Aqute Research Blog

Browser extensions could damage Google search revenues

When Google wanted to weaken Microsoft, it brought the fight to Microsoft's home territory (early speculation raged about a Google browser, Google made sure that Firefox was a success, Google launched Google Toolbar and Google Desktop, etc). Google spent a lot of money fighting Microsoft on its own turf. And Google has always been interested in tempting developers away from Windows (which has long ceased to be a sexy platform for which to develop).Seeing itself as the incumbent, Microsoft has not yet done the same. Microsoft still believes the place to fight battles is on Microsoft land. Not just Windows - Live Search is Microsoft bringing the Google fight to Microsoft territory (alas, territory that no one visits).

As we spend more time online, including with growing Firefox market share, and with growing Google/YouTube market share, the platform that users most interact with will become Google land, not Microsoft land. And when cloud computing does take off, even if that takes another decade or two, Windows will become irrelevant (incidentally, android suggests that Google is not philosophically opposed to client-side operating systems, it's just easier to promote cloud computing than to replace Windows). Consumer mindshare will belong to the hardware, the browser or the websites (or perhaps the access provider if ISPs manage to replicate the success of mobile operators). Google already beats Microsoft in web mindshare, is catching up in browser mindshare if you count the once-Google-in-disguise Firefox, and through One Laptop Per Child has shown its interest in hardware. It is not a coincidence that one of the effects of Chrome's interface is to minimise the way it looks like an application through which you view the internet - thus reducing the importance of desktop applications altogether.

So how can Microsoft bring the fight to Google's doorstep?

Firefox has become a development platform (through Greasemonkey and various add-ons). Extensions such as Customize Google (remove AdWords ads, add links to other search engines, etc) and Google Preview (preview thumbnails of the websites listed) let me customize the Google search results page to be quite different from the way Google intended it. And if Google is right that its design is perfectly tuned to maximise search monetisation, then these extensions must be costing Google money (they are unlikely to be increasing monetisation - Google's the expert at that, not small-guy Firefox developers).

For example, here is a normal Google search results page:

And here is the same page using the above two extensions:

These extensions are using Firefox as a development platform, and more specifically Google. They are adding features to the Google search page in ways that surely Marissa Mayer would rather they did not.

Now, it may not be a good idea for Microsoft to launch its own browser extension that removes AdWords (I think the IE8 feature is not quite the same thing), but even extensions with genuinely useful features (such as the two above) could unbalance the Google search results pages. And Microsoft could not only develop those for Firefox, which is still the minority browser, but enable them on Internet Explorer. Microsoft could drive the adoption of such extensions beyond the geek crowd.

Firefox also provides command-line capabilities. Unlike most users, I don't access Google Images through the Google homepage, because I've set up a search keyword that I enter directly from the Firefox address bar. For the same reason, I no longer go through Google to access Wikipedia, IMDB, eBay, Amazon or YouTube. If Microsoft popularises the use of address bar search keywords (a genuinely useful feature), Google could lose important chunks of traffic. And if part of Google's intent through Chrome is to change or tap into the actual behaviour of web browsing, then models such as Ubiquity (which adds even more command-line functionality to Firefox) become even more relevant to Microsoft. Thinking of the browser, and Google.com, as the new Windows (in real terms, not just as an academic discussion) could help Microsoft weaken Google's control over its own search revenues.

Microsoft, Google ramp up European infrastructure

In its recent FY2008 earnings call, Microsoft reminded investors that it intends to spend heavily to beat Google. Some of this spend is coming to Europe for Microsoft's new European Search Technology Centre - announced a couple of months ago, and now recruiting. Google has long had its own search development centre in Zurich, but that wasn't really focused on European search. And Google does have a mobile development centre in London, which was supposed to be focused on Europe but has turned out otherwise (as shown by the lack of European mobile search product announcements, and the inevitable shifting of resources towards Android).

Meanwhile, Google is recruiting for its own datacentre acquisitions.

On a not completely related note ... one day, both these companies will be strong candidates to supply the kind of outsourced datacentres that LloydsTSB's James Gardner thinks will be the norm. In the excitement of the Google Apps launch announcement last year that Procter & Gamble was a charter client, some people thought Google would be a shoo in for this type of outsourcing. Now, with Google Apps proving far from popular with enterprises, and Microsoft-heavy Procter & Gamble disappearing off the Google Apps quotations page, that is not such a foregone conclusion. Of course you should never write the "not so cool" companies such as Microsoft, IBM, Sun etc from the enterprise space. And in any case, as James Gardner points out, this may all be twenty years away, when the internet will be completely different. In the short term, Google and Microsoft are bringing the search datacenter arms race to Europe.

Comparing trend charts on Facebook Lexicon and Google Trends

Facebook Lexicon and Google Trends both let you chart trends in searches for popular keywords. Flawed tools, of course, but better than nothing.

Here are two charts you might want if you are interested in word of mouth recommendations (Facebook first, Google second):

And here are two charts you might want if you are interested in brands (Facebook first, Google second):

If you do more of these, the general result is that people rarely talk about specific brands, Pepsi, Coke, McDonald's and Nike seem to be exceptions.

And on a completely different tack, here are the Facebook and Google charts for the build up to The Dark Knight (particularly in the US, since both these charting tools are US-biased):

(I assume the Google Trends scale is slightly offset, rather than that Google users are prescient). Interestingly, the viral campaigns barely registered. You could argue that viral campaigns target influencers, so you only want to reach a small number of people who will have a large effect ... but whether these influencers even exist online is a debate for many another day.

