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More On Google, Yahoo, Media, Technology

By - December 10, 2004

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My post below has garnered some very thoughtful responses, some of which took the route of email or phone calls. It’s clear that I need to clarify and revise my ramblings on this subject, and I’m grateful that my thinking-out-loud is worthy of such consideration. Maybe by the time the book is finished, I will have gotten this right, but in the spirit of iteration, here’s another hack at it…and this still feels not quite right, like I need a good joints after midnight talk with a few more folks before the dead obvious stuff hits me between the eyes…

First, some of you challenge my distinction of Yahoo as more media-driven and mercantile, and Google as more “pure” and technology driven. And many point out that in the end, even making a distinction between “media businesses” and “technology businesses” is a distinction without a difference – both are in the business of creating value for customers. Such a distinction is vulnerable to a charge of easy thinking, and I agree. Let me clarify. In the end, I believe both companies are in the same business, and if I were forced to name that business in one word, I’d argue that business is media. Yes, Google started its life as an algorithm in a PhD program, and Yahoo started as an edited guide to the web, but they are clearly converging into the same business: they mediate information and services for consumers, and derive value from those services using the traditional revenue streams of the media business: advertising and subscriptions (if you don’t think Google is in the subs business, think again).

My point was that understanding both companies’ DNA and culture is important in understanding where they might go with relation to content businesses like music, movies, and television in the future, and on that count, Yahoo has a deeper and longer history of understanding the world of making media – most of its senior executives are from the content business, and its DNA was as an edited guide – a content play. While there is no question that Yahoo has and employs world class technology and Google has media experience, I believe the distinction of “media vs. tech” is important when thinking about how each company might approach Hollywood so as to make paid content easily available to all of us at a value proposition that works for all players – content owner, consumer and distributor.

As to the point that Yahoo is more commercial in nature, some of my Yahoo friends may see that as a dig – but in fact, I meant it as a something of a compliment. I think because of its media DNA, the company is clearly more comfortable with extracting fair value for media services rendered, and because of that, I believe has been free to innovate in its approach to search: as one of Yahoo’s executives recently put it to me, “We are entirely focused on completing tasks.” In other words, if the task at hand is buying an Usher CD, or checking a flight, or finding a local restaurant, Yahoo has repeatedly innovated in building a suite of search results that help a consumer complete that task and get Yahoo paid in the process. That, to me, makes for good online media. (I know that if a shortcut feature on Yahoo is not getting clicked on, for example, it’s dropped – “We don’t point people to things they don’t want,” is how one executive put it. I should also point out that the shortcut features do not always point to only Yahoo sites, they also point outside, depending on the search.)

Now Google does the same in many instances (flight checking, local restaurants), but it’s always been my impression that the company has been uncomfortable with the idea of tying commerce to its media products – its DNA resists monetizing the value created in any other way than AdWords (and even resisted that, at first). An example is News – there is no business model there yet; and Froogle – again, no business model other than AdWords. In a way, this reticence gates innovation in the search results space. If the consumer truly wants to shop, or browse high quality news results, and you provide a great service to do so, there’s no shame in making a buck while doing it, even if that buck is made in other ways than advertising (ie, cutting deals with music or news publishers, or selling your consumers up to a premium service if you can).

I also did not intend to imply that I believe Google is a pure technology company (and some Googlers did take offense at that) – regardless of the reticence the company has shown from time to time on the matter, it is a major media player. And the cards it holds, combined with the moves it has made recently, certainly point toward it being an even larger force in media in the future. Sure, it derives its value as a media company from its extraordinary technology assets, but my point is this: technology+AdWords is not enough. It’s also about making great media products, and to make great media products, it helps to see yourself as in that business in the first place.

A very interesting case will be Google Print. As that program expands, and it’s rumored that it will, dramatically, a number of questions arise. How will Google monetize out-of-copyright books? If it indeed does bring tens of thousands of out-of-print books onto the web and into its index, will it allow others to access and index that new treasure trove, or will it act more like a traditional media company, which would “own” that resource for itself? How will it choose what it brings into the index – those that might sell? Those that somehow are the most “in demand” by some measurable standard? With regard to books that are in print, will it limit itself to being soley an organizational tool supported by AdWords, or will it start to take a vig for books that are sold via the Google Print service (in fact, maybe it does already and I’m simply unaware of it – any publishers out there, let me know!)? And will the print model scale to television and movies or music?

As to search, pure, organic search, I have one additional observation. Pure organic search made Google what it is, and remains the True North of the company. At Yahoo, pure organic search is viewed as one (extremely important) option among a range of search-related services that the company provides. When you enter a search term, pure organic results are always there, but so are other services that the company has developed in response to the implied intent of your declarative term. That’s why I brought up the conundrum inherent in content-based searches – can you really write an “objective” algorithm for the One Great Index when it comes to paid content like movies and music? (Even in the case of finance content, Google’s solution feels temporary – it currently points to Yahoo Finance). Maybe you can, but it seems like a very difficult task without the moderating forces of great media products backed by robust commerce models (ie services that help consumers find what they are looking for in a far more specialized way – think AOL’s Pinpoint and Yahoo Local Search).

