Markoff’s Grace Note

Journalists read other journalist's stories with a different lens. So when I read Markoff's piece (reg required) in the Times today, I was thinking "OK, what does he have that is new – he never writes about Google unless he has a scooplet buried somewhere…" I found it here: According…

nytlogoleft_article.gifJournalists read other journalist’s stories with a different lens. So when I read Markoff’s piece (reg required) in the Times today, I was thinking “OK, what does he have that is new – he never writes about Google unless he has a scooplet buried somewhere…”

I found it here:

According to several people close to Google, the company’s reticence has drawn regulatory attention in the past. They say that a continuing informal inquiry by federal and state regulators about the way Google distributed shares to its employees in earlier years came about because the chief executive, Eric E. Schmidt, wanted to avoid a public stock offering in 2002. The company did not register shares granted under the employee stock option plan, which it might have been required to do.

Well and good, but…we knew Google was agonizing over the decision to go public. The real kicker in the piece, for me anyway, came when Markoff gave the following meme the all important final word in his piece. Quoting Inktomi founder Eric Brewer, he pointed out that Google is now an advertising company, as opposed to a technology company, a meme that The Register among others has been banging on for months.

“Because Google arose after the Internet bubble, they were able to acquire a very strong technical team,” Mr. Brewer said. “The irony is that they are really more of an advertising company than a search engine company today.”


Author: John Battelle

A founder of NewCo (current CEO), sovrn (Chair), Federated Media, Web 2 Summit, The Industry Standard, Wired. Author, investor, board member (Acxiom, Sovrn, NewCo), bike rider, yoga practitioner.

4 thoughts on “Markoff’s Grace Note”

  1. I agree that you need to strip away the parts of Google which generate insignificant revenues in order to see what business they are really in, and that this leads you to the conclusion that they are an advertising business.

    This doesn’t go far enough, though. You then have to further strip away the activities which generate significant revenues but insignificant profits.

    Google makes far more money selling advertising on the Google site itself than selling ads which run on other sites. As many people have found out and commented, they also do a much better job delivering value to advertisers through ads which run on the Google site.

    In my view the jury is still out on whether they can be competitive in the ‘ad agency’ business of selling ads which run elsewhere. The whole effort may yet come to seem like a big mistake.

    This makes their business at its core a media property, much like a magazine which has its own ad inventory to sell. This is why their continued management of the personality and performance of the search engine is critical.

    It’s also why they really are a ‘search engine business’, because if there is such a business then its revenue generator is monetizing search engine traffic through selling the associated advertising inventory.

  2. Much of the revenue from ads on other sites has to be paid right out to the owners of those other sites. All Google gets is a commission which is subject to ongoing competitive erosion over time.

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