Will Google's Greed Ruin the Internet?
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Should we be worried about Google? Ten years after the search engine was launched by two Stanford University graduate students, Google has become an empowering force and adopted behavior that has transformed the way we access news and information, shop for goods and services and -- increasingly -- how we engage in politics. Who would have imagined four years ago, that Google and its subsidiary YouTube would co-sponsor debates in which ordinary citizens could directly engage with presidential candidates?
Last week, Google's stock hit an all-time high, on the strength of reports that the company will earn more this year than the $10.6 billion it earned in 2006. But while Google has almost overnight become a trusted source of information for the technologically attuned, few have thought to question the extent to which its success poses threats to both our privacy and our aspirations for the positive potential of the Internet.
Google's dramatic growth is a reflection of its role as the most powerful player in the world of interactive marketing. Ninety-nine percent of Google's annual revenues (according to its 10K filing with the SEC) comes from selling targeted advertising on its search engine, which is driven by a massive consumer data collection system.
Google is far more than the digital incarnation of Madison Avenue in the twenty-first century. It is the engine driving us into a new communications era, in which interactive marketing will significantly shape our lives. The company is aggressively expanding its advertising role, building out a sales team poised to partner with the biggest brand advertisers on the planet. Google is pitching its souped-up interactive advertising system to global corporations so they can better blend marketing messaged into the news, information and entertainment we consume.
Google's message to Madison Avenue, as expressed at the OMMA Expo in New York this week is that its technology can leverage tremendous insights about global consumers of products and information, and can deliver the right interactive marketing messages to consumers at precisely the right moment. Ellen Naughton, Google's director of media platforms, urged advertisers to "fish where the fish are," a reference to the millions of viewers of online video, including YouTube. Naughton was particularly proud of "Green Tea Partay," a Google-sold video ad that has drawn more than 3 million viewers to date on YouTube. It's a cheeky video, in which Smirnoff Vodka marketing messages are subtly integrated into the insistent beat of an preppy California hip-hop routine.
As Wall Street celebrates Google's success as a marketing platform, the company's plans to extend its business and power are cause for concern, according to a handful of privacy and consumer groups in the US and the European Union, and elsewhere. Google has engaged in a rapid series of acquisitions, giving it control over YouTube (the world's most powerful online video service); Feedburner (which distributes content and ads to more than a half-million blogs and other news feed sites); and it is in the process of acquiring the online data collection behemoth DoubleClick. Much about Google's corporate goals can be gleaned from the $3.1 billion it is willing to pay to control DoubleClick.
As the online ad technology and data collection system favored by Fortune 500 companies, DoubleClick proclaims that its prowess is "...why all 10 of the world's top 10 brands, 8 of the top 10 global agencies and 8 of the top 10 U.S. and European Web sites choose DoubleClick to help meet their digital marketing needs." It has "1,500 of the world's top publisher, advertiser, agency and advertising networks as clients...." Among the attractions DoubleClick also offers: an elaborate data collection operation delivering "billions" of targeted, personalized, interactive ads each day, and a service that allows it to track more than 100 different ways we watch video online (If you're troubled by the drinking messages stealthily embedded in the story line of "Green Tea Partay" video think how marketing messages will permeate YouTube programming once Google finalizes its purchase of DoubleClick.)
Digital Gold Rush
Google isn't alone among the digital giants swallowing up online marketing properties. More than $33 billion has been spent in an ad-industry-focused merger and acquisition spree during the first half of 2007, Advertising Age reported in July. Microsoft, Yahoo!, Time Warner, ad giant WPP, and, of course, Google were among those spending big bucks to acquire firms that collect, analyze and target us largely via stealth and highly sophisticated interactive ad technologies (adding to their empires such interactive marketing entities as Tacoda, BlueLithium, Third Screen Media, and aQuantive).
The growing consolidation at the core of the digital media business, ultimately will result in a handful of companies controlling the revenues for all of online media -- blogs, social networks, search engines, mobile communication and (especially) news and information sites. This should be of concern, especially to progressive idealists who hoped that the Internet could pose a challenge to the "old" media monopoly. Today Internet users benefit from an incredibly diverse array of content to reach niche audiences through so-called " long-tail" distribution. However, there is a real danger that the hundreds of billions now being spent by the corporate giants and venture investors will significantly undermine the democratic potential of digital media.
This new digital gold rush by the established media companies and and newer players (think Rupert Murdoch acquiring MySpace) to acquire key online, mobile, and digital video outlets reflects an understanding of how our media system is fundamentally changing. Young people around the world are increasingly accustomed to consuming their media in small bites, at home, or on the street. They wish to create and distribute their own content as well, increasingly through social networks, willingly sharing personal information with a global audience. The marketing industry has responded to these changes by developing new approaches to branding and selling.
