Google`s Influence on the Internet Through its Ad Network

Google has a reputation as a playful, harmless company that strives to do good, or at least, to not be evil. In fact, the search giant has a stronger grasp on the Internet than most people seem to realize. Don’t believe it? Keep reading.

Sometimes to see the whole picture (or clearer version) you need pieces of information you did not have before. The real irony is, you are not aware of those vital pieces, until you discover them, and before discovering them you assume you have pretty good grip on things. Once a piece of vital information comes in, the paradigms shift and you can see from a higher altitude than you could before. Some refer to those as "Aha" moments.

Reading Scott Cleland’s Googleopoly: The Google-DoubleClick Anti-Competitive Case, I had one of those “Aha” moments, that gave me a new perspective on the real influence Google has on the Internet. I can now see how tight Google’s grip is on things, and why Microsoft, along with Yahoo, might never be able to catch up. I highly recommend you read three of Scott Cleland’s papers.

Personally I am very skeptical of the guy himself, but he does have a very knowledgeable perspective on things. Many arguments are weak, and some are extremely biased, so you have to get through the clutter to get the gems. Here are the three articles I recommend:

  • Googleopoly II Google’s Predatory Playbook to Thwart Competition

  • Googleopoly III Dependency: The Crux of the Google-Yahoo Ad Agreement Problem

  • Googleopoly: The Google-DoubleClick Anti-Competitive Case

The papers were written in opposition to Google on the Google-DoubleClick and Google-Yahoo deals.

One of the “fun” things to overcome for me was Google’s brand perception, which was of a playful, harmful, “don’t be evil” company. Google does a good job of maintaining this brand perception though public relations and brand management, but if we open our eyes, we’ll realize that with $30 billion at stake (or whatever the online ad market estimate is), the company cannot, even it wanted to, be “nice” and “harmless.”

Google has successfully built a platform that monetizes the content of other people, first though search, and then through a contextual network.

Let’s explore Google’s core revenue sources

 

Percentage

Billion Dollars

Search ads

66.2%

$3.672

Contextual ads

30.3%

$1.680

Other

3.5%

$0.189

Now let’s look into Google’s market share:

 

US

International

Search

~60% exclusively and ~70%+ with AOL, Netscape, and other distribution deals.

~75%

Display Ads (along with DoubleClick)

~65%

no info

Google, together with DoubleClick, controls 69% of the online search market share, which is display, contextual and search. Before we move further, we need to understand real impact of the Google-DoubleClick deal.

Contextual vs Display

Display ads are used for branding. Contextual ads are used for revenue generation, BUT from the platform perspective, there’s little difference between contextual and display. Both require similar code, and if Google chooses to, it could serve display ads instead of text ads on any website.

Look at it this way: an offline merchant with a store in downtown New York can place a sign on his front window that says “come in and buy,” or he could place one of his products on display. All he has to do is make a choice between a text sign that says “come in and buy” and a physical product. The same goes for DoubleClick and Google’s contextual network. Google could quickly change all of its text ads to pictures, and conversely, DoubleClick could quickly change all of its display ads to text ads. It’s just a matter of code.

The purpose of the above explanation wasn’t to suggest that Google will use DoubleClick to show text ads or vice versa, but to show the real similarity between the DoubleClick network and Google’s contextual network (AdSense). The only real difference between the two is the code (and of course the customer base, but I am speaking of technicalities). Google chooses text ads (and found them to be better revenue generators), and DoubleClick chooses display ads. Both can show either display or text ads if they choose to (though it’s expensive, time consuming, etc).

Google did not purchase DoubleClick for $3.1 billion (twice as much as Microsoft offered) because of its relatively modest $300 million annual profit, but for the strategic leverage the DoubleClick network gives Google. DoubleClick was the first network of its kind, and it held 60% of the display market. Combine that with Google’s AdSense textual ad network, and Google has 60%+ dominance of all online advertisements.

