Google Has Lost The Bubble And GPS Won’t Find It For Them (Part 2)

Yesterday I probably ruffled a few feathers when I asserted that Google was exhibiting all the signs of a ship, not yet rudderless, but certainly with no steady hand on the helm.  A few may not have liked by comments about Dr. Eric Schmidt, Google’s CEO, but I really don’t care if anyone (including Eric) likes them or not.  The fact is, when you are looking for a CEO for a huge company, and especially a company which is like no other that has grown like a gasoline fire, you want a CEO with a proven track record.  When you have been the CEO and/or a mover and shaker in top leadership for the companies Eric has, and they drop from market leadership to the depths of obscurity like Eric’s past ventures have, I submit your track record is pretty shabby.

Google makes money from essentially one thing and one thing only, selling advertising space.  The cornerstone of Google’s profitability comes from their AdWords program.  With AdWords anyone, anywhere in the world, can enter some information on a simple web sign-up form, type in the text of the ad they want to appear and in minutes the ad will be on display world-wide.  It’s a fantastic concept, so different to the other models of advertising that it has made Google a fortune.  It has been a boon to millions of businesses as well, because the companies who didn’t know how to use commercial advertising, didn’t have the budget to do so, didn’t have the time, are now on an equal footing with anyone else.

The other part of Google’s unique formula for success is the fact that they are virtually the only purveyors of advertising media who, in effect, continually offer a money-back guarantee.  If you sign up for AdWords you agree to enter an internal bidding process which decides where your ads will appear and how frequently.  You agree to pay enough per action (click) and John Q.Public’s ad an appear ahead of General Motors.  The implicit guarantee, though, is that since Google charges by the action taken, if your ads don’t get clicked, you don’t pay a dime.  Try getting a deal like that from the Wall Street Journal or Sports Illustrated.  (Note: Google does also sell “traditional” CPM ads … pay per thousand impressions, etc., but the AdWords “pay per click” model is the foundation of the company.)

So, you (if you’re Google) have essentially a license to print money.  The profits roll in … seen Google stock prices lately.  What do you do next?  Expand your wildly successful program?  Figure out new formulas for charges and payouts?  Well, in fairness, Google has done some of that.  But the really astounding move they made more than a year ago was to announce to the world they were going to take the broadcast radio ad market by storm by using GPS locations of vehicles to play “Location Based” advertisements.  Sounds great, until you analyze the “dream” a little:

• Although some may argue the point, radio, if not dead, is a comatose market.  The potential for growth is nothing even remotely resembling the potential for growth of Internet advertising.
• Google “wrote the book” on Internet advertising, although they don’t “own the Internet” they are, and will continue to be a formidable force.
• Google knows squat about radio advertising.  Manny’s Ad Agency and Storm Door Repair Co. in Dogpatch, USA knows more than Google does.  Google is rich so they can, of course, buy expertise, but the new hires will know nothing (much) about Google, the Internet or the issues in melding one established set of business rules and principles with another.
• Google knows less than squat about GPS location of vehicles, the key element of Eric’s flawed venture.  If tracking vehicles was all that common and all that easy it would already be a big business.  Tracking enough vehicles to make a location based advertising scheme viable is expensive and it is damn hard work.  I’ve been doing it for years and if it were easy, I’d be rich.

Enough!  I think I’ve made my point  Eric and the rest of the leadership at Google have forgotten a very old principle, summed up by an old Southern US saying … “If you can do what you say you can do, you ain’t bragging.”  So, from now on, try doing something first and then “bragging” when it’s done.