About Me 0053: January 2011

Monday, January 24, 2011

Making Free Money Online

Yesterday's announcement that Google's Eric Schmidt will be handing the CEO reins back to co-founder Larry Page came as a shock, but with the company's aura of invincibility fading, and its core business showing signs of age, the time was right for a change. There was "an example every hour," of how triumvirate decision-making by Schmidt, Page, and co-founder Segrey Brin was hurting the company, Schmidt said. If Google wants to assure investors and consumers that rumors of its looming insignificance have been greatly exaggerated, there are a few key things that Larry has to do.

No. 1: Fix Search

Google's cash cow is its online-search advertising business, but the search results are starting to look awfully spammy. Between content farms that flood the Internet with meaningless search bait and black hat optimizers that use sleazy tricks to get top results, there are entire industries devoted to gaming Google's algorithms.

People who depend on Google for their livelihood have started to notice, and consumers are showing signs of getting antsy: There is a reason Microsoft's Bing quickly picked up 12 percent of the search market, and it's not because of its Gossip Girl product placements, or even vastly superior search results. Google has also drawn some ill will with an aggressive, some say illegal, tendency to push its own services to the top of the page.

It looks like Larry gets the seriousness of the problem. Friday, on day one of his regime, Google acknowledged the issue in a blog post, even as it downplayed its severity. "Reading through some of these recent articles, you might ask whether our search quality has gotten worse," said principal engineer Matt Cutts. "The fact is that we’re not perfect, and combined with users’ skyrocketing expectations of Google, these imperfections get magnified in perception. However, we can and should do better."

It will take more than a wonky breakdown, but it's a start.

No. 2: Find Growth

The aforementioned cash cow is still so lucrative that it's easy to forget that Google has never really succeeded in any other business. Despite the ubiquity of Gmail and YouTube, they are not yet successful stand-alone businesses. YouTube only recently made it into the black after incurring hundreds of million of dollars in losses over the years.

It's not like Google isn't aware of the problem. Witness the frenzied diversification into anything that looks hot: cars that drives themselves, social networks, and yesterday's long-expected news of a Groupon clone. But trying everything hasn't produced much of anything.

Larry needs to ditch the side projects and focus on the most promising ones: the Android mobile-phone operating system, and the mobile ad network AdMob, which even makes money from iPhones as it serves up 2 billion ads a day.

No. 3: Stop the Brain Drain

Here's an enigma for Larry to unravel: Why does a company with five-star chefs, high-tech nap pods, and free massages have to throw millions of dollars in cash money at employees to get them to stay?

Part of the problem is Google's convoluted management structure, which Page is clearly trying to fix. If a team has been working on an amazing project for a year, only to hear that it overlaps with someone else's pet project, who wouldn't want to jump ship? But it also has to do with Google's size and a potentially fatal inability to face up to an unpleasant reality. From what we hear, there's reluctance from some of the old guard to accept that Google is a massive corporation now.

There is a major intangible at play as well, something that may not be easy for someone who is more Chief Engineer than Chief Executive to grapple with. If the ambitious go-getters that make it through Google's onerous interview process sense that the cool, sexy projects are happening at Facebook, Apple, or some stealth VC project with no name, then no amount of money is going to keep them on side, no matter how big a money truck Google backs up to their cubicle.

Which leads to....

No. 4: Consider a Personality Transplant

Tech bloggers were smitten with Eric Schmidt, but for all the wrong reasons. Sure, he grew Google into a $200 billion behemoth, but he also had a weakness for creepy Big Brother jokes delivered so dryly that no one could be sure he was joking. Contrast that with the controlling and charismatic Steve Jobs, surely one of the best salesmen in modern history, with a reality distortion field that may have made enemies but also bestowed an ineffable cool on his entire company.

Larry, by all accounts, makes Eric Schmidt look like Steve Jobs.

Ken Auletta explains:

He is a very private man, who often in meetings looks down at his hand-held Android device, who is not a comfortable public speaker, who hates to have a regimented schedule, who thinks it is an inefficient use of his time to invest too much of it in meetings with journalists or analysts or governments. As C.E.O., the private man will have to become more public.

