Wednesday, May 16, 2012

Is Google doomed?

By Carl 

One might begin to see the seeds of its decline here

iMore reports that Google may make four times the ad revenue off of their use in iOS than they do from their own Android platform. Apple wants to change that. Apple has already begun intermediating search queries though Siri, effectively cutting Google out of the valuable identity information associated with those searches. Next up is that other large data components on iOS, maps.

Google's revenue stream is based on advertising coupled with its unique monopoly on data-farming. In layman's terms, Google's software can extract information from you and sell that information to advertisers. Worse, it can do this on a micromanaged level: every click-thru you make from a Google page is one more data point, and eventually, the blizzard of data you provide presents a frighteningly accurate profile of who you are.

Most people come across a Google page at least once a day (I'd bet it's a lot more often than that) whether it's the search engine or a Gmail account or Google+. The only website that could possibly rival it for data-farming would be Facebook, but Facebook has all those stupid games and apps that really don't tell that much of a story (apart from the fact there are a frighteningly large number of would-be farmers out there).

Most people don't opt out of this data dump by signing out of their Gmail or other Google accounts. It's plain laziness coupled with a "who cares?" attitude. Not unreasonably, I guess I should add. After all, for the most part, it's pretty benign tracking and the convenience of being presented with targeted advertisements is in some respects a plus: imagine if you turned on your television and instead of seeing reverse mortgage or penis pill commercials, you saw commercials about things you care about, like raising your kids or your favorite hobby?

So Google's livelihood is wholly dependent on being able to quickly amass data and quickly provide that data to its advertisers. The question becomes, then, what happens when its data becomes fuzzy or inaccurate?

The advertising becomes less effective -- click-thru wane. Views-per-sale spikes precipitously as the inverse, sales-per-views plummets. The personalization and tailoring of advertisements becomes more generic and less targeted.

In other words, if you thought Google's mad scramble to get into mobile telephones was silly and ridiculous, guess again. They saw the writing on the wall: computing had to become less and less about the computer and more and more about on-the-go data access -- mobile computing.

I suppose the writing on the wall for Google parallels that of Microsoft's: brand extension into areas in which it had no expertise (the X-box, pen-tablet software, BOB) because it saw the demise of its core business as a real threat. Think about the last time anyone got excited about the next Windows software. System 7? Oh wait, that was Apple. Windows 95? Ever since, Microsoft has wasted billions of dollars on software development (Steve Ballmer estimates that the development of Vista cost 200 man-years more than it should have).

The parallels are pretty remarkable, and seem to fit how American businesses operate over the past century: a spectacular rise to market dominance followed by a plateau where innovation is hard to come by and market forces begin to intrude on the business itself, and then a meteoric plummet to at least mediocrity if not outright obsolescence.

There's a lesson there for any business in this nation: you don't want to become so big that you can't be nimble.

(Cross-posted to Simply Left Behind.)

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