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posted by janrinok on Friday February 13 2015, @11:13AM   Printer-friendly [Skip to comment(s)]
from the but-who-is-next? dept.

Farhad Manjoo writes at the New York Timesthat at first glance Google looks plenty healthy, but growth in Google’s primary business, search advertising, has flattened out at about 20 percent a year for the last few years and although Google has spent considerable resources inventing technologies for the future, it has failed to turn many of its innovations into new moneymakers.

According to Manjoo, as smartphones eclipse laptop and desktop computers to become the planet’s most important computing devices, the digital ad business is rapidly changing and Facebook, Google’s arch rival for advertising dollars, has been quick to profit from the shift. Here’s why: The advertising business is split, roughly, into two. On one side are direct-response ads meant to induce an immediate purchase: Think classifieds, the Yellow Pages, catalogs or Google's own text-based ads running alongside its search results. But the bulk of the ad industry is devoted to something called brand ads, the ads you see on television and print magazines that work on your emotions in the belief that, in time, your dollars will follow.

“Google doesn’t create immersive experiences that you get lost in,” says Ben Thompson. “Google creates transactional services. You go to Google to search, or for maps, or with something else in mind. And those are the types of ads they have. But brand advertising isn’t about that kind of destination. It’s about an experience.” According to Thompson the future of online advertising looks increasingly like the business of television and is likely to be dominated by services like Facebook, Snapchat or Pinterest that keep people engaged for long periods of time and whose ads are proving to be massively more effective and engaging than banner advertisements.

In less than five years, Facebook has also built an enviable ad-technology infrastructure, a huge sales team that aims to persuade marketers of the benefits of Facebook ads over TV ads, and new ways for brands to measure how well their ads are doing. These efforts have paid off quickly: In 2014 Facebook sold $11.5 billion in ads, up 65 percent over 2013.

Google will still make a lot of money if it doesn’t dominate online ads the way it does now. But it will need to find other businesses to keep growing. This is why Google is spending on projects like a self-driving car, Google Glass, fiber-optic lines in American cities, space exploration, and other audacious innovations that have a slim chance of succeeding but might revolutionize the world if they do. But the far-out projects remind Thompson of Microsoft, which has also invested heavily in research and development, and has seen little return on its investments. “To me the Microsoft comparison can’t be more clear. This is the price of being so successful — what you’re seeing is that when a company becomes dominant, its dominance precludes it from dominating the next thing. It’s almost like a natural law of business.”

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  • (Score: -1, Troll) by Anonymous Coward on Friday February 13 2015, @11:16AM

    by Anonymous Coward on Friday February 13 2015, @11:16AM (#144558)

    Anyone actually bother to read thru Pickens' "summary"? My eyes glaze over.

    • (Score: 2, Informative) by GoonDu on Friday February 13 2015, @11:48AM

      by GoonDu (2623) Subscriber Badge on Friday February 13 2015, @11:48AM (#144565)

      tl;dr Google adsense revenue is not really growing well and their tech innovation is not returning much yield. This is due the trend of advertisement which goes well with facebook, pinterest, etc.

      tl;dr of tl;dr Google is dead. Long live Google and hail to our new overlord, Facebook.

      • (Score: 2, Insightful) by Anonymous Coward on Friday February 13 2015, @12:48PM

        by Anonymous Coward on Friday February 13 2015, @12:48PM (#144576)

        he puts te adsense growth at 20%, he has a really really strange definition of 'not growing much'

        • (Score: 0) by Anonymous Coward on Friday February 13 2015, @04:29PM

          by Anonymous Coward on Friday February 13 2015, @04:29PM (#144654)

          What respectful economist has a wet dream without growth on growth action?

    • (Score: 5, Funny) by Anonymous Coward on Friday February 13 2015, @12:24PM

      by Anonymous Coward on Friday February 13 2015, @12:24PM (#144570)

      Anyone actually bother to read thru Pickens' "summary"? My eyes glaze over.

      Mr Pickens' submissions tend to be a bit verbose, but they are some of the best submissions on this site. Perhaps we can take up a collection and buy him an unlimited cr/lf package so he doesn't need to save them for special occasions.

    • (Score: 4, Insightful) by ikanreed on Friday February 13 2015, @02:22PM

      by ikanreed (3164) on Friday February 13 2015, @02:22PM (#144607) Journal

      It's a bunch of conjecture that I wish was true, but it isn't.

