Authors: Ken Auletta
Tags: #Industries, #Computer Industry, #Business & Economics
Googled (38 page)
Brin said he had dug deeper, reading genetics journals, searching for pieces of DNA shared with relatives. Ultimately, he learned that he shared with his mother the G2019S mutation. He spoke as if he were talking about someone else. The implications of this finding are imprecisely understood, he said. What was clear was that he had “a markedly higher chance of developing Parkinson’s in my lifetime than the average person.” Sounding like a scientist, he pegged the odds “between 20 percent to 80 percent, depending on the study and how you measure it.” This knowledge left him feeling “fortunate,” he said; the mutation had been discovered early in his life and he could reduce the odds through exercise, certain foods, and by employing his substantial wealth to support further research. With the audience seated in stunned silence, he concluded, “That’s all I wanted to say,” and sat down.
Compared with Steve Jobs, who had declined to discuss his own health and issued opague statements even as he grew visibly ill, Brin was admirably forthcoming. Yet it never seemed to occur to him to turn his attention to introducing to the audience his very pregnant, beaming wife, soon-to-be mother of a child who might very well carry that same gene. Certainly it did not seem to occur to him to display emotion, to allay the concerns his comments would arouse among Google employees or shareholders. What was billed as “a personal statement” was really a science lesson. The way Brin dealt with his DNA mirrored the way Google dealt with Washington, politics, or traditional media: just give us the facts, don’t blur them by discussing your fears or feelings.
The Justice Department did finally intervene against Google, informing the company that if it did not terminate its ad sales partnership with Yahoo, it would be sued for antitrust violations, just as Microsoft had been the previous decade. Three hours before Justice was to file antitrust charges, Google dropped the deal.
Microsoft did not capture its prize, at least not through 2008. However, by the end of that year Microsoft seemed eager to return to the bargaining table, if only to purchase Yahoo’s search business. Gates’s company continued to lose search market share, and emerged from this battle with Yahoo looking feckless and defensive, not the posture one assumes before a foe with Napoleonic power.
In the confusion, other media companies maneuvered to achieve their own best balance of power. In tactics worthy of Metternich, Time Warner pursued simultaneous discussions with Yahoo, Microsoft, and Google about either selling off AOL or forming a partnership. The News Corporation schemed to combine with Microsoft to bid for Yahoo and, at other times, with Yahoo to block Microsoft.
Among the more interesting aspects of this drama was witnessing Microsoft cheered on as an underdog. “Microsoft,” said Philippe Daumann, the CEO of Viacom, “is the one company that can most effectively challenge Google’s emerging dominance.” A victorious bid by Microsoft would provide advertisers with more leverage, Irwin Gotlieb said. “We’re always better off with more than one strong party.” He added, “The real concern is that once Google has an eighty percent market share, they can change the auction rules.”
At Microsoft’s annual two-day forum for advertisers on its Redmond campus in mid-May of 2008, the company’s new head of advertising, Brian McAndrews, was the first to speak. He described the online advertising opportunities Microsoft was offering, and sketched for attendees Microsoft’s pitch to advertisers: “We seek ongoing input from you.” He did not cite Google by name, but his meaning was clear: We seek to work with you as partners, and the other guy does not. On the final day of the forum, Irwin Gotlieb was eating scrambled eggs at a breakfast buffet, greeting people as they came by to shake his hand or lay a palm on his shoulder. Microsoft’s sales pitch, he told those who came to ask his thoughts, is not new. “They’ve been saying it for a while. Microsoft has never been perceived by people like us as someone who is looking to destabilize an existing business model because they feel like it.” They were not vying to enter the advertising business the way others were. He, too, did not invoke Google’s name, nor did he have to.
