Google Considered Too Big To Fail

theodp writes "Doc Searls is worried about the way Google makes money. 'Nearly all of it comes from advertising,' he frets. 'That's what pays for all the infrastructure Google is giving to the rest of us. As our dependency on Google verges on the absolute, this should be a concern.' Have we reched Peak Advertising? Blogger Dave Winer says amen, asking if Google is already 'too big to fail.'"

Re:What a doorknob

[Stook]

Not quite. The auto industry was bailed out because of the massive amounts of people it employed that would have lost their jobs. The banks were bailed out because small business and the average Joe didn't have alternatives to go to for credit. With Google, businesses could easily redirect their advertising revenue somewhere else. People could search with someone else. Email is everywhere. Google is massively convenient, but it's not a cornerstone of our economy.

Re:What a doorknob

[Anonymous Coward]

Trabant.

Re:OMG! Bailout.

[RingDev]

(Think Saturn. They weren't unionized, but profitable.)

Uhh, Saturn was unionized (UAW) and was only profitable for 1 year out of its entire existence (1993).

Not to say that the union was the problem, but not having a union does not give you the able to ignore trends, consumer demands, and quality controls and still have a successful company.

-Rick

Re:They can always start charging.

[tjstork]

if google would fee me lets say about 5 euro a month to use google.com I would pay

Shoot for $5 a month. 5 Euro is like, real money!

Re:What a doorknob

[mh1997]

No, he meant the depression of 1920 which was over by 1921. Reread his post jackass. http://en.wikipedia.org/wiki/Depression_of_1920%E2%80%9321 [wikipedia.org]

Re:What a doorknob

[Anonymous Coward]

Your sources are wrong. The Department of Commerce estimates a 6.9% decline in GNP during the depression of 20-21, not 29%. Christina Romer is famous for her work on depressions and she estimates it at 2.4% decline. That is trivial by Great Depression standards. Consequently unemployment peaked at 8.7% (Romer), well below even our current recession. The only way it was more severe than the Great Depression was the one year rate of deflation, 14.8% (Romer). Most importantly, the government DID INTERVENE. The Fed aggressively cut interest rates by almost 50% in one year, in half point chunks. Back then they had the right to actually set bank rates, not just their own rates. THIS IS EXACTLY WHAT KEYNES WOULD HAVE PRESCRIBED. There was no liquidity trap so there was no need for fiscal stimulus.

"Natural Born Clickers" vs. Google

[Animats]

Read "Natural Born Clickers [comscore.com], the ComScore study referenced in the article. "Only 8% of Internet users now account for 85% of all clicks". And that 8% has lower than average income and doesn't buy much on line.

The basic problem with Google's business model is not a killer problem for Google. It's for all those sites sucking off the "Google Content Network" teat. Ads on search results have value because they're presented at when the user is looking for something. Random ads on web pages aren't that valuable to advertisers. Most advertisers run them because Google's AdWords systems bundles them with search ads. (Advertisers can opt out, but the opt-out checkbox is hidden and doesn't opt you out of everything.) Worse, Google charges the same price for a click on a search result ad and a Google ad on some random site, while studies show that the search result ad is worth maybe 20x the value of the ad on some random site.

Amusingly, Google offers a lower price for the "content network" ads, but they only tell advertisers about it when they try to opt out of the "content network" program. [semclubhouse.com]

The big advertisers have figured this out. Note how few Google ads on random web sites are for major brands. Google tries to keep advertisers from developing metrics to measure click-through value; the AdWords contract prohibits advertisers from sharing their click stats. But enough information has leaked out that advertisers are getting wise to this. There's now a Content Network Cleanser [contreo.com] product to kick bottom-feeder sites out of an advertiser's campaign. But it's retrospective; you pay for useless clicks, then find out about them and block those sites.

A shakeout is coming. As more advertisers get wise to the uselessness of the "Google Content Network", they'll opt out, while keeping their search ads. Google will have to cut the price for ads on third-party sites. This will put the screws on all the sites whose entire revenue stream comes from those ads. (Like Slashdot.)

This won't kill Google, but it may cut into their revenue.

Re:What a doorknob

[Anonymous Coward]

That's the opposite of what your parent poster said, idiot.