Google: Fishing With Dynamite

A recent article in the U.K. newspaper The Guardian, covered a conference sponsored by Google called Zeitgeist 06, designed to brief its European partners on its new initiatives. Google co-founder Larry Page and CEO Eric Schmidt focused on an ambitious new project now underway to build true artificial intelligence capabilities into its search product, a prospect they estimate may only be a few years away.

But while Google wanted to talk about artificial intelligence and the future, apparently its partners wanted to talk about the present, particularly about its seemingly scatter-shot approach to new product development, its indulgence of its engineers pursuing pet projects with little coordination, and its seeming lack of support for products when launched, allowing many to languish in the limbo of perpetual beta.

According to the article, Schmidt claimed that Google was starting to spend more time thinking about how to integrate its various offerings into its core search business, while at the same time denying that Google was entering a business consolidation phase.

Schmidt also offered a few words of wisdom to publishers who are seeing their businesses eroded by online rivals. He said usage of traditional media placed online is rising rapidly, but circulations - the revenue generator - are declining. "You don't have a lack of audience problem, you have a business model problem," he said.

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This is one of those pithy comments that on first glance sounds profound, but on closer examination doesn't make much sense. How can circulation be down, yet we as publishers don't have an audience problem? How can we as publishers have a business model problem if we don’t have an audience problem? After all, our audience is our product.

I'd contend that if we have a problem, it's a Google problem. I will grant unreservedly that Google built a better mousetrap with its search engine technology, but the jury is still out in the world of B2B if Google is has created a fundamentally better way to advertise, or if their core innovaton was simply a cheaper way to advertise. Google's new product launches are, in my opinion, the equivalent of fishing with dynamite. Toss it out and see what happens. If it doesnt achieve desirable results, ignore the wreckage you have created and toss some dynamite in another part of the lake.

The Zeitgeist at Google right now is a dangerous mix of excess cash, egos stoked by early success, and as far as any outsiders have been able to determine, not much in terms of a long-range plan or strategy. Add in a "fishing with dynamite" approach to new product development that roils existing markets, consistently creating new enemies without consistently creating new profits, and you have a company that's damaging a lot of existing business models without offering one worth emulating.

Yellow Pages: From Local to Loco

The recent announcement that the Verizon yellow pages organization will become a Google AdWords reseller seems to me further proof that the big yellow pages publishers have lost their way. Yellow pages companies bear some superficial resemblance to publishers, but they are not. Their real business is saturation distribution of advertising messages to specific markets in a convenient format. This is evidenced by their approach to editorial content (free listings): "go buy a file somewhere", and their approach to circulation and audience development: "make sure everyone gets (at least) one copy whether they want it or not."

What makes their business work is that yellow pages companies know how to sell ads, lots of expensive ads, at prices that make most B2B publishers blush. I vividly recall a B2B directory publisher bragging to a yellow pages executive that he was getting $6,000 for a full-page ad. He asked the yellow pages executive how that compared to the rates he charged. The yellow pages executive blandly replied, "Oh, about the same ... per month."

So the core asset of any successful yellow pages organization is its sales force. And, thus, you grant outsiders access to your sales force at your own peril. You don't want to distract your salespeople by having them sell less profitable products you don't even own. And presumably, you would never want them selling competitive products.

Consider this hypothetical sales call:

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Verizon Rep: Hi Bill. I'm here to renew your Verizon yellow pages program. Great news, too. We're only raising rates 6% this year, and we’ve got some great advertising deals on our Verizon SuperPages site.

Bill the Advertiser: Sounds interesting. But I've been thinking maybe I should be spending some of my advertising dollars with Google.

Verizon Rep: That's an excellent idea, and we're now authorized Google resellers! You know, Google now gets over half of all searches done on the Web. Their advertising is totally based on relevance, so it's highly effective and waste-free, and best of all you only pay if somebody actually clicks through to you.

Bill the Advertiser: That eliminates all my risk! Great, let's cut my Verizon program by 50%, and put that money into Google for me.

Verizon Rep: I wouldn't recommend that. Our print yellow pages gives you total coverage for a fixed fee per year, and SuperPages is the place people go when they need to buy something locally.

Bill the Advertiser: I can't really track my print results, but I don't think my print ad is working as well as it used to with so many people online these days, and it's pretty darn expensive at that.

Verizon Rep: Well, that's why we have Verizon SuperPages. It gets unbelievable traffic, and it's the place people go online to find local businesses.

Bill the Advertiser: How does your traffic compare to Google?

Verizon Rep: Well, it's smaller, but, err..

Bill the Advertiser: Are you saying Google doesn't help people find local businesses?

Verizon Rep: Well, no, I can't say that. Actually, it's kind of complicated … but, ah ...

Bill the Advertiser: You know, let's just move my whole ad program to Google

Verizon Rep (to himself): Wow, our management team sure is bright. Without Google, we would have lost this account!

Aerial Pizza

A few weeks ago, I had fun in this column commenting on the prolific use of pizza as a search term when discussing online yellow pages. I commented that you could easily walk away from most any yellow pages conference convinced that the industry was totally consumed with helping Americans locate the nearest pizzeria and obtaining the right mix of toppings.

But a recent announcement by Yellowpages.com, the yellow pages joint venture of BellSouth and AT&T really takes the cake, errr, pie. It seems yellowpages.com, with great fanfare, is introducing aerial photos along with its maps. They may not be able to tell you what a business does, but they can now show you the top of its building. If you like to select your pizzeria by type of roofing material, run don't walk to yellowpages.com. After all, if a pizzeria can't top its store properly, how can it top your pizza properly?

