Google does not understand people. There, I said it. I’ve been trying to come up with a reason why I occasionally lash out at Google, only to come back and love and defend them, and I think it’s that from my vantage point, Google, the company we’ve all come to love and admire is just not very good with people.
Will Google Miss the Big Video Advertising Opportunity?
Google has an opportunity to be bigger in video than it is in search. No small feat given how dominant it is in search. This is the single most important opportunity for Google: eventually, video advertising will surpass search advertising, especially as web advertising surpasses TV advertising.
But, Google might miss out on the video holy grail - despite buying YouTube - for the same reason it seems to mess up acquisition integration after acquisition integration…
Google has created so much shareholder value that who cares what I say, but here goes:
Obsessed with Machines, Focused on Automation, Hellbent on Scale
Google wants everything to be automated by machines and scalable. This, they think, is the only way that networks effects can create revenue streams that would make a material impact on their $15B annual sales. This is ironic because Google’s stratospheric rise began by making pennies per click and across very few monetized keywords. Of course, like all companies do, once you get big, you lose your ways.
Why This Worked With Web Search
This strategy worked in search because spiders indexed web pages and parsed that data to return search results. This was not a manual job and as a result as the pace of additional websites was too rapid for any directory to manage. Google’s luck and good fortunes continued because in search advertising, it acquired Applied Semantics, a company that allowed it to match the context of the content on a page and match it with advertisers’ desired keywords. Up to this point, automation did not create a barrier to success, it fostered success.
But the world is changing, fast. Google understood this, so it bought YouTube.
Will Google Be Able to Profit From YouTube?
The Web has grown so much, that success now boils down to winning in the trenches, gaining inches here and there… using judgment. Relying blindly on machines is insane in that insanity is defined as repeating the same thing but expecting a different result. And this takes us to their acquisitions. Apart from YouTube, which ones have really done well?
YouTube has continued to grow rapidly, yes, but largely because Google has not done much to it. WatchMojo.com is a partner of YouTube. So let me be clear: we want YouTube to grow, prosper and profit… Google is the largest online advertising ecosystem out there… but YouTube being a video property entails a different mindset from Google’s initial one in order to attain success.
Video advertising will not be propelled by small and medium sized business who are happy to insert credit card, choose keywords, and turn on the Google traffic machine.
Video advertising will be powered by ad agencies, global advertisers and Chief Marketing Officers who fancy a conversation over an online form.
Online is a Drop in an Ocean of Offline Advertising
Google does not get that. They want to impose their hegemony over a subset of the population that controls about a quarter of a trillion of dollars. That is right: Google is a behemoth online, with $15B in sales. But advertising across all media is a $300B industry in the US alone. Google isn’t exactly expecting Google Enterprise Search to add to sales, it is betting on more of the same: more advertising sales from radio, newspapers, magazines, and television. But, it wants it to be automated and scalable overnight, and from the get-go. That will never, ever happen and oddly enough, it did not even happen in search. It seems like Google has forgotten about Google Ad Words’ early ways. I was probably one of the first Google Ad Words clients (and even used GoTo.com and other pay per click models) and the automation and massive scale came after some time and tinkering… the same will have to happen in video for Google to duplicate success.
Yet, how does Google seek to duplicate that feat?
Was Doubleclick the Smartest Move?
Google’s big bet was to buy Doubleclick thinking that the world’s biggest ad server could simply connect to Google’s ecosystem and allow it to move into display/banners and video advertising.
Wrong!
Since the acquisition of Doublelick last year for $3.1B - which has yet to be approved everywhere, but should - a handful of companies have moved to Doubleclick competitor aQuantive’s AtlasDMT, namely IAC (whose Ask.com search unit competes with Google’s search operations). Viacom jumped on Microsoft’s bandwagon, too. MSFT bought aQuantive. The list goes on and on.
Google’s strong-arming is causing many companies to run towards the arms of not just Microsoft, but Yahoo! too (disclaimer: I own shares in YHOO). Look at the number of newspapers that joined Yahoo!’s consortium. That is nothing to sneeze at as local advertising grows.
A Checkered Acquisition History
Ultimately, I respectfully doubt that Google understands people. The same DNA that would lead someone to barge in a negotiating room and tell red-hot VOIP startup Skype that “we’ll beat any competing offer by 10%” is the same DNA that will frustrate hot startups such as Feedburner and Jaiku. Let’s not mention Dodgeball and dMarc.
Are these really isolated incidents or a trend? I think it’s the latter.
Recall what I asked above about CMOs?
When dMarc founders took their $102M payouts and left the potential $1.3B payday, they said:
dMarc and Google apparently differed over the need for a “human touch” in the sales process. Although dMarc was a pioneer in automated radio ad sales, the company still employed human beings to explain the dMarc system to prospective customers and tutor those who signed up. As Google began integrating dMarc’s system into Google AdWords, it pushed to limit the number of product reps. dMarc executives in turn blamed this policy for their sluggish revenue results.
Google’s headcount has swelled in a Yahoo-esque fashion, from less than 5,000 people to 15,000 as of January 1 2008.
Communication Breakdown
The bigger danger, frankly, is not even that Google cannot seem to communicate with outsiders… it’s that Google’s traditional employee profile - an engineer or computer programmer - will probably start to clash with Google’s new hire profile: a marketer from a media organization that is trying to get Google to better understand the needs of content companies, marketing organizations and advertisers.
Culture Clash
In this context, you then wonder: if Google fails to communicate and better understand their new media-oriented employees (who understand machines alone won’t solve problems), then how does it expect to dominate in the outside marketing world?
Say what you want, but Google at $200B in market cap is way past priced for perfection. As we look for things that could derail the Google express, we rarely think about the human equation, but unless Google becomes more humane with people, then maybe 2008 will mark the beginning of Google’s slowdown.
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