Original URL: http://www.theregister.co.uk/2009/03/22/google_worship/

Worship Google, banish those broke business blues?

Journalism prof embraces imaginary perfect company

By John Lettice

Posted in Media, 22nd March 2009 08:02 GMT

Book Review Perplexingly, not one of the ecstatic dustjacket blurbs reads 'I could barely start writing for laughing.' It is, on the contrary, an "exceptional book", a "divining rod" and "the work of a genuine visionary". Goddam - and there was me thinking it was a wholly absurd conceit built atop a fundamental - and willful - misconception of the nature of Google.

But it is, anyway. Jeff Jarvis' What Would Google Do? categorises Google as an entirely new kind of company operating to entirely new, revolutionary rules that can be used to reshape the world because, as the publisher's blurb says, "everyone and everything - from corporations to governments, nations to individuals - must evolve in the Google era". Having deemed this wild generalisation to be self-evident truth, Jarvis then sets out to apply Google rules for life and business to anyone and everything.

Or to be more precise, to publishing mainly, and then extremely superficially to a fairly random collection of industries and things that Jarvis has personal gripes with. He doesn't actually get on to these until halfway through the book, and the individual sections serve largely to indicate that Jeff Jarvis doesn't know a whole lot about a whole lot of things, but there are several corkers in there.

Crowdsourcing Cola

"Jeff Cola", for example. "What if Coke retooled a bottler to make special-order batches... if I committed to buying so many cases a year?" (Jarvis is as oblivious to FDA regulations as he is to auto industry safety approvals in the "Googlemobile" section.) "If I sold Jeff Cola to others on my blog... perhaps my price could drop because I'd be bringing in more sales and volume. I'd create a cola club. It's no different from Gary Vaynerchuk's Vayniaks making and promoting their own wine."

Actually Jeff, it's entirely different. Vayniak, one of the smarter ideas covered in What Would Google Do?, is an internet wine club/store that combines branding, destination and community. And on the first two points it arguably undermines some of what Jeff's pitching elsewhere. Vaynerchuk extends the social aspects of the wine trade to the internet, and while he does offer a 'design your own wine' system, I'll betcha that's shop window, not the bit he makes the money from. This is not the wisdom of crowds in action, this is one shrewd cookie playing the star/brand system with the aid of the new megaphone.

Jeff Cola, on the contrary, is an entirely unbaked notion from a lone wingnut who thinks Coke would make money out of letting him screw with its brand, and who thinks he can make money out of low-run sugared water, from a low-run blog.

Not understanding the processes he's proposing to kick over is kind of a motif of Jarvis', and it seems to me reasonable to suggest that he confuses destruction with business re-engineering. It's in no sense novel to say that businesses should be continually examining themselves, their customers and their processes, and should always be asking themselves how new models, new shop windows and new distribution channels affect their business. But that does not mean automatically that their businesses are totally screwed and need rebuilding from basics, nor, if they are, that it is necessarily anything to do with Google and a bunch of rules that Jeff Jarvis imagines Google adheres to.

Assuming - effectively - that everything but Google is buggered allows Jarvis not to bother having anything more than a bar-stool opinion about what companies do and how they work. So with airlines he asks, what if frequent flier miles were a convertible currency (they are to a limited extent, but doesn't the fact that these are known as loyalty programmes tell you something?) and thinks that airlines would glean much useful information by turning themselves into social networking airlines. He doesn't cover the airlines' existing internal and external networks, which know a great deal about you and your movements, and are very good indeed at managing data, balancing pricing and loading, and upselling you on hotels, insurance car rentals and holidays. Sure, grafting some social aspects onto that to make you feel like you belong might be a useful business tool for them, but they won't cede control, and it's not in their interests to do so.

Jeff misses the networks in the auto industry too, puzzlingly claiming that we "buy off the lot, not out of the factory" (is this another reason why the US auto industry is screwed?) and on the one hand, that you can't get personalised cars any more, while on the other (next sentence) they come loaded with junk you don't want. Well yes, they do, and it's personalisation junk you paid good money for, too. Why should the manufacturers follow Jeff's advice and fit a 39 cent connector for an iPod and spoil all those good years when they can get a $300-$500 mark-up?