Microsoft intended to close the forum by presenting a new plan to overtake Google, a plan it privately touted as “a game changer.” Company executives took care to brief people like Gotlieb beforehand, seeking not just his input but his enthusiasm for a program they hoped would attract more advertisers, more purchases, and more searches. For the unveiling of this plan, Bill Gates, who would step down the next month from his day-to-day duties at Microsoft to concentrate on the work of his foundation, appeared on stage to announce what he called “a milestone.” He was tieless and jacketless, his sandy hair uncombed, and he stood at the foot of the amphithe ater and described the program they called Cashback. The idea was that Microsoft would offer a cash rebate to consumers who did their searches on Microsoft and clicked to purchase products from more than seven hundred merchants, including Barnes & Noble. In essence, Microsoft was offering a reward for consumers who used its search engine rather than Google’s. Yusuf Mehdi, senior vice president of strategic partnerships at Microsoft, helped shape Cashback and described it as “maybe a genius idea,” a program that would transform Microsoft into “the Robin Hood of the search business.” The initiative offered Google “two bad choices,” he said: duplicate Cashback and lose income, or don’t and lose market share.
Mehdi and Microsoft were spectacularly wrong. The program did not excite many of the ad agency people in attendance, partly because the Microsoft program already had a name in the advertising community: it was a rebate program. Perhaps it failed to excite because Microsoft didn’t come up with a catchy name and a finely tuned sales pitch—“geeks acting like marketers,” muttered one attendee. In the press too, Cashback failed to generate the headlines or excitement Microsoft anticipated. Still, the jury was out. “If consumers perceive that the search process on Google and Microsoft are the same,” predicted Sir Martin Sorrell, “what Microsoft is offering will be important.”
By November 2008, the verdict was in. Cashback had not boosted Microsoft’s search share. Google’s search market share in the United States had risen from 57.7 percent a year before to 64.1 percent. In September, when I asked Eric Schmidt about Cashback, he could not resist: “All attempts by Microsoft to give people back money they paid them is great!” By January 2009, the two executives who headed Microsoft’s advertising efforts, Brian McAndrews and Kevin Johnson, would depart.
Meanwhile, Sorrell, whose WPP steers an annual total of between five hundred million and eight hundred million dollars of his clients’ advertising dollars to Google, grew more agitated. What enraged him, he said on a panel at the Cannes International Advertising confab in June, was that Google was now reaching out and talking to his ad agency clients directly, something he claimed Google had vowed not to do. In WPP’s annual report, Sorrell noted that although WPP and the next three largest marketing companies combined had 50 percent more revenues than Google, their combined market value was 75 percent less. He expressed hope that Google was now working “to develop the constructive side of our relationship.”
Had he attended Google’s 2008 national sales conference, held June 11 and 12 at San Franciso’s Hilton Hotel, he would have been more alarmed. In the main ballroom, Eric Schmidt and Tim Armstrong were onstage. Below them sat a Google sales force of fifteen hundred people, one-third of whom had been hired in the past year. Why did Google need such an army of salespeople? “Because our customers must talk to someone at Google,” Schmidt said.
Many of these new Googlers were account executives, like the people who work for Sorrell or Gotlieb. And their mission, Schmidt emphasized in his remarks, was to share with advertisers the targeting techniques that made search advertising a rousing success. Online, he said, Google was pouring engineering resources into making itself the leader in display advertising on YouTube. In traditional television, he said, they started by “reaching into the long tail” and he expected that “over a five- to ten-year period ... we’ll become a very significant player in traditional television because of our targeting. The same thing when you look at radio or print.” Consumers of traditional media, he continued, “are scared. They’re scared of what they’re reading in the paper. They’re scared about what’s happening in their company. You show up and you offer a new message, a message of hope, a message of change and opportunity.”
Page and Brin showed up unannounced, and Schmidt spontaneously invited them to join him onstage. The troika sat in oversized armchairs and had a lighthearted colloquy before turning to the audience for questions. The first two were from a sales manager named Seth Barron, and both concerned missing pieces in Google’s effort: “How do we make it easier for agencies to work with us?” he asked first. It was a question that would have pleased Sorrell. The second question would not: “What resources do we need to be able to effectively compete for deals and eventually do bigger and better deals with companies like the Procter & Gambles and Mars of this world?”
