[Infowarrior] - The Google Decade Ends

Thu Dec 31 17:38:42 UTC 2009

The Google Decade Ends
By chris.thompson
Created 12/31/2009 - 12:24am
If the search king hasn’t ripped up your business yet, just wait.

http://www.thebigmoney.com/print/4732
As we near the end of the second decade of the Internet as a mass  
medium, no one can deny that the last 10 years have been all about  
Google [2] (GOOG). When the aughts began, Google was a clever search  
algorithm with a little venture capital but no CEO, no substantial  
brand recognition, and no clear way to make money. Now, it’s a verb, a  
tech empire, and a public company with a market capitalization just  
shy of $200 billion (and sitting on $20 billion in cold, hard cash).

But perhaps the best way to assess Google’s impact on our lives is to  
tally the firms that had never imagined the company would ever matter  
to them but now see it as lethal. Year after year, Larry Page and  
Sergey Brin thought up new industries to penetrate and disrupt,  
sending old companies into utter disarray. Google went from a simple  
search and page-ranking algorithm to a mortal threat to the media, the  
entertainment industry, telecommunications, traditional advertising  
models—even coal mining. Today, in corporate boardrooms across the  
country, executives are looking at their companies’ long-term  
prospects and asking themselves: When will Google try to kill us?

Company by company, industry by industry, the growth of Google can be  
measured by the rivals who are dead, dying, or struggling to live.  
Here’s a sampling of the butcher’s bill.

In 2000, the conventional wisdom around search looked utterly  
different than it does today. Companies like Yahoo [3] (YHOO), Lycos,  
Altavista, GoTo, and Excite all thought that the key to making money  
was to keep people staring at their Web sites for as long as possible.  
That way, you could flash garish banner ads at them, or pop-ups that  
distracted people as they searched for something that typically had  
nothing to do with the ads’ content. In some cases, search engines  
offered companies a deal: Pay us a wad of cash, and your firm will  
rise in the search result rankings, regardless of how relevant it is  
to the search itself.

Larry and Sergey rejected every one of these principles, hewing to the  
notion that search should be, you know, useful. They worked overtime  
to rank search results as accurately as possible and made sure you  
found what you wanted and got off of Google’s pages as quickly as you  
could. No banner ads would clutter their home page, and no pop-ups  
would slow the loading time. No one would be able to bribe their way  
to the top of the list.

At the time, this seemed the very height of silliness. How else were  
you going to make money? But once Google thought up selling small,  
contextually relevant text ads next to the results, its money problems  
were over. In 2001, the company turned its first profit and went on  
from there. One by one, its rivals in those early days started to die  
off, being gobbled up by other firms and turned into specialty  
services. Only Yahoo and Ask.com remain—along with newcomer Bing—and  
Yahoo is desperately trying to find a way back to its glory years.

Meanwhile, another line of businesses faced a mortal threat from  
Google: advertising agencies. Google adopted a concept from GoTo known  
as “cost-per-click,” in which advertisers paid only when someone  
clicked on their text link. In addition, Google’s vast amount of  
search data gave advertisers an unprecedented amount of information  
about their targets. Google could match advertisers to their target  
audiences more accurately than anyone had ever been able to do. Before  
Google, advertising was an art, in which Madison Avenue offered  
oblique advice on how to reach customers. After Google, it was a  
science—and all those witch doctors were suddenly a lot less relevant.

And Google was far from done. With these scalps hanging from its belt,  
the company had established its core business. Now, almost to pass the  
time, Larry and Sergey began to wonder what other industries they  
could disrupt.

Shortly after 9/11, a badly shaken Google engineer named Krishna  
Bharat decided that he had to do something to make the world a better  
place. And what the world needed now more than ever, he decided, was  
fast and easy access to international news, especially given the  
conflict that was about to play out in the Middle East. Using his “20  
percent time” to play around, he invented Google News. Although  
newspapers hadn’t exactly been growing prior to this moment, the  
launch of Google News was a bullet aimed straight at the old media and  
typified Google’s seemingly naive attitude toward industries it was  
mauling.

