There is something you need to understand about Google. It’s not a normal company. It’s not even a normal technology. Google is a revolution in our business practices, our media, our privacy, our governance and our democracy.
It’s taken me some time to come to terms with this. Indeed, I’m sure many of you are miles ahead and will look back at me with surprise given I’m a publisher. But the Google revolution is so enormous that it is obscured and quite difficult to discern.
Conversely, many of you will think that Google is nothing more than a search engine. This is the equivalent of describing the assassination of the Archduke Franz Ferdinand of Austria that started WWI as the isolated act of a nutter. Google is an historical pivot point.
Media revolution
Let me begin this exposition by explaining Google’s impact on the media. Google is the greatest consumer profiling tool in the history of capitalism. It collates every search and just about every click you make online in building an assessment of your consumption needs.
This is done is real time, at the speed of lightening. You can go to an airline site and search for flights to Newcastle and on the next website you visit you will see advertisements for Newcastle hotels in banners and blocks. You won’t need to search for the hotels. Google has served the ads to you already.
Google can do this because it is the technical middle man between advertisers and customers. It is literally the platform from which different ads are served into websites. Publishers no longer do it themselves. As such, Google does not serve up the same ad in the same space to different people. It serves up highly targeted, ultra-recent ads to different readers in the same space at the same website. It’s like you’re reading a newspaper and its reading your needs at the same time, and changing the ads on each page to suit your mood.
There is nothing in traditional media advertising that can come even close to competing with this. It is an extraordinarily productive functionality. It automates a vast swathe of advertising salespeople, journalists, editors, printers and advertising buyers. That makes it far cheaper as well as far more effective than traditional advertising model media.
The impact of this on print media is on three fronts. General interest media like newspapers are hopelessly, hilariously outgunned. Their old model was to sell ads appropriate to different sections of the newspaper each charged upon the assumption that every reader read every page of every section. That is, advertisers paid for every reader even though they were probably only exposed to a fraction of them. It was always a monopoly scam and it’s dead as a dodo. Expect all print newspapers to die in the next decade.
The second impact is on vertical market media which offers more specialised editorial. Magazines are the standout example. They’ve held up better owing to the “brand value” an advertiser attracts from appearing in a specific context. Buzz around “thought-leadership” or “cool” or other qualitative measures are the key to selling these ad spaces. But they too are under pressure as the Google value proposition described above becomes irresistible over time. Expect magazines to die as well over the next two decades as internet penetration spreads. Perhaps we’ll see niche retro magazine stores appear, much like those selling LPs today.
The third impact is now moving into the internet itself. Over the past decade, newspaper and magazine publishers have responded by moving their content online and cutting their own costs. That’s worked for a while but is now under pressure as well. Online margins were great while publishers could sell some their own advertising space to clients based upon the old pitch of adding “brand value”; that is, being seen by the right people in the right place. But the Google value-proposition is compelling enough that its edging out more and more brand value advertising.
In the long run, as internet convergence transpires with television and radio, exactly the same process will take place.
In basic economic terms, this is a tearaway success. It is a searing productivity gain. Consumers are getting better ads, faster and businesses are getting higher returns on investment, faster. Neither is it all bad for media. Niche publishers that can attain readership volume can operate businesses at high margin using only Google ads as revenue. It’s more democratic too given that the only measure of success is not whether you possess the capital to invest in a printing press but whether you have the intelligence or other appeal to attract readers.
There is one problem. Google is a monopoly and that means it can extract rents. Google International operates on a very healthy margin above 20%. The local operation is difficult to judge because often locally served ads are domiciled in Singapore. Revenue for the local operation is estimated at between $1-2 billion but its margin is much lower than international with only $46 million in declared profits. It is expanding fast here with what appears a heavy investment schedule so that will rise a lot in time.
This revenue used to be the profits of wider media firms, supporting all of their content. As Google absorbs a greater share, marginal publications, large and small, will fail without direct reader support. In the long run, Google rents will either cause the cost of media to rise for consumers via the re-imposition of subscription charges or choice will radically shrink.
Political revolution
Something else very important has happened in the media’s response to this commercial threat. As described above, publishers have countered by moving online and cutting costs. But they have done one other thing as well. Online media is defined by the immediacy of choice so a waffling general interest publication can’t really hold readers attention for long, especially since cost cutting is also reducing the quality of the material and better specialists are emerging in niche sites as the barriers to entry crumble.