  • (Score: 2, Touché) by Anonymous Coward on Friday February 13 2015, @11:50AM

    by Anonymous Coward on Friday February 13 2015, @11:50AM (#144567)

    According to Thompson the future of online advertising looks increasingly like the business of television and is likely to be dominated by services like Facebook, Snapchat or Pinterest

    So in short, the advertising moves mostly to services I don't use anyway? Well, I certainly can live with that. ;-)

    what you’re seeing is that when a company becomes dominant, its dominance precludes it from dominating the next thing. It’s almost like a natural law of business.

    Makes me think of this story. [soylentnews.org]

  • (Score: 0) by Anonymous Coward on Friday February 13 2015, @12:39PM

    by Anonymous Coward on Friday February 13 2015, @12:39PM (#144572)

    tl;dr - Patience, luck and due diligence are the key (though knowing how to throw dice doesn't hurt).

    I'm not going to say "Google is too big to fail!" because all of them are ripe for complacency and corporate mindset rot. But ...

    ... this is a long game and Google is well suited to wait out some of the flavor-of-the-month sites/apps/whathaveyou. This strategy isn't always a good practice. It didn't work well for Microsoft when it came to mobile (hell, they almost were late to the whole Internet party). Google needs to be smart about what companies (established or startups) that it acquires. Facebook is pretty aggressive when it comes to buying up companies, though that may hurt them in the long haul (just ask HP ... and was it Yahoo?). It's not uncommon for a startup's business model to be "create niche idea, get app to market, get some social media buzz, and then get bought by somebody".

    Google, as well as MS, Apple, et al, need to weigh the pros and cons of chasing every "new and better" idea and market. Spread yourself too thin and you fail. Buy too many companies that have "synergies and potential" and you fail. Buy too many companies that will get sued for patents, past business practices, etc, and you fail. Sit on your war chest and you fail. Miss the boat and you fail. Cautionary acquisitions aren't just for the tech sector. Ask some of the big banks that gobbled up troubled competitors back in '07 - '10. Those guys are still paying billions in new fines.

    • (Score: 2, Interesting) by FlatPepsi on Friday February 13 2015, @03:50PM

      by FlatPepsi (3546) on Friday February 13 2015, @03:50PM (#144629)

      Microsoft WAS late to the Internet game. Remember WinSock? Netscape was the face of the internet for a very long time. Microsoft managed a turnaround, but came very, very close to losing the desktop market.

      Apple & Google have a huge war-chest saved up. They can ride out the next big mistake if they don't squander it. Apple got lucky with the iPhone- but they've stopped looking for the next big thing. Google, on the other hand, is reaching out in many directions. Google Glass, their self driving car, floating data centers, and other wild & crazy ideas are them looking for the next big thing. If only one out of 100 of these makes money, it will be enough to keep Google into the future.

      We might be at peak "search results advertising", which happens to be Google's bread & butter - but peak Google? I think not.

      • (Score: 0) by Anonymous Coward on Friday February 13 2015, @04:17PM

        by Anonymous Coward on Friday February 13 2015, @04:17PM (#144641)

        Apple Pay could become a lucrative new revenue stream for the company. Forget songs and apps, get a cut of every purchase an apple drone makes.
        I'm skeptical of Apple Watch but if they can sell 26 million of the stupid things as J.P. Morgan believes, that's more than 5 times the current smartwatch market.
        A while after Apple Watch comes out, they will probably have $200 billion in cash reserves.
        There's almost no way they can fuck this up, right?

      • (Score: 2) by TheRaven on Saturday February 14 2015, @08:09PM

        by TheRaven (270) on Saturday February 14 2015, @08:09PM (#145009) Journal

        Remember WinSock?

        Even later than that, Windows 95 shipped without a web browser and Bill Gates thought that MSN would be a good competitor for services like AOL and Compuserve, which were the real threats and not this 'Internet' thing that didn't have big commercial backers...

        --
        sudo mod me up
  • (Score: 2, Insightful) by Anonymous Coward on Friday February 13 2015, @12:46PM

    by Anonymous Coward on Friday February 13 2015, @12:46PM (#144574)

    was going to be a weak long term market. This is true of ALL players in the leisure I.P. world, and everybody has known it for years. Advertising techniques are quantifiable and can be programatically profiled. So it was only ever a matter of time before statistical approaches are/were engineered to take the advertising pebble out of the shoe of our collective cultural experience. Advertising is obnoxious, but predictably so. The predictability, makes it filterable.

    The greater the focus on this sector, the more exposed a company is to the midnight coder who changes everything. So the bally-hoo is quite unjustified. The multiples these companies trade at reflect a much higher risk than most people are aware of. This sector could dilute at an accelerated rate, at any time with very little notice.

