Misunderstanding Google

Oh dear, someone really should have a little chat with the Guardian Leader writers.

The proposed merger has been about how other players could combat Google\’s increasing arm lock on search and the El Dorado of advertising that goes with it.

Google does indeed have the lion\’s share of search activity on the web. It also has the lion\’s share of contextual advertising on the web. And indeed, the excellence of the search engine when applied to where to place the advertisements is one of the explanations for the dominance of that advertising arm.

But the number of people who use Google to search is very little to do with the dominance of that advertising arm: the vast majority of the advertising revenues come from pages which Google itself does not serve up. Rather, it\’s Adwords and Adsense running on other peoples\’ pages which form the backbone of Google\’s finances.

If you get confused between those two things then you\’re going to end up, as The G does here, worrying about the wrong things. Google\’s dominance of search really isn\’t a problem: its dominance of advertising might potentially be.

I think the confusion might actually come from the newspaper mindset itself. In order to have the dominant position in classified ads (a rough and ready analogy for Adwords) a newspaper also needs to have the dominant circulation figures. But the web allows disintermediation, so this is no longer true. Google could keep the advertising dominance even if circulation (ie, share of the search market) fell, something that simply wouldn\’t be true in the newspaper world and mindset.

4 thoughts on “Misunderstanding Google”

  1. Actually, Tim, most of Google’s ad revenue comes from the ‘paid search’ ads that appear alongside the natural search results. Only 35% of its total ad revenues came from serving ads to third-party websites (see the Annual Report for details).

    Of course, Google’s dominance of this market will continue only as long as it continues to provide the best search results: if a better competitor comes along, it will cost consumers and advertisers nothing to switch their custom.

  2. Actually, Tim, most of Google’s ad revenue comes from the ‘paid search’ ads that appear alongside the natural search results. Only 35% of its total ad revenues came from serving ads to third-party websites – see the Annual Report (http://investor.google.com/pdf/2007_Google_AnnualReport.pdf) for details.

    Of course, Google’s dominance of this market will continue only as long as it continues to provide the best search results: if a better competitor comes along, it will cost consumers and advertisers nothing to switch their custom.

  3. Pingback: Top UK websites, and does Google have potential to dominate? | The Wardman Wire

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