Peak Google: From Utility to Rent Seeking
In 2020 we’re close to peak Google. In fact the basic concept of internet search from the days of Alta Vista and Lycos is long due for an overhaul (disruption is Silicon Valley speak).
Internet search is starting to fail both those who buy ads, thereby funding search engines, and those who use the likes of Google and Bing to find things. This may seem like an odd statement to make given that Google is one of the most valuable companies in the world. It’s worth remembering that Yahoo! and MySpace were once ubiquitous. Digital lifespans are short.
Spurious data, spurious ROI
The appeal of online advertising with Google is that companies get tons of data wrapped in faux-scientific legitimacy. In theory, this beats having to trust instinct and creativity in advertising. In practice you get dataism: a bunch of managers with no background in data science making bad decisions under the auspicious of being data driven.
To quote from The New Dot Com Bubble is Here:
Luigi’s Pizzeria hires three teenagers to hand out coupons to passersby (sic). After a few weeks of flyering, one of the three turns out to be a marketing genius. Customers keep showing up with coupons distributed by this particular kid. The other two can’t make any sense of it: how does he do it? When they ask him, he explains: “I stand in the waiting area of the pizzeria.”
Much of the supposed ROI of search engine advertising comes from this phenomenon. It’s surprisingly hard to filter out people who would have clicked a company’s link whether it was an ad or not from those would only have clicked an ad.
Nonetheless, the article continues:
Brand keyword advertising, the presentation informed [Tadelis], was eBay’s most successful advertising method. Somebody googles “eBay” and for a fee, Google places a link to eBay at the top of the search results. Lots of people, apparently, click on this paid link. So many people, according to the consultants, that the auction website earns at least $12.28 for every dollar it spends on brand keyword advertising – a hefty profit!
Tadelis didn’t buy it. “I thought it was fantastic, and I don’t mean extraordinarily good or attractive. I mean imaginative, fanciful, remote from reality.” His rationale? People really do click on the paid-link to eBay.com an awful lot. But if that link weren’t there, presumably they would click on the link just below it: the free link to eBay.com. The data consultants were basing their profit calculations on clicks they would be getting anyway.
Of course, this turned out to be the case after running an experiment:
Three months later, the results were clear: all the traffic that had previously come from paid links was now coming in through ordinary links. Tadelis had been right all along. Annually, eBay was burning a good $20m on ads targeting the keyword ‘eBay’.
At first glance this looks like a Graebberian example of a bullshit job. Middle managers come up with some KPIs that are easy to hit, sound impressive but are utterly meaningless. It’s in nobody’s interests to challenge such a system. Executives are pleased with the KPIs and dutifully pass along the results to investors via a report that will be skimmed without ever being seriously vetted.
This probably describes a fair amount of mindless brand keyword advertising. Nonetheless there’s something deeper afoot.
Jason Fried tweeted:
When Google puts 4 paid ads ahead of the first organic result for your own brand name, you’re forced to pay up if you want to be found. It’s a shakedown. It’s ransom.
Let’s take a detour to the rosy past. If Ethel had paid the phone company to list her dress shop’s phone number where I expected to find Lucy’s Dress Shop, that’d be fraud. It would be a protection racket to demand that Ethel pay more than Lucy to have her own name displayed in the ‘E’ section of the White Pages.
The Yellow Pages are a different story, of course. If I search for “Dress Shop” it makes sense that Lucy and Ethel can and should compete to place an ad for their respective dress shops.
Given the figures posted for eBay (20 million a year), Google makes more than chump change on their brand name protection racket. If I were do something akin to that in printed media, I’d be in a world of criminal and civil litigation. Google should face the same consequences.
The other major problem with calculating the true ROI of online advertising, is the lack of third party verification. If a company takes out an ad with a radio or TV station, getting a rough idea of the audience size is possible via neutral third parties. Understanding the effectiveness of the ad is also possible, albeit expensive, via a third party market research firm. The reliance on the party selling you ads for the data that justify paying for the ad make it incredibly hard to tell whether a potential customer saw and clicked an ad or some hapless click farm worker in Bangladesh did.
Who searches anyway?
As ads become more expensive and the ROI more dubious, another question businesses have to ask themselves is whether people are even ‘googling’ that much anymore.
I like personal stories and people sharing their experiences. For anything related to whether I should buy something or not, I head to Reddit.
When I need a hotel, I go straight to booking.com. If I need information, I go straight to Wikipedia. I’m doing fewer and fewer searches of the whole internet.
Anecdotally, this seems a pretty common trend. Humans are tribal and will go to Pinterest, NextDoor or other social networks first. Even Yelp is more useful for finding a place to eat than Google these days.
As more people use voice activated search, the old days of typing everything into Google and dutifully seeing ads in the results are coming to an end.
The SEO landfill
Part of the reason I do less searching is that the results are terrible. The internet is an SEO landfill.
Up until the early 2010s, searches would yield rinky-dink personal sites. You could find a lot of great stuff on a personal level just by googling. There were also plenty of authoritative sites with quality information. We’re going to look back on this as the glory days of the internet.
Now when I search, I get mostly spammy content marketing pages. 1.5k words to answer a simple question or post a recipe (that’s optimized length!), unnecessary stock photos (the old days of posting neat, not overly edited pictures to Flickr are long past…) and a bunch of links to some product. These are easy to recognize and most of them are churned out in overseas SEO content farms. They provide me and other humans with no value. They exist solely to game Google bots.
Simply put, I don’t use search engines to find quality content anymore. Sure, the quick search here and there comes in handy, but I’m not googling like it’s 2010 anymore.
In terms of getting new info, the old is new: RSS, Podcasts and email lists are king. Traditional media like the Atlantic can’t really come to terms with Joe Rogan or how Jordan Peterson became so popular without ‘anyone’ noticing.
For better or worse, getting onto these mailing lists, feeds and podcasts is where good marketers are going. Not AdWords.
The paradigm shift in waiting
For an industry that considers itself innovative, the tech world is hemmed in by convention and group think. There are signs aplenty that the mantras or scale, more data and more personalization aren’t working.
The fact that the NYT was able to stop using targeted ads in Europe without loosing any ad revenue, should have been a game changer. What’s the need for all of this expensive ad tech if it’s not increasing revenue for publishers?
The search-ad model isn’t going to die overnight, and there’s nothing to say the next model won’t be worse. But, the process is beginning.