Google's engineer-driven approach to new products has been a long-standing problem. (Google Wave, anybody?) Unlike Apple, it seems to build for engineers and developers, not consumers. That's great when you're making an open source mobile platform like Android, which is hot on the iPhone's tail due to its openness and potential ubiquity across multiple carriers and devices. It's not so great when you made everyone on Gmail opt into Google Buzz ’ or for creating fanboys and girls who want to use your products, even if they have to anyway.

Either way, Larry, you're going to need some charm to lend Google the same cool factor it had last time you were in charge. Maybe start by looking up from your Android phone every once in a while.

Another Facebook change, another privacy uproar. Read the headlines and you might have thought the social network was planning to open the books on private cellphone numbers and home addresses to any advertiser willing to slip them some cash, rather than adding some more sharing options along with the usual granular control over who gets to see what of your digital details. Unsurprisingly Facebook froze its plans pending a reassessment of its privacy controls; unfortunately, nobody is taking Facebook users – and the online community in general – to task over taking some responsibility for what they share.

If you haven’t been following the story, here’s the situation in a nutshell. Facebook announced on Friday that it was planning to add address and mobile number to the personal information that could be shared with applications, websites and advertisers. As with other personal details, the degree to which that data was accessible would be managed under each user’s permissions settings: everything from a come-and-get-me open pipe to a complete block on anything being revealed. Facebook billed it as a way to “easily share your address and mobile phone with a shopping site to streamline the checkout process, or sign up for up-to-the-minute alerts on special deals directly to your mobile phone.”

Don’t get me wrong; I’m under no illusion that Facebook is doing this for altruistic reasons. Making online purchases quicker is undoubtedly handy to those who actually click through Facebook adverts, but for the social network itself it’s all about making money from its most valuable asset: its millions of registered users. Just like with a free newspaper, Facebook makes its money by showing you adverts, and it can use your personal information to tailor those ads more appropriately. Access to personal contact details, meanwhile, is even more valuable.

However, just because there’s profit to be made for Facebook, it doesn’t mean this is either bad for the user or a sign of Evil Big Business taking advantage of the general public. We manage the degrees to which we disclose personal information all the time, long before Facebook arrived and gave us a simple privacy settings page to work with. Every time you avoid giving your phone number to a door-to-door charity worker, tick the no-junk-mail box on a bank form or refuse to give your address to someone you just met at a bar, you’re exercising your own, personal privacy filter.

Perhaps I’m being unfair. After all, it only takes a quick glance at sites like Lamebook (often NSFW) to see that many Facebook users have problems with over-sharing, accidentally making public posts out of what were meant to be private messages, and generally forgetting who out of their friends and family can read what they’re saying. Maybe Facebook does have some intrinsic responsibility to shepherd its members through the difficult journey that is online life; perhaps the privacy pages really won’t be complete until there’s color coding, pop-up warnings and a virtual cash register showing just how much you’ve lined Mark Zuckerberg’s pocket.

This constant push-me-pull-me with Facebook does users no favours. Every time the privacy patrol scream, and Facebook backtracks, it reinforces the idea that the site itself is solely responsible – should be responsible – for making safe use of the information we share online. Don’t get me wrong, if Facebook was looking to sneak in a “we can sell your identify” clause into the T&Cs, that’s something worth shouting about. When, though, we muster the same amount of vitriol for sharing options that already have safeguards – safeguards that satisfactorily protect our email address and other details – it looks more like abdication of responsibility. We want to trust Facebook do “do the right thing” – based on our own interpretation of what “the right thing” is, exactly – so that we won’t have to. We can spend our time looking up old crushes, posting photos of ourselves looking fierce in clubs, and commenting on videos of cats.

Privacy is important, but the responsibility begins at the individual level. Just as you don’t hand out your address to strangers in the street, maybe giving it to every website that asks isn’t all that sensible either. Relying on other people, or companies, to protect us universally is a naivety we abandon before adulthood in the real world, yet something many seem determined to cling to online. That’s before you get to the thorny issue of lost or stolen data. In the end, it’s your life, your number, your face: it’s up to you whether it’s an open book.

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