The Googlization of Everything. Siva Vaidhyanathan
these developments have occurred as part of the dance between these two behemoths. Among the arenas where that dance takes place are the law courts and the halls of regulatory agencies. Microsoft suffered some major legal hits in 2000 when regulators in the United States and Europe cracked down on its abusive practices that had limited competition in the Web browser market and threatened to lock down Microsoft’s advantages in a number of markets. By 2008, Microsoft was pushing for regulators to rein in Google’s ambitions and initiatives. Microsoft’s complaints were a key element in scrapping the proposed Google-Yahoo collaboration on Web advertising in 2008.23
Bing did not threaten Google’s core revenues. Chrome will not threaten Microsoft’s core revenues. But in the event that something changes in the world and one firm or the other undergoes a serious change in structure or personnel (because of pressure from new firms, consumer uproar, or government actions), the other would be poised to capitalize on the shift.
Among the most interesting responses to Google’s dominance of search in Europe and North America was Quero. Funded in 2005 by a partnership between the governments of France and Germany, and with the support of the European Union, Quero was intended to correct for the perceived American cultural bias inherent in Google. Underfunded, slow to develop, and unable to resolve disputes between France and Germany over Quero’s scope and role, the project died in 2007. As of 2010, Google is more popular than ever among European Web users.
None of these new search initiatives are compelling enough to wrest major portions of the search market away from Google, which is just so good at what it does, and clearly getting better every day. Even a slightly better service, result set, or interface design makes almost no difference to users. Google is now the comfortable choice for most users, and its array of services makes it undeniably useful. By default, it’s easier to stay in the Google universe. One must consciously act to move beyond it (although, as I discuss in chapter 4, Google’s dominance does not extend to some of the largest and most interesting markets in the world: Japan, South Korea, Russia, and China). Ultimately, Google’s overall dominance matters chiefly if we are concerned with the intellectual and cultural health of the Web. And if we are worried about the economic effects of Googlization, we must follow the money. Users have no stake in questions of market share. Firms that advertise on the Web, however, do.
ADVERTISING
At least in terms of revenue generation, Google’s core business isn’t facilitating searches, it’s selling advertising space—or rather, selling our attention to advertisers and managing both the price it charges for access to our attention and the relative visibility of those advertisements. In this field, Google is more than successful: it is simply brilliant.
In the era before Google, firms created products that they sold to customers by means of advertising that conveyed information to potential buyers. Google has completely reconfigured this model. Its own product, as I have said, is in fact the attention and loyalty of its users. While Google provides users with the information that they seek, seemingly for free, it collects the gigabytes of personal information and creative content that millions of Google users provide for free to the Web every day and sells this information to advertisers of millions of products and services. Through its major advertising program, AdWords, Google runs an instant auction among advertisers to determine which one is placed highest on the list of ads that run across the top or down the right-hand column of the search results page.
Using Google is far from free.24 Users incur up-front, sunken costs (computer hardware) and regular utility costs (Internet service), but Google doesn’t profit from these costs. Google’s real customers are the advertisers who pay Google to compete in an auction to rise to the top of a list of “sponsored results” that frame the “organic results” of each search. Content creators have passively allowed Google access to their sites for the privilege of being indexed, linked, and ranked. The data on who cares about which of these sites is accumulated, and access to those potential consumers is sold to advertisers at a profit.
It’s here that some troubling effects of the Googlization of everything start to become apparent, and where existing efforts to deal with those problems have fallen short. If there is one market in which Google has an inordinate share and exercises alarming power, it is Web-based advertising. In 2008 Google earned more than $21 billion (97 percent of its revenue) from online advertisements. In contrast, Microsoft lost $1.2 billion in its online advertising business. Google gives away most of its services to users for free in exchange for their attention. Microsoft, by contrast, leases software to consumers so successfully that it has been among the fifty wealthiest corporations in the world for most of the past fifteen years. Viewed in these terms, it’s inaccurate to consider Microsoft as even being in the same business as Google. The parties most concerned about Google’s dominance in the field of advertising on search engines are not Google’s ostensible competitors like Microsoft, but the companies that buy slots to run the small bits of text that sit to the right and just above the search results on most queries—the advertisers themselves.
Google did not invent contextual advertising on the Web, but it certainly mastered it. A long-gone search-engine company called GoTo.com developed a way to link search results to advertisements in 1998.25 By the time Google decided to adopt that practice in 2002, it had settled on an ingenious way to sell the best positions around a search term: an instant auction. If a user types “shoes” into a Google search box, Google’s computers instantly solicit bids from shoe vendors. The highest bidder—the firm that offers the most money per click, with a clear ceiling of maximum clicks it is willing to pay for—gets top placement.26
This formula often has served the interests of small firms better than large firms. Large firms can afford to waste money on advertising. Small firms must target their ads as carefully as possible. They don’t need to scream at millions of people that they should be buying some brand of weak beer. They need to attract the attention of potential consumers who have expressed interest in, say, Bavaria. For this reason, Google needs to understand how patterns of searches indicate behaviors. If Google can customize the placement of ads, giving a user results listing only local shoe stores or only Bavarian lager, then it can generate more clicks per advertisement. This maximizes revenue without necessarily pushing a small firm out of the advertising market or out of business. Google takes its money in small increments millions of times per day rather than by using the network TV model of taking millions of dollars a few times per day. In addition, Google can demonstrate to firms that these advertisements do indeed attract interested customers. There is no such clear feedback with expensive broadcast advertisements.27
Google’s method of generating and selling advertisement placement is brilliant. It uses an unusual auction system that ensures bidders do not overpay for their winning bids. The bidding occurs dynamically and instantly on the initiation of any search. The results—the order in which ad links get placed on the results page—are determined by a number of factors, including the preferences and Web habits of the individual user or population of users in the general area (thus allowing local results to show up). Google does not charge the winning bidder the amount it bid, but instead the amount of the second-place bid, so that bidders need not fear placing a needlessly high “sucker” bid; it thereby helps small firms compete with large ones. And earning the top place in a search for a term like “shoes” or “cars” is in part determined by the “quality” of the bidder’s Web page as well as the amount of the bid. In other words, Google ensures that firms bidding on terms such as “shoes” and “cars” actually offer shoes and cars. Thus customers do not fall victim to “bait-and-switch” tactics and lose trust in Google’s advertisements. This system not only enhances consumer satisfaction with Google’s service but also, as I state above, helps keep the Web clean. If a firm’s site does not say what it means and mean what it says, or if it installs malicious code onto users’ computers, or if it is just ugly and complicated, Google will not reward that site with revenue, no matter how high the bid. This system has generally kept firms happy, consumers happy, and Google’s stockholders very happy.28
Google has not abused its market position in online advertising in any obvious