Google controls over 60% of all contextual ads, both display and text. Let’s investigate further to see how contextual advertisements influence the Internet’s economy.

On the Internet, advertising proved to be the ONLY effective content monetization strategy. A subscription-based model does not work, as people refuse to pay for content on the Internet. As a result, content providers rely on advertisers to pay their bills and to make a profit, while offering free content to end users. Advertisers pay for Internet content. (look at the ads on SEO Chat all around this article; those ads paid for this article).

This is where Google leverages immense power – it is the biggest provider of advertiser dollars to websites that rely on advertisements for profit. Google controls 60%+ of all advertisements that flow in contextual networks. Its competitors, Yahoo Publisher Network, Real Media 24/7, Adcenter Network, Altlas, etc share the rest of the 40% pie with 25%, 10%, 5%, etc, but NONE can match 60% power for BOTH text and display ads that the Google-DoubleClick combination offers.

Thus Google can effectively provide more advertisers to content publishers, and more importantly, highly relevant ads. This is another core advantage of having such a broad network.

The broad network gives Google immense indirect control over independent publishers, who constitute the core of free Internet content and rely on Google for advertising dollars: MySpace, AOL, Ask.com, about.com, AT&T.com, Earthlink, NYTimes.com, CNETSearch.com, Lycos.com, shopping.com, engadget.com, Digg.com, dogpile.com, business.com, HowStuffWorks.com, Techtarget.com, MyWebSearch.com, Information.com, Infospace.com, foodnetwork.com, blogthings.com, netscape.com, Compuserve, Luxist, US News and World Report, CBSSportsline.com, Carconnection.com, MarthaStewart.com, Morningstar, HotorNot.com, tripadvisor.com, Oingo.com, dealtime.com, PlentyofFish.com – and on and on.

Take away Google, and stock prices of the above companies will go down, since none of the competitors can match Google in the number and quality of advertisers, along with the quality of advertising technology. Add millions of small publishers to the companies above, and you’ll see that Google’s influence over the Internet spans far beyond search. It goes right into the heart of the Internet – content.

Google is like a giant spider who has spread its net all across the Internet, and each time you get on that net, you give more power to that spider.

Google has built the most effective system for third party content monetization. It does not need to produce content like Yahoo or MSN; there’s more than enough on the web. All it has to do is offer an unrivaled monetization system, and content finds Google itself.

On top of having the most influential content network in the world, Google has the largest copy of the Internet on its servers, which it regularly updates through spidering.

“Our mission is to organize the world’s information and make it universally accessible and useful.”

Google’s mission statement becomes clearer as you realize that Google is taking this mission statement seriously. Google knows a search engine is only as good as the amount and quality of information it searches. By having the most information to search, it has the highest chance of serving quality information to searchers.

Google is moving in line with the mission statement by scanning libraries of books, spidering the real world with Google Streetview, scanning old newspapers, etc. It also knows that it will win the broadest user base by having largest amount of searchable information, and it will sell the most ads by having the broadest user base.

By putting up a snippet of AdSense or DoubleClick code you essentially give Google permission to track each click, and each visitor on the website (think of Google Analytics). With so much tracking power throughout the web, plus search, plus its toolbar and other services, Google can track ~70% of the Internet population.

Every time you see a DoubleClick display ad, Google knows you’ve been on that site, how long you stayed etc, and the same goes for sites that use AdSense.

Multiply that tracking leverage with a broad search history about each user, keywords they used and sites they clicked, and you’ll start to see that Google knows a lot more about any target audience to deliver relevant ads than any other company on the web.

On the topic of fairness, as we understand Google more and its monopolistic intentions, we also have to recognize that Google has gained literally a god-like status on the Internet though a fair game.

Look back a few years ago to the hundred million dollars worth of free word-of-mouth marketing that was distributed for Google by me and you. Big G holds its position not through deceit, but through fair game, and power which we gave to it. Now it us using that power to monetize and reshape the Internet. 

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