Google’s Business Strategy

Reading Malcolm Gladwell’s excellent (and acerbic) review of Chris Anderson’s Free in the New Yorker (Anderson’s response here), I was brought back to a thought I’ve had many times but have yet to fully commit to a blog post.

The quote that got the synapses firing was:

Companies ought to be able to make huge amounts of money “around” the thing being given away—as Google gives away its search and e-mail and makes its money on advertising.

For my money, the idea that Google gives away so many services for “free” because it makes its money from advertising is a little…simplistic.

If you start with the assumptions that Google has the best search engine, and despite the innovation in the space, we have to presume that it is, you start to see why Google is so committed to free services.

  • The more content that is online, the more a search engine is needed. [Blogger; YouTube]
  • The more search results that are returned, the more people will be willing to pay to be on top of those results. [AdWords]
  • The more people that embrace the Web, the more people will start to consider to create more content. [Gmail]
  • The more Web site owners understand about their users and traffic, the more they will consider purchasing traffic through AdWords. [Google Analytics]

As I said on Mathew Ingram’s blog, when discussing Google’s “Google Trends for Web sites” as a free service:

If I’m an e-commerce Web site owner, and I sign up for free analytics, I can put a price on my traffic, based on conversions. When my traffic has a price, I’m now more likely to try to buy traffic using AdWords.

The more blogs there are in the world (blogger.com), the more content needs to be indexed and the more competition there is around key words. Now as a marketer, in order to ensure I’m top of the pile when it comes to people searching for my key terms, I buy them.

Similarly, the more marketers know about the Web, and its metric driven effectiveness, the more they will spend on AdWords to attract new users and new customers.

For Google, free is not a business model, it is a strategy designed to feed into a business model based on scale and market leadership.

7 Responses to Google’s Business Strategy

  1. […] time this morning to think about Google's business model in the wake of gladwell's "Free" article [link to post] what do you […]

  2. […] 2009-06-30T13:48:11  @edlee – great commentary on Google's business strategy – [link to post] […]

  3. […] 2009-07-20T08:45:16  RT @TheRealPRMan: Very insightful blog post. Worth reading: Google's Business Strategy by @edlee [link to post] […]

  4. […] Very insightful blog post. Worth reading: Google's Business Strategy by @edlee [link to post] #SEO #marketing […]

  5. […] RT TheRealPRMan: Very insightful blog post. Worth reading: Google's Business Strategy by @edlee [link to post] #SEO #marketing […]

  6. Great post Ed. I agree that Google’s business model is less about being free than being a highly effective feeder strategy that generates heaps of cash for them. Anderson makes very good points in Free but using selective cases to generalize his findings conclusively is sure to confuse and frustrate business who who fail to beefit from the Free digital model.
    Gladwell sums up the review with a clear and accurate statement.

    “The only iron law here is the one too obvious to write a book about, which is that the digital age has so transformed the ways in which things are made and sold that there are no iron laws.”

  7. […] Google's Business Strategy В« Ed Lee's Blogging Me Blogging You … Jun 30, 2009 … time this morning to think about Google's business model in the wake of gladwell's "Free" article … […]

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