    • (Score: 1, Interesting) by Anonymous Coward on Friday February 13 2015, @01:12PM

      by Anonymous Coward on Friday February 13 2015, @01:12PM (#144585)

      The same has been said about TV, especially when cable TV arrived with its "TV with no commercials!" claims. Newspapers and magazines have lost out to digital media. Those industries lasted as long as they did because analog ads couldn't really be blocked, but they could be ignored (and let's face it, some print ads used to be creative, clever and very attractive). Digital ads are easier to block in websites, though there are a few ways websites can successfully thwart ad blockers. Ads overlaid on digital content, as well as ads in games, etc, are much harder to get around.

      The digital age has presented advertisers with a very difficult dilemma: audience cat and mouse. Digital consumers don't always watch at the same time, they use different platforms/software, and they use different technology to try to avoid ads. This won't stop the advertisers from trying (just like companies won't stop with DRM), and it won't stop some consumers from trying to get around the torrent of ads that litter up the intertubes.

      I'm one who tries to avoid ads whenever possible, but I understand that if companies can't make a profit they will stop producing content. It's easy to shout "find another business model!", but very few companies have found (or embraced) a way around the ad revenue approach to creating and delivering content. Trying to force companies that are dependent on ad revenue to go out of business will result in a much smaller pool of available content, and the quality will suffer. Every company needs to make a profit, just like the company that you work for, run, or own. If not, well, we all know how that works out for ownership & shareholders all the way down to the interns.

      • (Score: 1, Insightful) by Anonymous Coward on Friday February 13 2015, @04:34PM

        by Anonymous Coward on Friday February 13 2015, @04:34PM (#144656)

        I wouldn't mind advertisements that have the same properties as print advertisements: They do not move, they make no sound, they don't run code on your computer, they don't track you, they don't block you from accessing the actual content even temporarily, and they are guaranteed not to install any malware on your equipment. Any advertising that credibly(!) offers these properties I'll happily unblock.

  • (Score: 5, Insightful) by MrGuy on Friday February 13 2015, @12:57PM

    by MrGuy (1007) on Friday February 13 2015, @12:57PM (#144580)

    “To me the Microsoft comparison can’t be more clear. This is the price of being so successful — what you’re seeing is that when a company becomes dominant, its dominance precludes it from dominating the next thing. It’s almost like a natural law of business.”

    For example, when a company becomes dominant in simple console-driven pure text OS's, they'll be out of work when the world moves to graphical OS's and someone else will come in and dominate those. Or, when a company is a specialist in operating systems in a market where most players do one thing well, they'll be caught flatfooted when the real money shifts towards integrated suites of productivity apps all provided by a single vendor.

    If you're going to prattle on about the history of Microsoft, you should, maybe, I don't know, read it first? And maybe understand if they actually follow your "natural law?" They TWICE re-invented their company to be something other than they were, and twice expanded a dominant position in one market into a dominant position in what the "next big thing" would be. They were less successful the third time (going from a dominant desktop OS and productivity app company into a dominant internet company), though even there it's a bit of a mixed bag (IE was a fairly dominant browser for some time, C# and .Net are still fairly widely used).

    But using the fact that they failed the third time they tried to reinvent the company, while ignoring the other two times they did this with great success, as the crux of your argument is being an idiot. The quote above is a great rhetoric. What it's not is a compelling argument.

    Your argument is bad. And you should feel bad.

    • (Score: 2) by TheRaven on Sunday February 15 2015, @10:37AM

      by TheRaven (270) on Sunday February 15 2015, @10:37AM (#145242) Journal

      Microsoft had a few successes, but it's worth paying a bit more attention to exactly how they had those. Their first killer app was a BASIC interpreter. This eventually got them the sale for an OS, which they managed to get as a (non-exclusive) licensing deal rather than a sale because IBM didn't think that the OS was an important part of a microcomputer. The shift to graphical operating systems could easily have gone a different way - first GEM and then OS/2 had significant features that Microsoft's offerings lacked, but they managed to use their market presence to undercut their competitors.

      The office suite thing is a red herring. The first Windows version of MS Word was a port of the Mac version, which was where their market share in that area started. Excel was created because people were buying PCs to run Lotus 123 and Microsoft wanted something competitive with 123 that they could guarantee wouldn't run on competitors' operating systems.

      A good example of the OP's point is IBM. They're still a big company, but for a long time they completely dominated business computing. If you bought a computer, it was probably from IBM. Most of the companies that were competing against them at this point no longer exist. They'd successfully managed to go from tabulating engines to large batch-processing computers to mainframes to minicomputers. But then they botched the transition from minicomputers to microcomputers and the company has still not recovered.