“Today,” said Schmidt, “we lack the tools. We’ve identified this as a big hole in our strategy, and we’re either going to build them or buy them.”
“The piece that is missing is production,” said Barron. “The creative execution, the operational execution—those are the factors where we stumble today, and where our competition has world class solutions.” Later, Schmidt said that the “competition” Barron referred to was Yahoo and Microsoft and display advertising. But these are not the companies that produce “world-class solutions” to the puzzles of advertising. The true answer is probably that Google’s real “competition” is WPP and GroupM and their peers—the biggest players in the business of advertising.
THERE ARE THOSE WHO ASSUME Google has a master plan for world conquest, as Napoleon did. By early 2008, it was not unusual to encounter a traditional media executive who at the end of an interview whispered, “Have you read Stephen Arnold’s study on what Google is really up to?” Stephen E. Arnold heads a consulting firm, Arnold Information Technology, and starting in 2002 he and a team of researchers spent five years digging into Google’s various patents, algorithms, and SEC filings. Then, for a hefty but undisclosed fee, he sold his voluminous report to various media companies. The title of the report, “Google Version 2.0: The Calculating Predator,” telegraphs Arnold’s stark conclusion:
Analyzing “the Google” in a deliberate and focused way, we find that while Google may have started out to “do no evil,” it has, to some, morphed from a friendly search engine into something more ominous. Googzilla, fueled by technical prowess, is now on the move.
Where is it moving? The gruff Arnold, who responded to a phone call but refused to speak on the record to anyone who was not paying him, in his book often drops the scientific method in favor of a more fevered tone. Conjuring a monster, he repeatedly refers to the company as “Googzilla,” and writes that “Google stalks a market ... then strikes quickly and in a cold-blooded way.” Behind Google’s free food and volleyball games he sniffs a public relations scheme to “misdirect attention. Like a good magician, Google is able to get its audience of competitors and financial analysts to look one way” Meanwhile, “Googzilla is voracious, and it will consume companies presently unaware they are the equivalent of a free-range chicken burrito....”
Arnold and his researchers have uncovered enough information from their study of Google’s patents and algorithms to terrify media companies. As Wal-Mart reshaped retailing, Google, he believes, aims to become a digital Wal-Mart, an online shopping powerhouse that allows consumers to shop for the best price, an essential middleman that offers efficiency and data to advertisers, and shovels revenues to Web sites and services to merchants, including back-office computers that find the quickest and cheapest way to reroute their delivery trucks.
The world would have been better served if its leaders had been more paranoid in the 1930s; media companies would be better served if they were less paranoid and defensive today. If Google is destroying or weakening old business models, it is because the Internet inevitably destroys old ways of doing things, spurs “creative destruction.” This does not mean that Google is not ambitious to grow, and will not grow at the expense of others.
But the rewards, and the pain, are unavoidable. When Google Earth started displaying paintings from the Prado in Madrid, allowing users to zoom in and see the art as an up-close digital photo, it was giving many people access to art they would never see, granting them the time to study paintings that security guards in the bustling museum would never allow them. This was a wonderful opportunity to extend the public’s appreciation of great art. But perhaps we’ll learn that it wasn’t so wonderful for the museum’s box office. Just as the invention of the telephone crushed the telegraph, so motion pictures crippled vaudeville, television eclipsed radio, cable weakened broadcasting, and iTunes shattered CD music album sales. In some cases, new technologies brought new opportunities. The movie studios, after huffing about television, belatedly discovered a lucrative new platform to sell their movies. Exposure on YouTube has broadened the audience for
Saturday Night Live.
If advertisers can sell their ads more cheaply and better target them through Google, should they fret that they are harming Irwin Gotlieb’s business? What we don’t know is whether the new digital distribution systems will generate sufficient revenue to adequately pay content providers.
Saturday Night Live.
If advertisers can sell their ads more cheaply and better target them through Google, should they fret that they are harming Irwin Gotlieb’s business? What we don’t know is whether the new digital distribution systems will generate sufficient revenue to adequately pay content providers.
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