A cheap shot for a quick laugh? You bet. But I am also trying to make a point. Look at the big announcements by yellowpages.com since it was created: a distribution deal with AOL (more traffic); a distribution deal with Yahoo (more traffic) and still another neat and cool but not particularly useful site attraction (aerial maps).

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Too many data publishers are still caught up in this "traffic treadmill," spending ever-increasing sums to drive ever-increasing numbers of eyeballs against mediocre datasets, because advertisers value the traffic, not the content. Trouble is, users value the content, not the traffic, and you don't have a sustainable business unless you address both sides of the equation.

We've all now acknowledged that the power has shifted to the user, which means we have to serve the user with quality content. The problem with the big online yellow pages is that they are a mile wide and an inch deep. With no history of collecting, or for that matter valuing, content it's not surprising that they lean to bolt-on gimmicks like aerial photos. Trouble is, if you can affordably license content like this, so can others, so value and differentiation disappear quickly.

Here's a thought for the big online yellow pages publishers. Take the fat license fees you are paying for all these fancy site gimmicks and start calling the businesses in your database. Collect a bit more detail on what they sell and when they're open -- just the basics. Add this information to your database. Watch the increased user traffic and satisfaction that will follow. I guarantee a result you won't be able to top.

Vertical Search: The Early Years

There's been no shortage of discussion about how vertical search might provide publishers with new opportunities as well as refuge from the seemingly unstoppable incursions of the major search engines. The simple theory behind vertical search is that subject matter experts can find and organize information on specific markets better than a general search engine trying to cover everything at once. The thinking is that a vertical search engine will deliver deeper, richer and more relevant results to users. This is achieved by working harder to include relevant resources (especially those not on the open Web), and working just as hard to exclude inappropriate content. One of the most ambitious -- and impressive -- implementations of vertical search is offered by GlobalSpec, and vertical search is so integral to the company's strategy that GlobalSpec now positions itself as "The Engineering Search Engine."

Intriguingly, there are now vertical search applications coming out of the general search engines themselves. Google launched its Google Scholar vertical search application to great fanfare in 2004, providing not just a filtered view of its general search index, but also metadata pointers to enhance discovery of offline and paid access content, along with power searching features designed to meet the specific needs of academics. We also have an announcement from Microsoft of its new Windows Live Academic Search, aimed squarely at Google Scholar, and based on the Windows Live platform, which is being readied to replace the current MSN search engine. Microsoft Live Academic Search is actively encouraging publishers to contribute abstracts of paid content. Even the general search engines realize that vertical search requires rolling up your sleeves, actively looking for relevant content, both free and paid, and working tirelessly to deliver search results decidedly more comprehensive and focused than a general search engine can offer.

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But at its current state of evolution, vertical search is much more of a site attraction than a product. Vertical search is great for building site traffic. It appears to be good for building user loyalty and driving repeat visits, but for now at least it's not a money-maker. Google and Microsoft derive no revenue from their respective offerings. GlobalSpec has ingeniously woven its vertical search feature around its paid directory content, but as a stand-alone, its vertical search engine would not be a major source of revenue. Of course, it's entirely possible that vertical search engines can sell keywords just like the big search engines, but it's not clear yet what level of traffic is required to get meaningful advertiser participation, and it seems almost certain that some vertical markets will be too small to monetize vertical search in this way.
So while it seems clear to many that that vertical search is going to be big and important, the path to monetization is still murky.

From Problems to Profits

There's nothing more American than finding opportunity in adversity, and turning lemons into lemonade. This kind of creative thinking often becomes the stuff of legend and can create enormous wealth. But what if you are creating the very problem you are solving?

Two articles in Wednesday's Wall Street Journal offer examples of this phenomenon. The first dealt with recent moves by the nation's big three credit bureaus to further cash in on rapidly rising consumer interest in credit scores and reports. What's driving consumer interest in this information? Identity theft (for which the credit bureaus must assume at least some responsibility), and data processing errors by the credit bureaus that erroneously reduce people's credit scores. In short, the credit bureaus have discovered a lucrative business in letting consumers double-check their work, which is seemingly sloppy enough to warrant hundreds of millions of dollars in report sales annually.

In another article on the same day, it was reported that a growing number of guidance counselors and college test preparation services are recommending that students purchase backup scoring services to verify results of SAT tests run by the College Board. The backup scoring services, which can range from $10 to $100 on top of the $41.50 fee for taking the SAT test, are available from only one source: the College Board.

Why the sudden push to verify test results? A wave of recent bad publicity about scoring errors that wrongly lowered the test scores of thousands of students, admittedly a uncommon occurrence for the College Board. But here, too, the data provider has become, albeit inadvertently, a beneficiary of its errors.

These two examples seem like anomalies in a time when we all agree that the customer rules. What does, in fact, set these entities apart is that the information they generate and report can have a huge impact on our lives. Yet this great power over the lives and livelihoods of individuals must be matched with an equal level of responsibility to do the job properly. Certainly the College Board can be excused for isolated errors. They happen. But in the case of the credit bureaus, telling individuals in effect that data accuracy and quality control is ultimately their responsibility, and then charging them to perform it, sends absolutely the wrong message. And the perverse incentives created when errors and sloppiness can generate large amounts of revenue only works to further erode trust in these organizations.