Is Google Getting Too Good?

By Orr, Bill

“Google’s mission is to organize the world’s information and make it universally accessible and useful” Thaf s the first sentence in their website’s Corporate Overview. They mean it. And by any measure they’re getting there.

A metered study by Nielsen/NetRatings in July 2006 measured the web search behavior of 500,000 people worldwide and found that 49.2% of their searches were done by Google. Runners up were Yahoo (23.8%), Microsoft (9.6%), AOL (6.3%-they use Google’s search engine), and Ask.com (2.6%).

A year later, Netapplications gave Google 55% of the worldwide searches, when Google UK and Google Canada were included.

The googling of the web is a story as revolutionary as the emergence of the web as a commercial tool. Amazingly it was just nine years ago that two Stanford Ph.D. candidates Larry Page and Sergey Brin, incorporated their Silicon Valley garage operation, whimskally naming it for the mathematical term “googol,” ten followed by 100 zeros. The name reflected their unique approach to search-look at every word of every page in the whole World Wide Web, not just the webpage title. Their trick for doing that was to use as many parallel processors as it would take. (Google won’t say how many processors it uses today, but published estimates range from 175,000 to “in excess of 450,000.”) About these arrays of computers at data centers around the world, one observer huffed: “They are so primitive I wouldn’t give one of them to my son for his high school work.” But they do the job. That is, first, to “crawl” through every webpage and capture its contents. Then the computers compile an index of all the elements.

In 2001 Google patented PageRank, their unique system for judging how closely each found website matches the search query. The system delivers to the searcher a list, with “snippets” of contents, of dozens, hundreds, tens of thousands, or millions of websites that best match the search query. Then it ranks them in the order of their likely match to what the user intended. To determine what most closely matches the user’s intention, the system analyzes the words and content of each page, using an algorithm with more than 500 million variables and two billion terms. PageRank weighs the “vote” of each page’s intrinsic relevance, apart from the specific words in the search query. The whole process is automatic and normally takes less than half a second.

The strategy has obviously paid off big time. Its second quarter report showed $3.87 billion in revenues, up 58% from the previous year; and $1.22 billion in operating income (29% of revenues, 4% lower than first quarter 2007). The firm had $12.5 billion in cash on hand as of June 30, 2007, and 13,786 employees.

Where did all that money come from?

A big share of profits comes from advertising. Two closely meshed programs, called AdWords and AdSense, drive Google’s ad revenues. The program’s goal is to attract leads and turn them into sales at the lowest cost. For some time, advertisers have knowjj that digital advertising does this better than alternative marketing media. In his 2006 book The Search, John Battelle cites these customer- acquisition figures from Piper Jaffray: $8.50 per customer with search; $20 with yellow pages; $50 through online display ads; $60 with e-mail; and $70 with direct mail.

Using AdWords, an advertiser creates text ads for placement throughout the web where they will likely attract the most qualified prospects. Those digital ads are worded to motivate that prospect- then looking at another webpage-to click on the Google-enabled ad there and be transported to the advertiser’s webpage. What magic words have the best chance of doing that? Google answers: put words in the ad that match the search words or the content of the page where the prospect went in an unrelated web search. The advertiser can put in one ad as many such words as she wants to. Since Google knows all the words in all the webpages, it’s in a good position to suggest the matching words-or even a whole text ad. Google’s AdSense program does all this automatically, on a large scale, with expert help from Google. The advertiser doesn’t pay anything until the prospect clicks on her ad. The webpage publisher shares the payment with Google.

This summer, Google announced another ploy in leveraging its advertising assets by joining with Salesforce.com, the leading hosted software service provider, to integrate Google’s AdWords into Salesforce’s customer relationship management system.

A controversial acquisition

In April of this year Google announced it will acquire,sfpr $3.1 billion in cash, San Francisco-based DoubleClick, a global leader in digital display advertising and management of campaign strategies for media sellers and buyers. Google says that theracquisition will provide, in one place, the best possible way for agencies and advertisers to manage both text and display ads. This will optimize ad spending across different online media, using a common set of metrics. The merger will also benefit users by increasing the relevancy of search results, and it will give online publishers access to new advertisers, Google says.

Objections to the acquisition come from two directions: fear of creating a monopoly in digital advertising and invasion of user privacy. One letter to privacy regulators feared that “Google will vertically leverage its own keyword search dominance with DoubleClick’s leadership in online banner/video display advertising, and with its YouTube’s dominance in video search.” (Google acquired YouTube in 2006 for $1.65 billion in stock).

Privacy objections center on the basic principle that users who have given personal information to YouTube could not have expected- and possibly not wanted-that information to be used by Google. Anyway, privacy advocates argue, if personal information about what you buy, read, support, oppose, find interesting, and so on is too widely accessible, it will inevitably tempt some party to abuse legitimate purposes in pursuit of private gain. And a government can compel an information provider to reveal the behavior of individuals or even thousands of suspected wrongdoers.

The best solution is to forestall creation of a worldwide database of everybody’s personal information, privacy advocates say. While they recognize that most people do not object to present uses of private data to help them make purchasing decisions, privacy advocates say that the digital advertising industry should at least adopt an “opt in” policy for governing the use of personal information; i.e., do not use the information unless each user explicitly assents. The alternative “opt out” policy now prevails and is supported by advertisers, most governments-and the ABA. Let the market decide which way to go, they say. Google’s policy is a mix of both options, depending on the context and what they want to use the information for.

The ongoing privacy debate currently centers on the issue of how long information providers like Google can retain personal data. While privacy advocates are saying that no retention at all is just about right, the movement of insider opinion seems to be toward limiting the retention period. Google led off with an 18-month period; Yahoo and Microsoft followed suit. Ask.com, the number five player in the search field, came up with AskErase, which allows a user to expunge some personal data from the provider’s files. All providers will likely say they must be allowed to retain some personal information that is essential to managing the service with search data indexes and cookies (software that tracks a user’s path across and within websites).

Earth and stars

Over the past several years Google has branched out into other hosted software services, among them a search facility for enterprise intranets and GoogleMaps, which lets small businesses show their locations, along with inducements such as discount coupons. More significantly, this summer Google began offering Sun Microsystems Star Office as a free downloadable alternative to Microsoft Office 2007.

So, is Google too good? It has its detractors, as noted, and they will likely multiply as the company continues to expand its reach. But consider that Google has already embarked on a project to use its computing power to make every out-of-copyright book available to anybody on earth with an internet connection. Extend this and you get all the world’s published knowledge available to everybody at no cost, except the sacrifice of some privacy. So far, most people seem willing to accept that deal.

By Bill On, contributing editor, who writes from Waterbury Center, Hwww.billorrr@bert.orq

Copyright Simmons-Boardman Publishing Corporation Oct 2007

(c) 2007 ABA Banking Journal. Provided by ProQuest Information and Learning. All rights Reserved.