Google makes the vast majority of its money from advertisement programs. Eric Schmidt put it quite bluntly by saying…
“Think of it first as an advertising system. Then as an end-user system — Google Apps. A third way to think of Google is as a giant supercomputer. And a fourth way is to think of it as a social phenomenon involving the company, the people, the brand, the mission, the values — all that kind of stuff.”
The programs look at key words that the person uses in emails and searches and the advertisements are tweaked to reflect the recent content the user has provided the Google algorithm. Along with the ambient suggestions, advertisers can buy Google Adwords. This creates “sponsored links”. So when a user searches for something like Ford F150, a sponsored link of a Ford Dealership in your area pops up as a sponsored link. The Dealership bought the words and then must pay Google if it’s clicked. Google also uses AdSense. Website owners can sign up for AdSense and Google places context relevant advertisements on the websites. Google is almost like an ad firm, placing ads on websites that get traffic that might be interested in the content. The owners make a super small percentage. Google also runs the ads on YouTube that pop-up in the player.
There is no reason this wouldn’t work for the geosocial networks like Gowalla and Foursquare. I see two ways it could work…
1. So person A, uses Gowalla everyday and checks-in to 20 coffee shops a month. A coffee shop could then buy the “people” who go to coffee shops and through the geosocial network suggest to Person A…”we know you love coffee shops…so, have you tried this place?” It’s basically ambient suggestions for the users of the geosocial networks.
2. This idea might be better and the possibilities are endless. So Person B loves to eat sushi in Los Angeles and does so 20 times a month. Person B is on a business trip or vacation in Boston. The location based app could then figure out that Person B loves sushi in L.A. and then suggests places in Boston to try sushi. Those places suggested are based on the sushi restaurants paying for the advertising or being suggested just like with Google’s “sponsored links.” The businesses could bid on the keywords. iTunes basically does this same kind of advertising using the Genius mode…if you like this, you will like this.
Traditional media companies could carry out something close to this as well. It would need to be a site that has diverse content. MSNBC could provide ”suggestions” on products based on what articles people read. It is the same as AdSense, but MSNBC basically cuts out the middleman in Google.
Advertising is going to change dramatically once companies begin to figure out how to drill down through the data that matters. They are going to find your habits and cater to those habits. I don’t mean “habits” in a bad a way, but more like each person’s individual trends. Is it scary? Yes it is…but if you get what you want without really having to work for it, people won’t care. It is basically a race to see who can figure out the perfect model to make money, but the way technology evolves the race will be never ending it seems. There is no silver bullet for making money, getting good leads or converting website visits into sales. It is a continuing challenge. The best bet is to figure out a way to use data that is freely given up on the web. That’s the Google model and it seems to be working a tad better than any of the other models.
It will be interesting to see if Google can keep up with its work load and what happens if Google gets to big. Diversity is great, but spreading yourself too thin can be a downfall waiting to happen. Just as the Hall of Fame, baseball coach Augie Garrido says…”you must play within yourself,” Google should follow that mantra. Jeff Jarvis pointed out that Google is a brand at this point. The name on the product says Google and the user expects certain things. As long as Google is able to keep the products at the same quality, they should be fine. Buzz wasn’t an incredible success and there has been more and more talk about Google Me, a social network run by Google. Google has also created a browser (Google Chrome) and is working in the smart phone realm. With all this stuff going on, I would hope Google is playing within themselves. Bing seems to be creeping up on Google slowly and doesn’t seem to be changing the game, but maybe it’s creeping at the same speed that IE crept up on Netscape?
And as I wrote this…Google chases Bing!
Monetizing the internet so it reaches its full potential is something I think about, and try to read-up on constantly. Its fascinating to think that something as powerful as the web still hasn’t reached its full monetary potential.
Thanks for the post and I’ll be sure to come back for more.
[...] The second part is from yesterday’s Great Googleymoogley! [...]