      --
      sudo mod me up
  • (Score: 5, Insightful) by PizzaRollPlinkett on Friday February 13 2015, @01:41PM

    by PizzaRollPlinkett (4512) on Friday February 13 2015, @01:41PM (#144592)

    We should all have such problems as consistent 20% growth! I would love to be doomed to that fate. This filler article compares the mature Google, which is still printing money, to Facebook which started from almost nothing and is growing faster (when you start from nothing, initial growth is always fast) but will also "peak" at some point. These filler articles are written all the time about Microsoft, Apple, Google, etc - whoever is on top is about to lose their grip at the top and sink into obscurity. I don't think any of these predictions have come true. Apple is a money-printing machine. Google hasn't slowed down. MS is reinventing itself.

    --
    (E-mail me if you want a pizza roll!)
    • (Score: 1, Insightful) by Anonymous Coward on Friday February 13 2015, @02:33PM

      by Anonymous Coward on Friday February 13 2015, @02:33PM (#144614)

      I don't think any of these predictions have come true. Apple is a money-printing machine. Google hasn't slowed down. MS is reinventing itself.

      And it forgets Apple to reinvented itself no less than 6 times. The were almost wiped out in 1998 until MS threw them a bone. Even if googles growth was 0 tomorrow. They would still be printing money. A good metric I like to look at is total rev per employee. It shows a great metric for Google. So long as they keep the cost low (another good metric for health of a company). Google is far from 'sick'. Companies like HP are 'sick'. However, a sick company can lumber along for years (see radio shack).

      • (Score: 0) by Anonymous Coward on Friday February 13 2015, @08:06PM

        by Anonymous Coward on Friday February 13 2015, @08:06PM (#144727)

        And it forgets Apple to reinvented itself no less than 6 times.

        Once you figure out you're holding yourself wrong it's pretty easy to change your grip on yourself. ;-)

    • (Score: 1) by twistedcubic on Friday February 13 2015, @07:35PM

      by twistedcubic (929) on Friday February 13 2015, @07:35PM (#144715)

      Increasing 20% per year for the past three years is exponential growth. If my money grew that way, I wouldn't be complaining :)

  • (Score: 3, Insightful) by brocksampson on Friday February 13 2015, @02:16PM

    by brocksampson (1810) on Friday February 13 2015, @02:16PM (#144603)

    I don't use social media, so I really don't know how Facebook or whatever works these days. However, I cannot imagine that you can cultivate the kind of brainwashing that TV accomplished in the mid-to-late 20th Century. Think back 20-30 years--many people's lives were organized around the TV schedule. It really didn't matter what you were doing, if you wanted to catch Cheers you had better drop everything and plop down in front of the TV when it aired. Sure, you could wait for a re-run or syndication, but you'd miss out on the shared experience. After a while it just became habit. The only thing that could get me out of bed early as a kid was Saturday morning cartoons. All those years of being exposed to advertisements engrained jingles, logos, slogans, and mascots so deeply in my psyche that I doubt massive head trauma could shake them loose. I may get dementia and forget my own name, but I'll never forget the Energizer Bunny.

    People do obsessively check their phones now, but it doesn't seem like the same thing--do Facebook users actually have to sit there and watch and listen to the same ads over and over again in order to get whatever it is they get out of Facebook? I just don't see how modern advertising can carve a groove the way TV commercials could in the pre-Internet era. With push media the ads were inserted into a stream of entertainment that could not be time-shifted or even rewound if you missed a moment. (Remember running to the bathroom during a commercial break?) Perhaps Google is being smart by betting that advertising firms are clinging to brand advertising the way movie studios are clinging to business models that died with VHS.

    • (Score: 3, Insightful) by Anonymous Coward on Friday February 13 2015, @02:31PM

      by Anonymous Coward on Friday February 13 2015, @02:31PM (#144612)

      Facebook is even better - each user gets ads customized to their own weaknesses, so instead of one-size fits all manipulation, facebook uses their vast data profiles to find out what techniques will work best on each user. They've personalized the brainwashing.

      • (Score: 2) by Joe Desertrat on Friday February 13 2015, @07:46PM

        by Joe Desertrat (2454) Subscriber Badge on Friday February 13 2015, @07:46PM (#144719)

        Facebook is even better - each user gets ads customized to their own weaknesses, so instead of one-size fits all manipulation, facebook uses their vast data profiles to find out what techniques will work best on each user. They've personalized the brainwashing.

        Unless you use Adblock, or whatever it is I use that blocks ads on it. I was stunned to see the difference when I saw someone's page on a browser with no protective extensions being used.