Thanks in large part to Google News, Craigslist, and Google’s core  
advertising business, traditional media went into a tailspin.  
Newspaper advertising revenue would drop by 9.4 percent in 2007, and  
17.7 percent the following year. The Tribune Company, the Philadelphia  
Inquirer, and the Philadelphia Daily News all filed for bankruptcy.  
The Knight-Ridder chain would be broken up. The Boston Globe nearly  
closed down. The two major newspapers closest to the GooglePlex were  
hit hard as well; the San Jose Mercury News was forced to lay off 200  
reporters and editors, and the San Francisco Chronicle began posting  
annual $60 million losses.

Google isn’t the only reason for this catastrophe, but media moguls  
have all but declared war on it nonetheless. Rupert Murdoch’s News  
Corp. [4] (NWS), Dean Singleton’s national suburban newspaper chain,  
and the Dallas Morning News have all announced plans to charge  
subscriptions for their content—and ban the Google News spybots from  
scanning and indexing their pages.

Meanwhile, Google was blithely menacing another outpost of traditional  
media: the book publishing business. In 2004 the company launched  
Google Book Search, a massive effort to digitally scan, archive, and  
present to the public millions of books from the country’s largest  
libraries. From Google’s perspective, this was a classic case of doing  
well by doing good; the company would expose millions to excerpts of  
books they could never access otherwise, and Google would dramatically  
expand its universe of searchable information. But to authors and  
publishing houses, who watched as book sales grew flatter and flatter  
with every year, the plan was practically an invitation to piracy. How  
easy would it be, they asked, for garden-variety hackers to download  
millions of copyrighted books and offer them for free?

The Authors Guild and the Association of American Publishers sued  
Google for copyright infringement in 2005. The resulting proposed  
settlement may have satisfied the plaintiffs, but it unsettled untold  
numbers of copyright holders, who realized that the settlement would  
give Google the right to publish copyrighted material without  
informing the authors. And since the settlement empowered Google to  
sell digital copies of books online, it also unnerved another major  
player in book sales: Amazon (AMZN).

And in 2006, Google threw the entertainment industry into a tizzy when  
it bought YouTube for $1.65 billion. Soon, users were uploading clips  
from The Daily Show and music videos onto the site, and Google—which  
planned to sell ads next to YouTube content—didn’t seem to care that  
other companies owned the work. Or, rather, its leaders claimed that  
it was up to the owners of that work to notify Google when someone in  
the world uploaded a five-minute clip of copyrighted material—even  
though policing someone else’s Web site would take enormous amounts of  
time and resources. This attitude left Hollywood, the television  
networks, and the music industry livid, and Viacom [5](VIA.B) led the  
charge when, in 2007, it sued Google for $1 billion in copyright  
infringement damages.

Earlier this year, Google added another group to its enemies list: the  
telecoms. In March, Google launched Google Voice, a new service that  
promises—or threatens—to change the telephone forever. With Google  
Voice, users can consolidate their home phone, cell phone, and work  
phone numbers into a single number that they can keep even when moving  
to a new city. More importantly, it made phone calls, even long- 
distance calls, virtually free. Everyone from AT&T [6] (T) to eBay [7] 
(EBAY), which produces Skype, suddenly realized that they, too, were  
in the path of the Google juggernaut.

In the meantime, Google has almost accidentally challenged the  
viability of countless other industries. Its release of Google Maps  
wiped out the business plan of AOL’s MapQuest. In 2007, Google  
announced a scheme to invest millions in renewable energy, with the  
express intent of reducing Americans’ reliance on the coal industry.  
Larry and Sergey have personally invested a small fortune in  
manufacturing electric cars, which can’t make Big Oil very happy. This  
year, Google announced that users of Android-based smartphones would  
be able to use GPS navigation services for free—upending the whole  
point of the TomTom, which you actually have to buy.

