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!)