement and was pondering what to do about that. He didn’t have any immediate suggestion as it’s clearly a tough question.

At the heart of the issue is the question “What does Google do?” The short answer is “lots” and probably “too much”.  Having organized the worlds data then found ways to turn it into the most powerful new advertising vehicle since the invention of the TV it has amassed a war chest so large that it has the resources to try almost anything…and they have.  They are in email, data infrastructure, social media and even medicine to name but a few areas. They power a significant majority of the world’s mobile devices with Android and have many projects with lofty (some argue crazy goals) like delivering Wi-Fi to the third world by high altitude balloon which cost billions with no measurable revenue attached as yet.

Despite the extraordinary range of projects they are involved with the vast majority of their revenue comes from their dominance in search.  Love them or hate them the majority of online users in the western world navigate the web through their products. It’s a great place to be in…but it’s not without problems which I noted in this blog a week or so back.  So it’s hardly surprising that the powers that be are struggling with a message which covers all the pies they currently have fingers in. Coming up with a mission that covers autism research, self driving cars and online advertising is a tall perhaps impossible order.

Tough Times at Google High?

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It’s not that often that a cloud crosses the sunlit commercial uplands where the Googlers play….but last week was a little stormy.  The big story last week was the cataclysmic pounding which Netflix took when they missed their numbers and HBO announced a non-cable option.  The other sad story was Google. After reporting slower than anticipated revenue growth the markets took them behind the woodshed where their stock ended up at a mere $511.17.  I have covered the reasons for their predicament at length in this blog over the past few months and years….but let’s do the Cliff Notes version.

1   Desktop search has been rapidly overtaken by search on mobile devices. Mobile devices have much less space for ads and lots of the big advertisers still haven’t quite come to terms with mobile…even tho we the users are all about it. That means that as mobile click volume has risen the average price over all continue to drop. These are seismic metrics which anyone…even Wall Street analysts can readily grasp.

2   On mobile devices we tend to spend most of our time on apps like Facebook Instagram, Yelp and Twitter.  Google has spent billions acquiring “moonshot” projects focused on the long term big win.  It hasn’t been as successful acquiring the kinds of mobile aps that we are spending our mobile time on. In many cases we’d rather buy our stuff from Amazon or even ebay direct rather than do the Google dance.

3   A lot of people have developed a healthy scepticism about how Google (and others) handle our personal information.   They aren’t the only offenders for sure, but I have to believe there is at least some backlash against them.

Don’t get me wrong Google is still a powerhouse…but this may be the first time ever when the stars aren’t all fully aligned in their favor.