To hold their audiences major media titles are abandoning their traditional roles as the arbiters of values and debate in the political centre of the polity. Instead they are becoming tribes of like-minded readers, trussed up like roasts in a closed loop of logic by the high priests of each politico-economic tribe.
It’s really not that hard to see. On the “loony right” in Australia is The Australian, Business Spectator and the Australian Financial Review. All are defined by the promotion of business interests over markets. All conduct campaigns for and against policy that privileges sectional interests over the national interest, and all engage in ideological myth-making that has no basis in history.
On the “loony left” are the Fairfax metropolitans and The Guardian. They hover over the propertied baby boomer classes with endless reassurances that Australia’s old economic model of asset inflation and consumption can run forever. They advocate for the well-fed customers that are the flipside of the business media’s protected firms while administering a salve to chaffed consciences in coverage of the system’s downsides.
There is no mainstream press left in the middle.
At the level of policy the result is that reform proposals have stopped and what is proposed is destroyed by swift and effective mainstream media manipulation. Political accountability is eroding and the Westminster system in which minister’s used to resign when departments failed has ended. Governments on both sides now can “tough out” scandals, secure in the knowledge that at least their half of the media will support them in short order.
It is unfair and overly dramatic to blame Google for this devolution, of course. The internet itself is the driver and that is not my intention. But Google is the central force behind the changes in the media and consider for a moment just how hard it is for government to sell any difficult policy reform when there is no objective forum of critical mass to debate and persuade the polity. It’s damn near impossible.
Privacy revolution?
Google itself seems quite aware of its own power. It is a remarkably low profile company for one that is so disruptive. Look at its own ads and image-making and there is clearly a conscious effort to appear homespun, even bumbling. This ties in nicely with its famous dictum of “don’t be evil”. The founders understood the power in their hands and thank goodness it was a free-spirited pair that invented it because one shudders to think what all of that information on everyone could do if it were in the wrong hands. It’s the kind of database that J. Edgar Hoover and other Big Brother aspirants could have only dreamed of.
Is that a problem? Not so long as the company remains “good”. But Google does pass information to government. Indeed, it seeks to be more transparent about doing so than the government’s involved, issuing a regular “transparency report”. The most recent of those describes how:
Like other technology and communications companies, Google regularly receives requests from government agencies and courts around the world to remove content from our services or to review such content to determine if it should be removed for inconsistency with a product’s community policies. In this report, we disclose the number of requests we receive from each government in six-month periods with certain limitations.
Governments ask companies to remove or review content for many different reasons. For example, some content removals are requested due to allegations of defamation, while others are due to allegations that the content violates local laws prohibiting hate speech or adult content. Laws surrounding these issues vary by country, and the requests reflect the legal context of a given jurisdiction. We hope this tool will be helpful in discussions about the appropriate scope and authority of government requests.
For global government requests:
And Australian:
The numbers seem very small in context and, let’s face it, Google is only one in a number of large US IT firms capable of delivering the same. Microsoft, Yahoo, Apple and others have similar information on users and also hand it over to Government in particular circumstances. It’s those rules that are the focal point of protecting privacy. We vote in or out the politicians that determine the boundaries so although the information exists, and it may feel uncomfortable, we’re not powerless on its distribution. It may not be so clear cut in some emerging economies.
Moreover, Google does have multiple utilitarian uses. One can track the progress of a pandemic using Google search trends. It can also disrupt all kinds on cosy industries, such as we’re seeing with the current battle between Uber and taxi interests, bringing more productivity to a Western world in desperate need of it.
Conclusion
Please forgive the rambling nature of this post. It was born out of MB’s recent deliberations and decision to shift its own business model and I’ll happily concede that that vantage point is limited. It seems to me that so long as it is well-managed, Google offers as many benefits as it does downsides. Indeed, MB is itself a creature born of the Google revolution, able to expand at a phenomenal pace without capital, owing only to its superior editorial. The disruption Google brings should be welcomed not feared.
But it should also be understood. History is replete with examples of technology running ahead of society and triggering headlong change before anyone considered whether it was a good idea. I am late to this but hope that it helps trigger some thoughts for you.
