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Wednesday, October 26, 2005

Google's Future in Auctions -- And Everything Else?

When you leak news of further diversification, the market often punishes. After record earnings, though, this news of Google's development of an auction service pushes the stock up another six bucks. I suppose that's a buy on rumor reaction.

One observer noted in the AP story that when you start competing with the very people you're indexing, as Google plans to do, it changes the whole dynamic.

Well, hello. Google has been in that position for quite some time, and so has any large search site that reaches portal or destination status. In Google's case, it becomes an issue that the algorithmic tweaks that govern what users see may determine whether, say, Shopping.com, EBay, Amazon, Kelkoo, LookSmart, About.com and other internal pages of companies that compete or have alliances with Google (sometimes both) are or are not ranked well in the index.

That's power, baby. But when there are so many such alliances and competitors -- thousands, in fact -- the power is potentially more diffuse. Sure, Google may build in a bias against shopping and auction results in general, and then promote its own services. I'm sure that if, say, a Craigslist or a Shopping.com became the world's biggest destination site, they'd do the same.

In the case of networks of vertical sites like About -- and other specialized vertical portals in both B2C and B2B realms -- Google has a huge interest in not competing with them, since they either serve AdSense ads on their pages, or pay Google high ad rates to attract targeted visitors. Let's hope Google recognizes that there need to be some limits to how they behave in relation to partners and competitors alike. They may well rock the world of some travel portals with, say, their new meta travel lookup tool (that could eventually require participating vendors to pay a fee to be part of the referral pipeline), but that's a high-value category that Google is virtually giving away to certain aggregators and resellers today. As long as they don't start trying to grab a bigger chunk of every transaction, the EQ (Evil Quotient) may be held in check.

Whether or not you assign EP's (Evil Points) to any of these initiatives, those in Google's ecosystem -- large companies and small -- need to take away clear lessons from this, I think.

  1. Consumers go directly to Google, Yahoo, and other top search destinations for information of both a commercial and non-commercial nature, because they have become global, beloved brands. Consumers don't have time to research search per se, so they go for the defaults. Because the defaults make a lot of money from this, they can then improve their ability to discern searcher intent, improving the search experience, so it's a potentially self-reinforcing cycle.
  2. "Florida" and subsequent algorithm tweaks by Google have established that the company is capable of downgrading whole classes of information (some types of commercial pages might lose out in favor of informational, for example). "Organic" traffic can continue to help users and businesses connect, but not to the extent they once could. Also, more screen real estate (up to three big sponsored listings) will be taken up by paid results above the fold. When you're the pre-eminent global brand for information, you have power with a big P. All this talk of general search losing to specialized search and vertical sites misses the fact that to establish a presencek, those specialized sites must get noticed in the first place. For those who don't catch the wave of great PR or happy word-of-mouth, the cost of getting noticed is rising. Those vertical companies that do particularly well might get acquired by the majors (don't forget IAC in this picture), so again, the cycle can be self-reinforcing. This is a continued effort at the sort of monopoly power that induced us to start writing about this industry in 1999.
  3. Essentially, for businesses seeking to acquire customers at reasonable cost or even to establish their own global, local, topical, or "micro" brands, time is of the essence. Customer acquisition costs are rising in the search space. Buy exposure on the major engines now before they decide to extract an even larger referral fee (on average) from you. They have that option. Remember, they are the known, global brands in search, and you're not. Search is not a public service offered to you for free, as nice as that might be.
  4. If you are indeed looking at search engine optimization tactics to get your share of unpaid search referrals, again, time may be of the essence. But also, those tactics must be appropriate to today's complex algorithmic realities (it ain't what you think) and must tie in with the user experience and your own goals as to credibility and image. White hat? Black hat? Grey hat? I have a strong opinion here. :)
I'll be covering all of 1 through 4 above, and more besides, in my talk on November 13, in London, for Nielsen Norman User Experience. The title of the day-long seminar is "Search Engine Marketing: Free Prize Inside." If you're in the area or able to get to London at that time, check it out.

Posted by Andrew Goodman




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