What actually happens in auto sales on this side of the pond is you check pricing on the Internet (where Autotrader is a more obvious destination than Google), then you call up a dealer once you know your target price, they talk you through colours and upsell you on options, then they arrange to have your particular car magically start rolling along the production line. And then, "why doesn't the dealer... deliver the car to me?" Why Jeff, they do that in Europe, and I feel sure they do it in the States too - have you seen Vanishing Point?

The network here runs from the dealer through to the factory, the dealer is a useful intermediary because they can talk you through the deliberately baffling range of models, options and price plans, and the dealer is further tied into the manufacturer via finance and the technology in the vehicle, which can no longer be fixed by independents. There are networks there, they're not open ones but they work, at least in the good times.

Show us the money

Old dog, new tricks (National Media Museum)

Aside from Google and the internet, Jarvis' special subject is publishing - he's an associate professor of journalism at City University of New York - but even here his knowledge seems rickety. He's particularly shabby on bean-counting, and a discussion he had earlier this year with Guardian Media Group CEO Carolyn McCall at DLD 09, German publisher Burda's annual Web 2.0 showcase, serves to illustrate this. Jarvis consults for both Burda and GMG, incidentally. (An iTunes version of the discussion can be found here)

Both he and McCall were relatively open about their numbers, which displayed a certain asymmetry. GMG is a very large and expensive publishing group that makes a lot of money out of classified ads (Autotrader, which is destination revenue that's not Google revenue, and recruitment, ditto). That revenue translates - has to a large extent, translated - to the Web fairly well, and is used by GMG to fund good works by proper journalists (along with, unfortunately, the bubbleheads at Guardian Unlimited.

It's not exactly a business model because you'd make shedloads more money if you skipped the bit about chucking it down the newspaper hole, but it works insofar as it all stays afloat. McCall made the point that it's an expensive business to pay for on the spot reporters in trouble spots, and that in order to run a proper news organisation you need to have these, and to pay for them. She accepted that local eyewitnesses were useful, but maintained that they were no substitute.

Now, when it comes to classified Jarvis seems only to think of Google and Craigslist, which actually makes it a lot harder for him to figure out how publishing could be financed. McCall's classifieds do have an association with Google in that you'd obviously want to pay for a Google presence in order to let people know that, say, Autotrader exists, but once they know this they'll go to your site directly in order to shop for cars - bing, destination. You've also got some basic knowledge of your audience there, so you can charge more for the advertising, and you can pick up information about them along the way as they search - the area they want to buy in, target price - and more specific demographic data can be got, say, from people inquiring about finance packages. You can carve out fairly tight audiences here and charge a good sum for advertising to them - it's not yet a living that can finance a whole national newspaper, but it's a good living that isn't hugely dependent on Google. The same goes for recruitment advertising - build massive destination, rake in money, Google can go Screwgle.

Jarvis appears to be of the opinion that Google's keyword-based 'relevant' advertising cuts the feet from under demographic targeting. The previous paragraph illustrates why this ain't so, but try this as an example. Say you're Harley Davidson. You can get people reading about motorcycles if you buy motorcycles from Google, or even Harley Davidson if you buy that. But what's your target market? What if you could reach high income males having a mid-life crisis? What's that, a double page spread in Esquire with a call to action? Costs more, but quite possibly sells a lot more of your bikes.

Bottom line, Google ads are low revenue because they're not tightly targeted enough to command high revenues, and they don't cost the advertiser much because the advertiser is only paying for clickthroughs. This doesn't matter much to Google because its volumes are so vast that it can still make vast amounts of money, but it does matter to anybody who thinks they can make a living out of displaying Google ads, because almost certainly they can't.

Jarvis recognises - sometimes - that Google isn't the whole show, and volunteers ad networks as an alternative or supplement. But again, his bean-counting is faulty. The words 'ad network' are very dirty indeed in publishing. Ad networks pick up excess advertising inventory (of which there is a great deal, and Jarvis counts this "abundance" as one of Google's good works) across numerous web sites and then sells it in volume to advertisers. The ads are generally far less targeted than those sold by publishers' own sales teams and placed by ad agencies, so response is much poorer and rates much lower. Advertising Age recently gave a run-down of the issues here, but the executive summary is that if you need to fund more than a handful of writers, uncontrolled ad networks are a threat, not a saviour (Disclosure - from time to time The Register deals with ad networks in - we hope - a controlled fashion).