For me, these are all interesting questions, because they help untangle the intentions and possible future paths of two innovative, valuable, and extremely important companies.

Let me know what you think, as always…and happy weekend!

(Hat tip to all of you who contacted me but prefer to remain anonymous, and to Gary for Pinpoint!)

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  • http://www.br1an.net Brian

    Nitpick. Picasa is free. Aside from that, Google lowered the cost of Keyhole from 70 dollars to 30 dollars a year. This probably covers bandwidth and rackspace and I doubt they are turning a profit. This is hardly subscription.

  • http://battellemedia.com John Battelle

    Yes, Picasa is free, but my point in pinging it is…for how long? At least there’s a good premium service to be built there, a la Flickr…

  • http://www.br1an.net Brian

    Possibly. Sorry if I sounded over critical, I found your recent ramblings interesting and insightful.

    Regarding Keyhole, I would suspect that eventually the subscription will be removed. This would happen when they have an innovative way to insert advertising into the software. Google is not in the specific business of preferential paid listings, but if there were two pizza restaurants by my house, and one was marked blue because they hadn’t paid for advertising, and one was marked yellow because they had, i’d suspect the one interested in promoting their business might have better pizza. Google can even use their PageRank and context technology to let you know which pizza joint is more popular on the web.

    I don’t know how they are going to turn a profit from Picasa.

    There were ramblings, and I believe mentions in the Gmail FAQ, that certain aspects of Gmail will not be free when Gmail leaves beta (I believe POP access was of mention). We know that people pay for cable and still tolerate advertisements, but would they tolerate it with Google? I think that would be decidedly evil. So possibly maybe, there could be an alternative subscription aspect to Google. I think this would be wonderful, but then again, a good portion of Google’s beta services run without any immediate intent to turn a profit, so it’s obviously not of immediate concern to them.

  • http://feedster.com Scott Rafer

    There is one other major difference between what we all perceive as media companies and tech companies. Yahoo and Microsoft/MSN are very experienced at running heterogeneous online businesses. Google will certainly be able to build that management expertise, but it won’t be instant or painless. Successful media companies all create as many revenue streams as they can think of per type/piece of content without [overly] diluting its value. That sort of capability is not easy to achieve.

  • http://www.idealab.com Bill Gross

    John, I have one different thought on Yahoo / Google and Media company or technology company. It’s just my opinion, but here goes. Yahoo wants to be your one-stop-shop to find anything on the planet, and also wants to host it. Google wants to be your one-stop-shop to find anything on the planet, but wants to link you to it. I think that’s the main difference that makes Yahoo “feel” more like a media company, because they actually license and in some cases own content, where Google might “host” content, like gmail, but they don’t own it or license it, it’s user created. Let me know if you think that is a more accuracte distinction between the two companies philosophies.

    Bill

  • Dragan Sretenovic

    Google is making a great public image
    by striving “to do one thing really, really well.”
    http://www.google.com/corporate/tenthings.html

    Another difference is Google’s *empowering* of it clients,
    advertisers (AdWords) and web publishers (AdSense).
    In both cases it is a *hope* and *trust* that is so valuable.

    So, while Yahoo is a very good conservative bossiness,
    Google has a chance to does make a real difference…
    More risk, more potential.

  • http://boingboing.net/markf.html Mark Frauenfelder

    This is great stuff, John. I hope it’s going into the book! I love Google’s approach because they have, as much as possible, taken the man out of the loop. They write an algorithm, then field test it, tweak it, test it, tweak it. I don’t know why this appeals to me more than Yahoo’s approach. Maybe I like what Google is doing because it’s clear they’re having a hell of a lot of fun. It seems like Google’s main goal is to blow their own minds with what they can do, technology-wise, and the excellence of their services are an expected symptom of this kind of behavior. Yahoo, on the other hand, is focused 100% on making money, and trying to come up with the best search and service system to do that. No doubt that can work, but it’s much more boring. Not to say Yahoo! doesn’t have some brilliant scientists and marketing wizards, because they do. But Google is having all the fun.

  • Dragan Sretenovic

    I think it will be a great book :)

    Here is an example you may find helpful:
    a size of HTML page with 100 emails at:
    * Gmail (Google): 1.16 KB
    * Yahoo Mail : 130 KB
    * Hotmail (MSN): 70 KB

    So, Google is using more than 100 times less
    bandwidth and server IO/CPU to achieve the same
    thing like Yahoo mail, thanks to heavy usage
    of DHTML (JavaScript) to assemble the page
    inside the browser, not at the server.

    On top of this, advertising (graphical) on Yahoo
    is more aggressive and less relevant
    than targeted text of adds at Google.

    That said, I still prefer Yahoo mail, that I
    find easier to use, maybe since I am using it for years.

  • http://www.frugaldelights.net Sally

    I have my active e-mail on yahoo, but use google as well. I like them both.