Ad industry consolidation and corporate strategic alliances are designed to create a marketing system where each of us can be scooped up in the digital marketing net wherever we are: using search, viewing online videos, communicating on social networks, texting or talking on our mobile phones. In addition, advertisers have unleashed new approaches designed to get consumers to embrace brands by creating corporate ads themselves and then virally pass it on to friends (such as the highly successful Dorito's " Crash the Superbowl" contest last year).
Interactive advertising offers marketers the ability to measure how each of us engages with ads and entire campaigns: Each one of our clicks, pageviews, mouseovers, and searches is recorded, compiled and analyzed. Interactive advertising generates nearly $17 billion a year in revenues in the US already; some analysts suggest that by 2011 it will exceed $80 billion annually in this country alone. And as all marketing eventually goes interactive, the companies dominating the advertising market will have tremendous political and economic power, including over the production of news.
A new report by the private equity firm Veronis Suhler Stevenson (VSS) predicts that by 2011, online media will "replace newspapers as the largest ad medium." Such an impending transformation raises key questions about the viability of our already fractured and conglomerate-driven news media system.
Getting to Know You
Internet users are largely oblivious to the fact that our online experience -- websites, search engines and social networks -- is being shaped to better serve advertisers, including those "big brand" purveyors of cars, fast food, and prescription drugs. As part of this process, individuals are being electronically "shadowed" online, our actions and behaviors observed, collected, and analyzed so we can be "micro-targeted." The goal of interactive marketing is to use the awesome power of new media to deeply engage us in what is being sold: whether it's a car, a vacation, a politician or a belief.
Google is by far the most ambitious of this new breed of interactive advertising companies. It now dominates the search business, recently earning more than three-quarters of ad dollars spent for that medium. The one part of the online ad industry it covets but does not yet have real clout is known as the "display" market -- those flashy and video-like ads on major websites -- that's where Doubleclick comes in.
In its pursuit of becoming the leading global force in interactive marketing, Google wants to know even more about each of us. As CEO Eric Schmidt explained last May, "We cannot even answer the most basic questions because we don't know enough about you. That is the most important aspect of Google's expansion." He said that Google wants to be able to answer when users ask, for example, "the question such as 'What shall I do tomorrow?' and 'What job shall I take?'"
Google will be able to wield enormous power to invest and promote content across cyberspace and even in newspapers and television. For that reason alone we should be concerned about this merger, the related consolidation, and the interactive marketing model at the core of digital communications. Currently, Google distributes more than $3 billion a year to its content partners (including hundreds of thousands of websites, from The Nation to the New York Times ). These ad revenue funds are known as TAC -- traffic acquisition costs. But how Google determines how much TAC to share -- and to whom to award it -- will likely have profound consequences for media diversity.
Do we wish to have a new media environment where one company -- or a handful of giants, driven by the demands of profit-seeking shareholders -- make decisions about editorial content and public service programming? What happens to the "long tail" of interactive content if a giant like Google decides it should primarily invest in content that generates the most revenue, or ruffles the fewest government and corporate interests?
New Scrutiny on Google
So far, Google and the rest of the largest players in the interactive advertising business have avoided the critical scrutiny necessary so the public can be informed to begin asking such questions. This week, however, the European Commission launches its inquiry of the Google/DoubleClick merger; the Senate Judiciary Committee's antitrust subcommittee held a hearing Thursday. The FTC is reviewing the deal, with a decision expected by year's end.
One reason why there has been so little critical scrutiny of Google is that it has been the leading corporate supporter for such key media reform goals as network neutrality and open access to wireless spectrum. But while seemingly on the side of the public interest, Google has taken such positions for its own reasons, principally to expand its online advertising business (including ads delivered on cell phones). Another reason why so few questions are being asked is that policy-makers have failed to keep up with the fast-moving changes transforming the interactive media marketplace.
Regardless of what happens to Google's planned expansion with DoubleClick, fundamental questions about the role interactive marketing and advertising play in shaping our new media world should be raised. We are evolving into a new global society where the corporate giants will be able to deliver personalized commercials on an array of platforms. Much of interactive marketing is designed to work in an under-the-radar way, out of our conscious awareness (which is why Google, Microsoft, Yahoo! and the others oppose meaningful consumer privacy rules). These electronic pitches will be generated by advertisers, regardless of the consequences to the environment, our values, and global economic disparities. Do we want a ubiquitous data collection system where private repositories of sensitive information can be sold to the highest commercial bidder -- or turned over to the state for its own political interests?
With the Internet and other online media holding such promise for achieving diversity of expression, do we really want to find ourselves beholden to a global few to underwrite the editorial content essential for democracy? These are among the key concerns that should be on a progressive agenda for this and future digital generations.