Cloud Street

Monday, June 12, 2006

We hear the sound of machines

Sooner or later, the Internet will need to be saved from Google. Because Google - which appears to be an integral part of the information-wants-to-be-free Net dream, the search engine which gives life to the hyperlinked digital nervous system of a kind of massively-distributed Xanadu project - is nothing of the sort. Google is a private company; Google's business isn't even search. Google's business is advertising - and, whatever we think about how well search goes together with tagging and folksonomic stumbling-upon, search absolutely doesn't go with advertising. (Update 15th June: this is a timely reminder that Google is a business, and its business is advertising. Mass personalisation, online communities, interactive rating and ranking, it's all there - and it's all about the advertising.)

I had thought that, in the context of plain vanilla Web search, Google actually had this cracked - that the prominence of 'sponsored links', displayed separately from search results, allowed them to deliver an unpolluted service and still make money. I hadn't reckoned with AdSense. AdSense doesn't in itself pollute Google's search results. What it does is far worse: it encourages other people to pollute the Net. Which will mean, ultimately, that Google will paint (or choke) itself into a corner - but that, if we're not careful, an awful lot of users will be stuck in that corner with them.

For a much fuller and more cogent version of this argument, read Seth Jayson (via Scott). One point in particular stood out: Google (Nasdaq: GOOG) insiders are continuing to drop shares on the public at a rate that boggles the mind. It's true. Over the last year, as far as published records show, Sun insiders have sold $50,000 worth of shares, net. In the same period, IBM insiders have sold $6,500,000; Microsoft insiders have sold $1,500,000,000; and Google insiders have sold $5,000,000,000. See for yourself. That's a lot of shares.

6 Comments:

  • I don't believe it is fair to compare insider sales at Google with the other tech giants. Sun/MSFT/IBM did not just go public two years ago and have a 400% increase in stock price. Insiders tend to sit on their shares when their companies slump. But you have a lot of folks at Google that are happy to cash out some of their options and these are primarily pre-planned sales. They would have occurred anyway, would have occurred regardless of the price and are not in response to anything positive or negative happening within the company.

    As for your argument in regards to Search and Advertising, the reality is that as long as Google enables third-parties to serve up relevant content, then the world benefits. If you have a web site that has meaningful information on it and a user community that is viewing your web pages, there is no better way to monetize that income than with Google Adsense. Yes, there will be scammers and polluters, but the reason for Google's success is because it is win-win for everyone. When the micro-economic transaction is profitable for all entities involved, you are looking at a business model with truly strong fundamentals.

    By Anonymous Roman Geyzer, at 12/6/06 18:18  

  • There is an alternative Phil....
    Seen this?

    http://www.majestic12.co.uk

    It's not there yet, but it's a nice idea nonetheless.

    By Blogger Paulie, at 14/6/06 12:34  

  • Paulie - thanks, that looks very hopeful. With enough eyes all searches are shallow, perhaps. (And enough people with fast connections and tolerant firewalls...)

    Roman - I don't have an answer to either of those points; I think they qualify my/Seth's argument (very effectively) but don't actually refute it.

    By Blogger Phil, at 14/6/06 12:54  

  • Google insiders are acting on the same information that everyone else has: rumors of the next big push. I sold my shares because I understand the tech industry and I believe the rumors. There will be a dip in Google stock price in the near future as the search engine transitions from a universal algorithm to one that is customizable for individual needs, and as the default algorithm expands to include this new layer of natural selection. After the augmented system proves more useful than the original and its competition, Google stock value will reach an all time high. Long term investors can keep their money at Google with confidence, but day traders, like myself, take advantage of the microtrends.

    By Anonymous Zephram Stark, at 15/6/06 17:08  

  • If you have anything bad to say about google why don't you contact them directly, I'm sure someone will eventually give you their precious time. It's not about the stocks, it's about the service you get when you are online.

    By Anonymous carlo.76, at 24/8/06 09:11  

  • Almost $7.7B sold in 20 months!!

    How can google continue to go up with fiend like this?

    By Anonymous Anonymous, at 11/1/07 16:11  

Post a Comment

Links to this post:

Create a Link

<< Home