Blogging for paupers

Jarvis is in a position to figure out the ad revenue numbers himself if he wants. He gave his revenue numbers at DLD, and declares them in the book - in 2007, $13,855 in ad revenue from his blog, Buzzmachine, of which $4,450 came from Google. By his own admission Jarvis does not set out to make money from his blog directly, but it is "what got me appointed as a journalism professor... (worth not quite six figures a year) and consulting and speaking gigs (worth a few times that in good times) and the contract for this book (worth about double those gigs). So over a few years, my weblog is easily worth seven figures."

How to succeed in publishing - get out of publishing, pitch yourself as a pundit of Journalism 2.0, parlay that into a professorship and a string of punditry gigs, then build that into (current phase) business book guru status. Essentially, you don't make money out of blogging, you use blogging to get yourself a job. Dan Lyons, formerly Fake Steve Jobs, confirms there's no money in it, and that neither Fake Steve nor Real Dan plan a return to the blogosphere. But Dan did even better than Jeff here - he started with a job, got his value ratcheted up by the blog, got a book contract, then got another job which one presumes is better.

If Jeff were really to go for it, his revenue numbers would likely scale in the direction of Dan's. Obviously it'd be ludicrous to even think about trying to use Google as the sole revenue stream, as both Jeff's and Dan's numbers undercut the What Would Google Do? presentation of Google as the gift that keeps giving. Even cutting a better ad deal didn't work for Dan, probably because a solo blogger has little choice but to go to an ad network or similar, so larger packets but still peanuts. The model appears not to scale, and only gets better if the product's of sufficient heft to start funding its own sales team.

Try something even more ludicrous - what would the numbers look like if you tried to scale it to a newspaper? Or, as Jeff says following tea with Ed Roussel, the Telegraph's Web 2.0 mad scientist, "What if papers handed over much of their work to Google?" (What, like they don't already?) Roussel "couldn't imagine a paper creating better technology or attracting better technical talent than Google. In advertising, Google is the clear winner. So why not outsource distribution, technology, and a good share of ad sales to Google as a platform so the paper could concentrate on its real job - journalism?"

I think we've already figured out why not. But if Dan made $1,000 one month out of 1.5 million visitors, the Telegraph would make approx $14,000 through connecting itself to the exact same firehose. This can't possibly be what even Roussel has in mind, but it is very hard to see what Roussel means when he says Google is the clear winner - that he's the clear loser? Possibly - elsewhere he writes: "If your sales team can’t beat Google, then outsource to Google." Google, incidentally, is widely held to be rubbish at display advertising, which is one of the places where the money still is. (Disclosure - some time back The Register ran a banner ad from Google claiming how much better adwords were than, er, banner ads. I still can't figure out which of us was the dumbest here.)

So what does Google do?

Google is good at advertising, but consider what we mean by "good" here. It owns the überdestination and controls the advertising there. It decides how much money it's going to take, how much of that you're going to get (but it won't tell you what the split is), and although its business is underpinned by content, it does not produce content but uses other people's. This is organisation, not stealing.

Kind of a one-trick pony, isn't it? But yes, one hell of a trick. Jeff's various imagined Googles are not just imaginary, but entirely impossible, and he's perfectly capable of figuring that out for himself - he can certainly explain the machinery when it's not a company he's blinded to. Amazon, for example.

He states what Amazon does ('create digital equity') and describes how it does it, but although it's quite a coherent and cogent description he characteristically fails to make the short jump to figuring out what Amazon's about. Amazon as he describes it and in actuality is a one-stop shop destination that makes everybody else involved in the process hold the stock and ship the product. It takes a cut from absolutely everything that goes through the system, gets people to do the reviewing and recommendation for free and even rents its computing capacity back out to people. Amazon doesn't cut out the meatspace, it just makes everybody else carry it while Amazon counts the money. The money's all made out of selling stuff, but throughout the process other people are dealing with the stuff for Amazon.

It's genius, and it relates to what Google actually does, but although there's much more money in Google there's far more intricate genius in Amazon. Amazon is multi-decked, multi-faceted genius rake-off (remember when we all thought Microsoft wanted to be the gatekeeper taking the rake-off?), Google's just one huge destination that monetises via low-rent small ads, and spends lots of money on other stuff that - so far - doesn't work.

But yes, Google runs like hell from the meatspace too, and thus wouldn't - this is a key component of its business model - go anywhere near a Google Newspaper, a Googlemobile or Google Air. Essentially, Jarvis' book is about a Google he has imagined, but that does not and could not exist. Still, good luck with the guru campaign, Jeff. ®