Schiessl, Michaela. Google Über Alles. The Ad Machine. Google Effectively Owns the Market for Internet Advertising. Spiegel. January 30, 2007.
Google effectively owns the market for Internet advertising. Now the company wants to further expand by entering foreign and local markets.
Colorful, playful and professional -- that's the image Google is working hard to present.
The German businesspeople gathered in Frankfurt on Jan. 18 for an award ceremony thought that the only turbulence they would experience was from the storm "Kyrill," which hit Europe that day. They didn't realize that the real thunderbolt would be the evening's keynote speech.
Despite the inclement weather, 700 people still made it to the Schauspiel Frankfurt, a prominent theatre in the German banking capital. Entrepreneurs and advertisers, editors-in-chief and managers of publishing houses, marketing agents and creative directors greeted each other, looking slightly disheveled from the extreme weather. Three of them would later that evening receive the prestigious "Men of the Year" awards from the German marketing and media trade journal Horizont.
But two prominent guests weren't there. Philipp Schindler, Google's representative in Germany, was stuck at Helsinki airport. And Google's Vice President of European Operations Nikesh Arora was waiting in London, unsure whether he would be able to depart at all.
Two years ago, hardly anyone at the party would have noticed the absence of the two Google managers. No-one paid any attention to the two Internet entrepreneurs then, as the pair wandered around in open-necked shirts and ordered Coca Cola instead of rosé champagne.
But on this evening Arora was booked as the keynote speaker -- the person who says where things are heading. And that's just what he did, despite the unfavorable weather. The 38-year-old Indian had been rattled around so much during his flight he needed a change of clothes at the hotel. But shortly afterwards he casually sauntered onto the stage, wearing a black turtleneck under his dark suit, one hand in his trouser pocket.
Arora's message to the assembled representatives of the advertising and media sectors was perfectly clear: Companies will lose their clients if they don't adapt to the changes in how those clients use the media. Germans are already buying twice as much on the Internet as the French; they're even outdoing the British. When it comes to products such as mobile phones, MP3 players or travel, up to 69 percent of purchasing decisions are taken on the Internet -- even if the purchase itself is then made offline.
Despite these figures, German corporations are investing only between 6 and 7 percent of their total expenditure for advertising on the Internet, Arora complained. In short: They're neglecting and disregarding their customers. This is especially negligent given that no other medium allows advertisers to target potential customers so selectively, follow them so personally or locate them so specifically -- and all thanks to Google, as Arora pointed out.
In fact, the minimalist search engine which the Stanford students Larry Page and Sergey Brin developed in a Californian garage in 1998 has since developed into the most sophisticated and effective ad placing program in the world.
Google is gaining an ever-increasing share of Internet advertising.
Google's approach to advertising turned the company with the playful touch into a $150-billion corporation -- worth more than DaimlerChrysler and BMW together -- in less than 10 years.
When a user enters a search word into Google's search field, he or she gets not only the search results on their screen, but also, as if by magic, appropriate ads. The ads, which consist of pure text and are no longer than three lines, are all marked as such. Which ads get placed, and where, is determined by an online auction.
But the highest bidder doesn't automatically get the pole position. If the Web site isn't accessed often enough, either because it's junk or because it's a prank, one of Google's many thousands of computers notices this and downgrades the ad. After all, Google only earns money when potential customers actually click on the ad. Often it's just a matter of a few cents, but when it comes to fiercely contested markets, each click can earn Google hundreds of dollars.
In addition, Google's AdSense program provides Web site owners with the tools to place ads on their own site, including search engine-supported ads. Google programs scan the Web site's content and continually select appropriate ads. For example, a customer looking at real estate on a Web site may encounter an ad for loans to finance a private home.
This development poses a severe risk for those traditional media that depend economically on advertising fees. But for Google, it's only the beginning.
Organizing the world's information
Google's mission statement, "to organize the world's information and make it universally accessible and useful," is the mantra being broadcast around the world from the Googleplex, the company's headquarters in Silicon Valley. It sounds like a noble task, not to mention an endless one -- and it provides an infinite number of possibilities for getting tailor-made ads to the consumer.
Right now the company is busy scanning the books of the world with Google Book Search. Whenever possible, the full text is placed online. Where copyright applies, only a few excerpts are quoted.
Everyday life at Google is portrayed as being very relaxed, just like on a university campus.
Meanwhile Google News functions like a virtual news vacuum cleaner. The program scans hundreds of news Web sites the world over and then lists the articles.
The wave of protests these two Google products initially caused in the media and publishing sectors is gradually ebbing away. Some authors, literary agents and publishers are using the book search program as a sales tool. And some media -- including many who threatened to sue at first -- now complain when their stories don't show up on Google News.
Google News doesn't steal the articles -- it just displays their headlines. If a user wants to read an article, he or she is redirected to the news provider's website. That way, even small newspapers can suddenly receive a great deal of traffic to their Web site -- which increases their revenue from advertising. And who could organize the advertising better than Google?
And so the circle is completed. The advertising market on the Internet is controlled by Google. The technological corporation gives away more than 60 products to its clients as gifts. Most of them are technically brilliant, like the recently presented first three-dimensional view of the city of Hamburg on Google Earth.