Yell wastes money on YouTube

Yell has been running a number of online advertising campaigns over the past few months, using clever rollover technology to allow you to flick through a Yell directory, or perform other such actions.

The first one that I saw, in June, was linked to a YouTube channel, encouraging you to do funny things with your fingers (the campaign is called All The Digits).

The YouTube channel has been a complete waste of Yell's time and money. With 2 subscribers and 223 views, it has not been popular even with Yell employees, their friends or their families. If this were one of many experiments in a "fail fast, fail often" strategy, fine. It can't have cost that much (although the ad agency behind this will have taken their fees) and it can't have taken up much time. But the mistake Yell made is in losing focus and misunderstanding the (non-)usefulness of viral campaigns. With one or two exceptions (Dove, Menthos), corporate viral campaigns don't go viral, don't create brand recall, don't promote product use. Additionally, in this case, the fingers concept is associated with Yell's printed directories, and the problems of the printed directory business are not going to be fixed by a simple viral campaign.

What will Google do when measurability runs out of power?

Google's key value proposition to advertisers is measurability. Measuring exactly what, and whether measurability is related to success, are questions still open to debate (I realise that linking to my own blog hardly counts as a debate). However, even if measurability works, it will only take you so far. The latest cracks: only half of display advertising clicks (to which Google now has great exposure through Doubleclick) are worth anything. The throwback to Mr Wanamaker is a little ironic for Google (given that Eric Schmidt has often positioned Google as the company that will tell you which half) but not ironic at all (given that Eric Schmidt has often positioned Google as the company that will tell you which half).

The shallowness of interaction with display advertising is not as much of a problem as it used to be, now that advertisers are seeing the opportunities in online communities. Will Google be able to fix the problem of shallow audience interaction, rather than just measuring it? Not in the short or medium term, and not with its current technology. Google may develop algorithms that are better at buzz monitoring and so on than those currently on offer, but there is a tension between algorithmic harvesting, and the kind of conversation that brands say they want. Brand advertisers are becoming increasingly educated about deep engagement with consumers online, but deep engagement does not sit well alongside the need to enlist a lot of consumers quickly. Building ten deep relationships over a decade (the rate at which deep human relationships occur) is not very useful for a global brand, so the temptation will be high to sacrifice purity and depth of interaction for the sake of volume and speed.

Conversations with consumers are immensely valuable, and very satisfying for brand managers. But they require hard (often manual) work and long-term commitment. Google's strengths are at odds with this kind of brand engagement. Google will want an algorithmic solution - which is a great start but goes no further. You cannot engage with consumers in a deep, sustainable way algorithmically. So Google's most likely approach will be to set up smoke and mirrors to make brand advertisers believe that shiny dashboards showing social map links between people are enough. And advertising agencies, who for all the coming doom, will remain the gatekeepers of the largest piles of money, are likely to buy in to that approach.

Internet case studies

ecch is a clearing house for business school case studies. Here are some of them (which I must confess to not having read, due to laziness issues):

• Alibaba vs eBay
• eBay buying Skype
• Google diversification
• Google in France

In the UK, Google vs media overtakes Google vs Yahoo/MSN

In ye olde days, Google was always analysed in relation to Yahoo, MSN and AOL. What these companies had in common was a chance to redefine the Internet, as opposed to serving routine web content like of Tiscali and Orange do; and the idea that they all had similar advertising revenues or the potential for similar advertising revenues. Eventually, AOL dropped off that list, especially here in the UK where their acquisition by Carphone Warehouse aligned them more closely with the latter type of website. Now, Yahoo's rather bizarre relocation away from the UK (bizarre because come on, how many US companies manage their UK operations from a country not even in the EU), although not marking a formal exit, does mean that they won't be undertaking any radical strategies in the UK. A possible Microsoft acquisition may relocate them back, but MSN UK has faded as a serious competitor to Google UK, if it ever was that. This leaves Google as the only one of the original foursome still trying to be innovative and create market changing services - largely from the US but that is nonetheless more than their erstwhile competitors will do.

That leaves Google competing with the real world media companies, with whom Google has always fought for the same budgets but less clearly so when Yahoo was around and when MSN was touted as a real alternative (and when media companies were not so aware that they would lose revenues to Google). Until Google changes the market, the online spend of small and medium businesses will largely be on text-based advertising, given that display advertising require time, money and design effort that such businesses do not have). For a small business, the choice is often AdWords or newspaper listings or yellow pages listings. Google isn't targeting these media companies out of any personal vendetta, but they just happen to be the next layer of revenues. Regional newspapers (who recognise Google as a competitor but also as their primary source of traffic), classifieds and directory companies (who recognise Google as a competitor but are limited by their smaller and often declining budgets) and advertising agencies (who do not recognise Google as a competitor).

While media companies have little interest in some of Google's business areas (their document or health strategy, for example), Google, regional newspapers, classifieds websites and directory companies all want local, text-based advertising from small and medium advertisers. In the US, the battle between Google and Microsoft, and to a much lesser extent Yahoo, is still on (this is one reason why Kara Swisher's suggestion that Microsoft should buy Yahoo is not good - the game Microsoft US should win is the "change the Internet" game, not the "be an online magazine" game). But in the UK, when Google does something, the more relevant question to ask now is how will it affect these three categories of media companies.