In 1990 the world's first web-page was created, and by 1992 there were all of 26. Today there are about 150 websites for everyone on the earth-- population (6.7 billion) and Google daily users number in the hundreds of millions. Google's chairman believes that Google (now $22 billion revenue firm) will someday reach $100 billion in revenues; revenues increased 31% last year. Googled: The End of the World As We Know It (Penguin Press/ Nov 2009) by Ken Auletta, is another in a line of books covering the history of Google's spectacular rise while also trying to explain it and project the future. The very good part of Auletta's work is that it makes readers think about Google's approach and potential in the future; the not so good parts are that many areas recently 'invaded' by Google are not well covered (fortunately, Wikipedia and Google itself can help fill in the gaps), and too many pages are filled with useless anecdotes and detail.
Google's search service underlies the company's success. It is based on a secret (to limit spammers' efforts to artificially boost ratings) algorithm (PageRank) developed by Google's founders, based primarily on the 'importance' of the pages (recursively determined by the other pages linking to them), and constantly under change (359 in 2008). About 200 factors are utilized in determining PageRank. Auletta contends that Google also uses cookies to refine search responses over time.
Google's advertising revenues account for more than 40% of all ad dollars spent online. Google also pumps additional ad dollars into tens of thousands of Web sites through its AdSense program in which Google serves as matchmaker, uniting advertisers with Web destinations. In effect, AdSense allowed Google to turn everyone's content into a potential place for Google ads. Google charges a fee of about 33%, and the Web destinations pocket about $5 billion/year as a result of visitors clicking on the ads. AdSense for search also allows website owners to place Google search boxes on their websites - Google shares any advertising revenue it makes from those searches with the website owner. 'Google AdSense' has been criticized by some as a large source of "invalid clicks," in which one company clicks on a rival's search engine advertisements to drive up the other's costs; auditing programs are available to help detect and correct for this.
Google AdWords, however, is the company's main source of revenue. AdWords allows potential advertisers to bid to place small text ads (95 character limit - less intrusive and bothersome than typical banner ads) next to the results for key search words. All auctions for ads are run online and automated. The highest bidder gets to place a small text ad to the right of the search results; up to ten lower bidders also win ad space below it. The order is set by a combination of comparative bid levels and the "quality score" of all ads shown. (The quality score is calculated by historical click-through rates, relevance of an advertiser's ad text and keywords, an advertiser's account history, and other determined by Google.)
Minimum bids per keyword are set by Google, also using the quality score - a commonly searched word or phrase like JetBlue might cost only a penny or two, while more esoteric phrases like helicopter parts might go for $50/click. Advertisers can choose to pay either according to the number of viewers or clicks. Google Analytics allows advertisers to track day by day, hour by hour, the number of clicks and sales, the traffic produced by the keywords used, the conversion rate from clicks to sales, where viewers came from (referrers, as well as physical location), etc. It helps advertisers target by age, sex, income, zip-code, personal preferences for leisure time activities, product preferences, news preferences. etc.
Google bought YouTube for $1.65 billion in 2006, the idea being to use it's free content as another platform for selling Google ads. YouTube, however, is losing money ($100 million expectation in 2009) so far. In 2008 Google also bought DoubleClick, a service that tracks users and records what commercial advertisements they view. It's main service is to automate the administration effort in the ad buying cycle for advertisers and the management of ad inventory for publishers to increase the purchasing efficiency of advertisers and to minimize unsold inventory for publishers - eg. allowing last-minute substitutions of higher-paying advertisers and filling unused ad space. Auletta reports DoubleClick as posting 17 billion display ads/day.
Ads constitute over 95% of Google's revenue, yet its tentacles are exploring numerous other areas. These include Google Earth, Google Maps, Google Scholar, Google Finance, Google Product Search, Google Calendar, Google Desktop (Docs, Spreadsheets, collaborative forms), Google Chrome (Google's browser), Google Sites (free and assisted way to create websites), Google Android (new mobile phone operating system, with over 1,000 released applications in 2008), Gmail, Google Reader, and Google Voice (provides people with a single phone number that can be used to reach them on their work, home, or cell phones, has 1.419 million users), as well as Google's efforts to digitize all books and to provide cloud computing (no installation). Part of this reflects Google's efforts to return more than just web sites in response to inquiries (eg. videos, books, photos, maps), and to respond to inquiries from more than PCs (about one-third of 2008 Google queries in Japan originated from mobile phones). Google's potential business model for all these is not clear - on the other hand, Google began without a business model, so it doesn't allow that to be an initial hindrance. (Google engineers are all allowed one-day/week to work on a project of their own choice, again without regard for profits; some of its non-engineers are also afforded that privilege.)
The cloud in Google's future - possible antitrust regulation, and lawsuits over copyright infringement (eg. Google Books). On the other hand, Fortune recently noted that Google and the Obama administration have generally good relations, with top company executives participating in a number of government projects.
Bottom Line: Readers need to read Googled slowly and carefully, thinking how this behemoth might affect their businesses. Newspapers, TV and cable stations are already undergoing dramatic changes as a result of Google. They also need to carefully read Wikipedia and Google sites for additional related information to fill in the holes Auletta left.
Ken Auletta is the author of ten books, including four national bestsellers. These include Three Blind Mice: How the TV Networks Lost Their Way, Greed and Glory on Wall Street: The Fall of the House of Lehman, and World War 3.0: Microsoft and Its Enemies. You'll find the author online at www.kenauletta.com
http://www.basilandspice.com/financial-well-being/google-to-reach-100-billion-in-revenue-increased-31-last-yea.html
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