There’s just one case of a company picking a fight with Google, rather  
than the other way around. As Google showed the world how much money  
you can make on search, the tech world’s great behemoth, Microsoft,  
jumped into the business and took direct aim at the industry’s leader.  
But just as quickly, Google struck back, developing products that  
directly compete with Microsoft’s core business. Following its cloud- 
based computing model, the company rolled out Google Apps, a line of  
word-processing and spreadsheet services that goes head to head with  
the Microsoft Office software. Gmail competes directly with Hotmail.  
Google’s Chrome browser is designed to eat into Internet Explorer. And  
with the recent launch of the Chrome operating system, Google is  
offering an alternative to the Windows operating system. Google is now  
locked in a global war with one of the largest technology companies on  
Earth.

If there’s one company that Google has historically been perfectly  
amicable with, it’s Apple [8] (AAPL). The two firms share a similar  
creativity-is-God ethos, and until recently Google CEO Eric Schmidt  
sat on Apple’s board of directors. But that friendship came to an end  
when Google decided to get into the business of selling ads on mobile  
smartphones. The company launched Android, its mobile Internet  
operating system, and gave it away to anyone, from Samsung to  
Motorola, who wanted to build a device that would go head to head with  
Apple’s iPhone. (Almost as a postscript, Google has launched the  
Chrome browser for Mac, which will directly compete with Apple’s  
Safari.) And after numerous smartphone manufacturers spent millions  
developing these phones, Google recently announced that it had built  
its own smartphone and may release it for sale in January. Companies  
that once depended on Google to help them compete with Apple now worry  
that the search giant may compete with them—and keep all the niftiest  
Android apps, which are key to any mobile device’s value, for itself.

Of course, Google has stumbled a few times during the decade,  
particularly in the area of social media. Google Video, the company’s  
initial answer to the rise of YouTube, fizzled out. Knol, its attempt  
to build an alternative to Wikipedia, languishes somewhere in a dark  
corner of the Internet. And Orkut, Google’s effort to challenge  
MySpace, has itself been eclipsed by Facebook.

And of all these challenges, none has yet proved lethal to the  
companies or industries in Google’s crosshairs. In fact, of the 150  
products Google offers, only two—AdWords and AdSense—make significant  
amounts of money. In fact, Google’s threats have forced many  
industries to race to adapt to a new Internet reality that was coming  
anyway. Record labels and some movie studios have cut deals to offer  
content on YouTube and share revenue, for example. And NBC, News  
Corp., and Disney [9] were spurred to develop Hulu, the video-hosting  
site that may well signal a new revenue model for the entertainment  
industry.

But consider all the mortal foes Google has racked up in the last  
decade. Microsoft. Amazon. Viacom. News Corp. AT&T. Every publishing  
house and newspaper in America. That’s quite a list for two men who  
once merely aspired to put the Gettysburg Address on your screen in a  
microsecond or two. What other businesses will they disrupt in the  
coming years? Will they set up a hedge fund, as Sergey Brin once  
suggested? Will they start predicting the weather? Just last week, the  
Federal Trade Commission reportedly began an investigation into  
whether Google was scanning local restaurant and business reviews  
posted on sites like TripAdvisor and OpenTable, organizing them on  
Google Maps, and selling ads next to content it didn’t generate.

In industry after industry, by offering services for nothing, Google  
has metastasized the modern economic dilemma: Everything is free, but  
no one has a job. This was probably inevitable, and maybe we should  
thank Google for forcing us to face reality now, and in such a  
dramatic fashion. But as we look back on the last 10 years, one thing  
is clear: Google should change its slogan from “Don’t be evil” to “Be  
everywhere.”

Source URL: http://www.thebigmoney.com/articles/0s-1s-and-s/2009/12/31/google-decade-ends
Links:
[1] http://www.thebigmoney.com/sites/default/files/091230_TBM_googleDecadeARTICLE.jpg
[2] http://www.thebigmoney.com/search/quotemedia/goog
[3] http://www.thebigmoney.com/search/quotemedia/yhoo
[4] http://www.thebigmoney.com/search/quotemedia/nws
[5] http://www.thebigmoney.com/search/quotemedia/via.b
[6] http://www.thebigmoney.com/search/quotemedia/t
[7] http://www.thebigmoney.com/search/quotemedia/ebay
[8] http://www.thebigmoney.com/search/quotemedia/aapl
[9] http://www.thebigmoney.com/search/quotemedia/dis
[10] http://www.thebigmoney.com/users/christhompson