Traditionally, Google felt almost like a common carrier, helping users find their end destination, then sending them on their way to other websites via the blue links on a search results page.
Google collects a tidy sum based on advertising on those search results pages, but others reap the customers' end purchase. Now Google wants to change that. The company is aiming to keep users from leaving the mother-ship -- looping them through interconnected Google search and e-commerce sites -- and allow Google to collect a direct slice of the exploding e-commerce pie.
Google's Eric Schmidt highlighted the company's new direction last week at the D: All Things Digital conference, where he raised the goal of Google delivering answers to search queries that did not deliver links to other websites:
But the other thing that we're doing that's more strategic is we're trying to move from answers that are link-based to answers that are algorithmically based, where we can actually compute the right answer. And we now have enough artificial intelligence technology and enough scale and so forth that we can, for example, give you -- literally compute the right answer.
Schmidt noted in the talk that this goal is "exactly what drove the acquisition of ITA," the flight-data company. This will allow Google to respond to a search for "flights from Boston to Chicago" with direct information on flights and schedules. (Notes from Engadget's liveblog,)
Google's page about the acquisition explains that Google purchased ITA to get beyond "the traditional 10 blue links" of a Google search page and start providing the information directly. But as Nieman Journalism Lab notes:
That's great -- unless you're behind one of those 10 blue links and you've been counting on Google sending you search traffic when someone searches for "flights from Boston to Chicago." ... It's a shift in the focus of Google's judgment; websites shift from competitors to be ranked against each other to data sources to be diced and analyzed to figure out an answer.For all the times that Google has said it's not in the content business, it's not hard to imagine a future where its mission to "organize the world's information" goes way beyond spidering and linking and into algorithmically processing for answers instead of PageRank.
Creating Stand-Alone E-Commerce Sites: This fits with another big announcement by Google in the last few weeks, the launch of a new Google Advisor site where consumers can receive offers on mortgages, credit cards, CDs and checking accounts. For mortgage offers, all users need to do is tell Google what size home they are looking for, the cash they have for a down payment, and their credit rating and Google will find offers for them -- with Google collecting a fee from whatever company the user contacts.
Note the last part. Google will now collect a commission on each mortgage sale and the company appears to be looking to collect similar commissions on selling other financial products. And of course, Google adds to its storehouse of information on each user.
This just adds to the rest of its burgeoning e-commerce empire. Google already runs Google Product Search, but the company just acquired Sparkbuy, a comparison shopping site, apparently less for the website itself than for the expertise of its staff in enhancing its own e-commerce systems.
And the company's new Google Offers program, similar to Groupon, will provide both a chance to get a slice of local deals sold, while enhancing its local Google Places site which is designed to be a platform for a whole array of local e-commerce activity.
So Google is working to be creating a series of stand-alone e-commerce sites, whether for travel or financial services or for more general product shopping. This keeps users on Google sites, allowing the company to serve up more ads first and foremost, but also opening up a whole new opportunity for collecting a share of customer purchases directly.
Google in Your Wallet: Tying all this together potentially is the other big announcement last week, the official introduction of Google Wallet, a system to make payments for goods in the real world using your cell phone. The system -- with partnerships with Citi Mastercard and a range of merchants in New York and San Francisco from Duane Reade to Radio Shack to Walgreens -- may provide a chance for consumers to consolidate all those annoying reward cards and coupons into a single electronic "wallet" stored on a smart phone. Tied to the Android operating system initially, Google hopes to extend it to other phones as well.
The company will be able to use its new Google Offerings deals to pull in customers initially. As with everything Google, the service is secondary to the new data the company will now be able to collect on user behavior to enhance their value to advertisers and justify demanding a share in the end purchase price.
And the payoff of Wallet will be the chance to actually observe the full lifecycle of users seeing a Google ad, clicking on it, storing the offer, then seeing which ones actually lead to a purchase. Every click of the button at a checkout counter with Google Wallet will deliver invaluable data on purchasing behavior. Advertising campaigns and their success will be able to be tracked continually from initial display on a website to final purchase.
So your whole financial behavior will now be under complete surveillance by Google, from what goods and terms you use to search for products to what ads you click on that are associated with those search terms to which offers you download to where you then make your purchase and redeem the offers.
The Economic Imperialism of Search: This is the classic problematic behavior of dominant companies in an industry, not so much controlling a large share of one market like search itself, but the fact that such overwhelming dominance in one sector can be leveraged for dominance in other related sectors along the economic chain. Potential innovative rivals without the sprawling resources of the multi-sector monopolist can never get a firm foothold, so many stop even trying.
As Google seeks to swallow e-commerce, the question will become, first, where will there be room for innovative upstarts to take the company on and, second, with the overwhelming information Google will be collecting on customers, what chance will any new competitor end up having to compete in the e-commerce field?
Follow Nathan Newman on Twitter: www.twitter.com/nathansnewman
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Huh? Well, let me explain.
Google, and all services like it, is all about "central." But the Internet itself is all about, "distributed." There are millions of computers connected to it and almost all of them are doing nothing. Google works by vacuuming up =copies= =of= data and indexing that data on a "Googleplex" of computers which they ... they alone ... own. You can't actually find anything that's on a web-site in Google's massive database: you can only find what was there at some point in the past.
Furthermore, at this point, the Internet is still stuck on the idea of "locations." To read this post you have to "go to" HuffPo, and the content has to be served by "HuffPo's" computers. But what you are looking for is not "HuffPo." It's content.
Consider the original Napster. A totally original idea because it was totally distributed. There was no central place that you could drop a nuclear bomb on to put it out of business forever.
Nuclear bombs. Oh yeah, as in MILNET; ARPANET. Where all this INTERnet goodness came from. Still an important consideration; maybe now more than ever. Don't put all your eggs in one Googleplex.