If you are wondering about what the big deal is about the recent publicity regarding Google and their new privacy practices, you really need to understand the history behind all that has happened over the past 10 or so years to see how Google achieved the current powerful position. While privacy concerns are the headlines these days, in my mind the bigger issue is the market power Google has achieved, and how they are using that market power to suck the air (and profits) out of online retailers and other business that market online. That is the real story, and it’s one that needs to be understood by anyone who is currently or planning to to business on the Internet.
Over the years, Google has created a vast array of widely-adopted services, most of them free. They are free for a reason. Now Google has the market power to leverage the data they compiled from these services, so much so that now industry pundits and even governments are starting to take notice. Here is my analysis of how did Google become such a dominant company and where this is all going:
Early Online Dreams
In the early mid-90’s the online world was more of a social curiosity than it was a marketplace. Most of us accessed the web over modems. Services like America Online or the Microsoft Network provided access as well as content in a closed, proprietary systems. The Dream Scenario for AOL and Microsoft was a closed system where everyone wanting access to anything online had to pay an online service their monthly fee. AOL became one of the richest companies in the world during this period. But soon the Netscape web browser and the rise of the World Wide Web smashed the online services’ control over content delivery.
The Wild West Days
The new millennium marked the beginning of the ‘Wild West Days’ of the Internet. Like the Old West of American history, in the early days of the web anyone could venture out into the wilderness of the Internet and ‘cowboy’ their way to success – using their guts and ingenuity and handy HTML editor. Search engines were desperate for content, and gladly indexed and ranked web pages. Lots of money was made during this period. The barrier to entry into any market was very low, but still there were relatively few marketers actually fielding products, making it a true seller’s market.
When Google came along, the entropy of the web began to be indexed into a more organized medium. Before Google, web sites were ranked in most search engines primarily on the content that existed on the pages themselves (what we call ‘On Page Factors’). Google’s algorithm was different in that it factored in ‘Off Page’ factors like link popularity. The result was an impressive improvement in the relevancy of the search results. You could intuitively judge that Google’s results were better than those of Yahoo, Alta Vista, HotBot or any of the other search engines.
With the success of Google ranking web sites based on ‘Off’ page factors, a new industry was born: SEO or search engine optimization. SEO became important, even necessary to get a web site ranked in the Google results. The SEO experts who could put successful formulas together became web celebrities in their own right. Soon however, the successful formulas began to unravel.
The Ascendancy Of Google
Google was already a publicly-traded company, and by 2006 had the cash to acquire many companies that would compliment it’s flagship search product, most notably YouTube. Google began providing other free services to webmasters like sitemaps, website analytics and split testing. These free services offered irresistible features and were widely adopted. They also provided incredibly useful data intelligence for Google. And Google uses this day to make their flagship product more profitable – that product is called AdWords.
AdWords, the small text ads that appear in the Google search results, have made the company very rich. The way AdWords works is simple: you agree to Google’s price-per-click on keyword searches, and your ads show up alongside the regular Google search results. When users click your ads, you pay Google a small fee.
With their dominant share of the search market, coupled with the incredibly valuable data provided by use of its free services, Google’s command over online data metrics became unmatched. With the thousands of AdWords advertisers worldwide, Google had the data on most of the profitable searches and markets. If you bid on AdWords keywords today, you’ll find that nearly all your profitable keywords are within of few cents of your own Average Visitor Value calculation. In other words, after advertising costs, you make a very small profit per sale. With it’s huge database, Google has created a nearly perfect market for keywords; there are very few untouched bargains left. So in effect, Google gets a very large percentage of the profits from the sale of online merchandise.
A New Era Begins
Google’s search engine algorithm changes began rolling out around the year 2002. With odd names like Jagger and Buffy, each update announced by Google followed with incremental changes on how it ranked web pages. But in 2011 the Mother Of All Updates, codenamed Panda caught everyone off guard. Panda has had several stages throughout 2011 and has left many once-profitable web sites in the cellar of a page 5 or 10 ranking in Google’s search results.
With it’s broad reach, Google has now begun tightening it’s influence. Searches for popular keywords are now dominated by Google’s own monetized properties ‘Above The Fold’ like brand-centric shopping results, AdWords, YouTube and recently, Google+ social results. If you are competing for keywords today, you are never going to out-compete Google.
Google has also begun using human reviews of web sites to assess their quality. Spammy web sites are being pushed down in the search results or are being removed altogether in the Google index. If you try to use AdWords to promote affiliate products with ‘thin’ or ‘bridge’ sites – beware, a human review can cause your AdWords account to be banned – forever.
Many high-traffic web sites have had to simply accept lower rankings in Google’s index. It’s not nearly as simple as it once was to create a profitable site. Just as the railroad and mining companies ‘civilized’ the Old West and destroyed the ‘cowboy’ lifestyle, so has Google now tamed the Internet.
The Old Way Of Doing Things
It was fairly easy in the ‘Wild West Days to create a profitable web site:
- Find 5-7 long-tail (low competition with decent traffic) ‘niche’ keywords to promote a product
- Create up a 5-10 page web site with original content to promote the product
- Acquire just enough backlinks to put the site on page 1 of the search results OR buy clicks on Adwords
- Add a well-written offer that converts
- Add the visitors to an email list
- Rinse and Repeat
That was pretty much the formula everyone has used for the past 7-8 years with good success. It was great because if was a ‘Passive’ strategy – set it up and automate, and the checks roll in. And while this formula can still work, it’s not nearly as effective as it once was.
It’s harder to rank because you are competing with Google’s own properties for the top spots in the search results. It’s harder to convert because users have grown tired of standard sales pitches, long sales copy, phony testimonials and scarcity tactics. It’s harder to get them on your email list because 
users are so wary of spam, and are frankly just too busy to read all their email anymore. Users check their Facebook status now before they bother with their email.
Google is busy tying their search product to their own social media site, Google+. Oddly enough, the paradigm that Google helped to destroy may now become a reality for Google itself – they are close to creating their own Dream Scenario, a near-proprietary Internet like that envisioned by AOL and Bill Gates. The leaks in the big plastic bag for Google are social media sites like Facebook and Twitter. This is why Google is going to push their own Google+ social network down every one’s throats in the next 24 months. They see the leaks, and they aim to plug them as quickly as they can. It remains to be seen if Google can compete, or even should compete, in the social space.
Social Engagement Can Trump Google’s Dominance
Most Internet marketing strategies up until now have been classified as ‘Passive’. I have had some great, profitable web sites using the old passive model. But that method is not sustainable any more. From now on, to be successful, you will have to allow customers the ability to prove for themselves that they can trust the marketing message before they will buy anything you are selling, or anything you recommend. And the way to build this trust today is through social media, like Facebook and Twitter.
Social media allows you to build trust over time, one customer at a time – using the best referral method known: word of mouth. You do this by engaging the reader in a conversation. Social media gives you the best platform to make this happen. Using social media allows the marketer to provide value and engagement in a way that you could just not do by relying on simple web search:
- Immediacy – You can give my readers updated information in real-time
- Media – You can easily tie photos, audio and video to my content
- Trust – Readers can gauge for themselves whether to trust the me
- Proof – Readers can see that others find my content valuable
- Speed- Readers can scan my social posts and zoom in when interested
- Involvement – Readers can quickly and easily comment and suggest ideas
- Reliability – You are diversified, not counting on one big company like Google for your success
The winds of change are blowing right now – and Google is not the only player trying to win – Amazon, Apple and even Microsoft have their own strategies. But for YOU to win online, it’s time you adopted social media in your business; it’s the best way to insure your business can compete online on YOUR terms.
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