Part 2: Don't Be Evil
But Google's products aren't entirely free. The price to be paid is total transparency. Users of Google's email service, Google Mail, have to agree to their mail being scanned by computers. The email you send your mother telling her about your vacation is then automatically complemented by travel agent ads. When a customer uses Google Finance, he or she receives investment offers. Use Google Desktop to organize your computer and you're granting the company access to all the data stored there.
Google's giant computer brain registers everything -- which Web sites users visit; whether what they need is credit or a girlfriend; whether they're looking to change their job; what they google on their mobile phone.
Small wonder that this massive data grab makes many people nervous. Megadeals such as the $1.65 billion acquisition of the video portal YouTube are bringing Google ever closer to the dimensions of Microsoft, no matter how many lava lamps they have in their offices. In Germany, Google's market share is 87 percent, giving it a kind of gatekeeper function when it comes to information, warns Hendrik Speck, a professor of computer science at the Kaiserslautern university of applied sciences. What if the company were one day to give up its informal company motto, "Don't Be Evil"? What if the state were to force it to yield its data? What if shareholders were suddenly to set new goals?
In short: What if Google did turn evil?
The boys from Silicon Valley have been regarded with increasing skepticism for some time now. Suddenly people have noticed how tight-lipped the information distribution company is when it comes to its own affairs. Visit Google and you'll be shown daycare centers and cafeterias, but you won't be told about ongoing projects or hear any figures. For many, Google's acceptance of censorship in China marked the company's fall from grace. Some Google fans, on the other hand, view the decision as subversive, since forbidden searches are clearly marked as having been censored.
The fact is that the company hasn't been found guilty of abusing users' data yet. The discomfiture is more felt than real. Unlike its rivals Yahoo, AOL and MSN, Google has successfully refused to issue user data to US authorities. Google knows how dangerous a sinister "Dr. No" image can be, and the company is working to avoid that. Google's leaders are going on more and more transparency tours. Just last week, the company's founders invited journalists for a chat at the World Economic Forum in Davos.
Google employees, not being evil.
In Germany, Big Brother's sidekick is called Philipp Schindler. Ever since the marketing specialist was poached from AOL in 2005 to direct northern Europe business operations from Google's Hamburg office, the sales branch has had a human face. Schindler personifies Google's corporate values: likeable, fast-thinking, strategic and ambitious. The tall 36-year-old tours the country constantly, on a mission to convince every last person that Google is, as he puts it, "the largest and most efficient marketing and sales channel."
Schindler puts in appearances at the German "Bambi" media awards and the "MainzerMedienDisput" media conference in Mainz. He gives presentations to top-level managers in Germany's blue chip companies. Schindler is doing his best to develop Internet advertising in Germany, playing the roles of coach, business partner and taskmaster. In 2005, Google abolished the traditional 15 percent commission for media agencies. Now agencies only get a discount if their members complete a Google training course. "We want to make sure the quality is right," Schindler says.
A change of strategy
Google's offensive goes hand in hand with a change of strategy. One year ago, the company decided to massively enter local markets via the Internet and mobile phones. Maps provided by Google Maps and three-dimensional urban vistas provided by Google Earth will provide a platform for advertising, advice and information: Where is the nearest shoe store? What time does the harbor boat trip begin?
But if it wants to reach these target customers, Google has to have people on the ground all over the world -- which requires a massive increase in the company's number of employees. In order to ensure the very best experts join its ranks, Google is cultivating ties with the top universities. Development centers have been opened in Krakow and Tel Aviv, Trondheim and Moscow, London and Dublin. The 100-person German team, responsible for an annual turnover of €750 million ($969 million) is to be expanded with an additional 50 staff. Google is looking for salespeople, marketing specialists, programmers, lawyers, recruiters and PR experts.
It won't be easy. Nothing is higher on Google's list of priorities than hiring new employees. Before a contract is signed, one of the company's founders has to give the go-ahead by email. None of the company's 9,300 present employees entered the world of Google without the special seal of approval.
It's even more complicated than it sounds. Applicants for a job at the firm, which is the most popular US employer (and eighth most popular in Germany), need staying power. It's not uncommon for applicants to go through a dozen job interviews, spread out over several months. The idea is for applicants to present themselves to every part of the company they will have contact with later. Even the slightest of reservations is enough for the applicant to be rejected.
As well as fluent English, there are four key prerequisites for becoming a Google employee. The first is a top degree from a top university. The company's founders want to preserve the academic flair they enjoyed as Stanford graduates -- the easygoing manner, the courage to think unconventionally, to have childlike curiosity, not to mention be badly dressed.
The second prerequisite is that the applicant must already have achieved something exceptional in their life -- something they did passionately. Thirdly, the applicant must have qualified him- or herself as a leader -- for example by managing a university project or leading a sports team.
Another decisive prerequisite is the so-called "Googleness" factor, that is, the applicant's capacity to fit in socially. "Sometimes we have applicants of the corporate consultant type who are brilliant in terms of what they have to offer, but who are too accustomed to using their elbows to get ahead," says Schindler. All that leads to is aggressive competition, in-fighting, and displays of power -- all deadly sins according to Google's corporate culture. "If you can't share your results, you can't be here," says Schindler.
Applicants who just think Google is hip or who are in search of big bucks are ruthlessly filtered out as well. "The long application process is ideally suited to doing that," Schindler says. "No one can disguise themselves the whole time."
Perhaps that is the true secret of Google's success: No alpha males allowed.