  • (Score: 3, Insightful) by Anonymous Coward on Friday February 13 2015, @02:30PM

    by Anonymous Coward on Friday February 13 2015, @02:30PM (#144611)

    I've waited for Google's ad revenue to sink. It hasn't. I can literally block their main revenue generator using HOSTS and extensions. Adblock has millions of users. They have been sued over advertising click quality. They still make billions on ads. Want to talk brand ads, how about YouTube? Now one of Google's competitors (Facebook) have declared their intention to get another billion people online. More eyeballs that will find ads. Eyeballs being tracked even more closely if they are on smartphones.

    Microsoft Research was founded in 1991. Google X in 2010. The Google research projects seem more ambitious [wikipedia.org] and far removed from computing/search/ads. None of the public projects of Google X have failed outright yet, even Glass.

    PizzaRollPlinkett is right. Let's see growth at below 5% or below 0%. Let's talk about Apple Pay and Apple Watch or Apple's pile of billions.

  • (Score: 0) by Anonymous Coward on Friday February 13 2015, @03:53PM

    by Anonymous Coward on Friday February 13 2015, @03:53PM (#144631)

    Same as what they did with Youtube and Android.

    Management in big successful companies are all about adding features to existing products, taking ideas from competitors but maybe doing it a little better, integrating your major products into a suite, etc. This is even true in companies like Google that seem to make a major attempt to be innovative.

    But Google can wave $2 billion at a startup and say, "wouldn't you like to have that AND still be running your company inside a corporation full of people of think like you?"

    • (Score: 0) by Anonymous Coward on Friday February 13 2015, @05:57PM

      by Anonymous Coward on Friday February 13 2015, @05:57PM (#144691)

      Wouldn't you like to have that AND still be running your company inside a corporation full of people of think like you?

      Eventually, an alpha personality gains control of your (former) company, and you're out, working on "special projects"

      This is exactly what's happening to any projects that were in competition with Nest.

    • (Score: 0) by Anonymous Coward on Monday February 16 2015, @12:04AM

      by Anonymous Coward on Monday February 16 2015, @12:04AM (#145407)

      That would be Apple. Google is known for Search/ads and getting lucky with two crappy products such as YouTube and Android. Peak Google was reached long ago. Peak money won't probably come until a market crash and subsequent economic downturn.

  • (Score: 5, Insightful) by Thexalon on Friday February 13 2015, @03:59PM

    by Thexalon (636) on Friday February 13 2015, @03:59PM (#144633)

    One of the peculiarities of the way big businesses work is the imperative "grow or die". Investors don't tend to like a company that, say, makes a steady $500 million a year in profits and pays out a nice hefty 10% dividend year-after-year, but go bonkers for companies that make $50 million this year and are projected to make $55 million next year.

    It doesn't matter that both investments might earn you the same return. It doesn't matter that you can easily swap between publicly traded companies at any time, so if there's a longer-term upswing with the smaller less profitable company there's no particular reason not to invest in the safe hefty dividend instead.

    A big part of this, though, just seems to be the fact that traders work on emotions and hunches at least as much as they do numbers. As a demonstration, managed mutual funds, on average, perform no better than the S&P 500 and other major indexes.

    --
    The inverse of "I told you so" is "Nobody could have predicted"
    • (Score: 0) by Anonymous Coward on Friday February 13 2015, @04:21PM

      by Anonymous Coward on Friday February 13 2015, @04:21PM (#144648)

      Billions in profit and continued growth has to be a better position than Amazon's "lose money or make no profit every single quarter, but grow revenues"

      • (Score: 0) by Anonymous Coward on Friday February 13 2015, @09:15PM

        by Anonymous Coward on Friday February 13 2015, @09:15PM (#144742)

        Common sense question: If amazon is not making a profit, then how is it growing?

        They reinvest everything. It looks like zero profit, but if you earned a 10% raise and spent it on a 10% hotter wife, that certainly is an enviable position.

        • (Score: 0) by Anonymous Coward on Friday February 13 2015, @11:29PM

          by Anonymous Coward on Friday February 13 2015, @11:29PM (#144788)

          When you give out free shipping on most orders, make a phone nobody wants, or undercut everybody in offering cloud services, is that "reinvestment"? Or is it just unsustainable?

  • (Score: 5, Insightful) by hubie on Friday February 13 2015, @04:23PM

    by hubie (1068) on Friday February 13 2015, @04:23PM (#144649) Journal

    I would swear about once a year an article predicting the decline of Google comes out because of the "new economy" or a "paradigm shift" or some other hot business catch phrase. Eventually someone will be right, but probably just due to happenstance and not any significant economic prognostication ability.