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Why Even Ask The Question?

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By Andrew Goodman

The question was “Is Google Too Powerful?” In true Clintonian fashion, I’d like to say it depends on what you mean by “Too.” (I guess the full Clinton treatment would have us questioning the meaning of “is”, too. Let’s keep it simple.)

I think most people get the idea of what we mean by Google, at least, though as I write new material for Ed. 2 of Winning Results with Google AdWords, I am running across some very basic facts that I think might completely escape the world that resides outside our relatively informed circle of technorati & advertising gurus.

For example: think back to January 2005, when we were able to mull over where the online ad wars were heading. Google had reported full-year 2004 revenues of $3.19 billion, and folks were wondering if this was going to level off. Did it? Not even close. In two years, that number more than tripled, to $10.60 billion. And wait for it, pretty much the entire thing is still from one source: ad revenue.

Here’s another interesting nugget: Google spent a good part of that time actually clamping down on “bad” sources of revenue — click fraud, weak publisher partners, etc. The proportion of revenue in 2006 from non-Google-owned properties actually dropped to 39.65% from over 50% two years earlier. Google, then, has enjoyed much of its recent revenue growth from Google-owned properties, and those properties, especially search, have gained market share. Meanwhile, the “partner revenue” has been tightened down and quality initiatives have been put in place so the stage is set for further uncontroversial growth into new formats and channels.

I think we all know what powerful means, roughly. Google is very powerful.

In addition to their major revenue generators, they connect many of our online lives with an increasing array of powerful free services. They can and will acquire and create more such services. This is the position that Yahoo and Microsoft were once in. There are myriad reasons the tide shifted so dramatically; a major one of course is how great people follow winning momentum. How are you going to out-compete the leader if they’ve got all the great people? Fortunately, Google doesn’t have all of them. Some people might not even want to work for such a big company, especially given the fact that options windfalls for employee #12,500 don’t add up to anywhere near what you’d have got for getting in at #75.

At the end of the day, I wear a very recognizable hat: that of a businessman who facilitates clients’ profitable use of Google’s advertising services; and secondarily, one who works on certain side projects and content production (including major search conferences) whose activities revolve largely around what Google’s up to.

I hardly think I can be an objective commentator. In the course of our daily work, the quality, price point, and innovation of Google’s products means a lot to me and my colleagues. I recommend Google’s products and services in spite of the fact that Google is, by any rational historical standard, enormously economically powerful. I didn’t wake up yesterday and find myself shocked by this outcome, because I’ve been writing about major search engines-slash-portals-slash-media-companies making utter domination their goal, ever since I reviewed the state of the portal wars in September 1999 (back when Google was only a startup and had no significant revenue).

Is an enormous economic and technological behemoth, the likes of which should soon come to dwarf Microsoft, “too” powerful? It all depends on what you mean by “too.” The only way you’d arrive at the conclusion that they aren’t too powerful is to recognize that they have not strayed into all kinds of crazy forms of vertical integration and buying up of economic chokepoints just for the hell of it because they have $10 billion lying around and the ability to raise $50 billion more at the drop of a hat. They might continue to increase their dominance of advertising and online traffic flows, but there are other things they’re not doing… yet. So, planet, that’s your only consolation. Google has stuck to its knitting. They’re a great company as a result.

Why even ask the question? Historically, that question gets asked when it’s time to protect citizens and other businesses against the incursions on freedom that go hand-in-hand with monopolistic behavior. (Roughly speaking, it falls under the general heading of regulation, with the extreme end being like the antitrust suits brought against Microsoft.) Google would do well to build in and encourage checks and balances against itself. Because when you get this big, right or wrong, eventually the political tide turns against you… as sure as you can say “somebody break up those Red Sox.”

Andrew Goodman is founder of Page Zero Media, a Toronto-based search marketing agency, and co-founder of Traffick.com, an award-winning industry commentary site.