Can Google Shift Its Revenue Model From Advertising to Products? | Street Fight

Can Google Shift Its Revenue Model From Advertising to Products?

Can Google Shift Its Revenue Model From Advertising to Products?

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In this regular Street Fight feature, local marketing gurus David Mihm and Mike Blumenthal kick around some of the biggest ideas affecting the local search ecosystem and the broader industry. Send an email or leave a comment if you have specific topics that you’d like them to touch on in future columns!

Mike: It’s still sunny in Western New York… amazing Indian Summer and I rode my bike to work today. Hopefully the rains have not yet started in the Northwest.

David: Well, they have (big surprise), but they’re our only defense against an onslaught of Californians, so I tend to welcome them as early as possible!

Speaking of Californians, let’s turn back this week to our friends in Mountain View. What did you make of Google’s big hardware announcements? Was it another undifferentiated PR stunt, or were there some real strategic insights to be gleaned from Pichai’s presentations?

Mike: Well, Google rolling out integrated hardware and software is a big change. They have tried their hand at manufacturing many times and failed, but this feels more strategic. Clearly their AI assistant effort is central and it seems that AI is table stakes for the coming battles.

You have been a skeptic of Google’s ability to move into manufacturing. Your thoughts?

David: Their hardware products have never had the mainstream cool factor that software like Search, Gmail, and G Suite have had, whether Chromebooks, the Nexus, or their attempted ingestion of Motorola.

They acknowledged that strategic weakness with the acquisition of Nest, but that’s turned into an organizational debacle. Even hardware that could have been cool (Google Glass) appealed to an incredibly niche — and, for the most part, annoying — audience.

So yeah, I’m more than a little skeptical of any new Google hardware release gaining a toehold as a major consumer product.

Mike: But if the world is going to AI assistants and Voice, Google will need to pivot. Ben Thompson at Stratechery made the point that ads don’t sell very well when the machine only gives a single answer.

David: And when there is no interface in which to display the ads!

Mike: Exactly: “THIS ANSWER BROUGHT TO YOU BY NEW ERA CAPS.” It’s not a Google experience that I would look forward to.

And if Google is to leverage their amazing leading-edge AI capabilities then they need to have more control of a widely adopted platform where they can profit from the platform without ads.

David: It wasn’t announced at the October 4th event, but I thought a couple of contemporary announcements — the integration of Assistant commands into Maps and Allo — were just as illuminating.

I think they’re so far behind the hardware game with respect to Apple, Amazon, and even Samsung, they may have a hard time catching up in market share even if these new devices are relatively well-adopted. Which is why they’re desperate to make Voice a central component of every app users might possibly install on their iOS devices.

Mike: AI-driven Voice may give them an advantage but Amazon and Apple are not standing still. Apple’s been practicing the single answer result via Safari and iOS for several years.

Google couldn’t compete with Facebook in the social wars and there is no guarantee that they can compete in the world of integrated hardware and software. And what about support? Never a Google strong point! That seems critical if they are trying to get any adoption of a new platform. And they run the risk of really alienating their many current partners.

David: Right. Samsung has been gradually weaning itself away from Google and their acquisition of Viv — a company you and I were impressed by very early — signals that gradual break-up is going to accelerate.

Mike: I would imagine that it’s not a good time to be a Google Android partner. Samsung obviously thinks they need a voice assistant as part of their plan. I can’t imagine that they are feeling Google’s love at the moment and need to develop a full stack of which the AI-based assistant is a big part. They are the most vulnerable with this change. The “burning issues” they have dealt with recently don’t help.

David: Note 7 “difficulties” aside, Samsung has undeniably cooler hardware, though. Just by way of recent example, their new VR commercial that played nonstop during the Ryder Cup was incredibly well-executed.

But let’s bring things back to local search for a bit. The big takeaway from both Google and Samsung’s moves this week is that single answers to voice queries are going to be huge. It used to be that if you weren’t on the first page of Google, you were invisible. In this new world, if you’re not #1 (albeit across multiple platforms this time), you might be invisible.

Mike: As we pointed out previously, one of the anointed app partners has the best shot at that spot with any of these platforms. That would really change the realities of local marketing.

David: Exactly. It’s hard for me to see how any of the legacy players (IYP and media properties) have even a toehold in this new era.

Mike: And with the recent SMB tests of the Google Posts product, posting directly to the SERPS,  Google is emphasizing super fresh content over a list of static directories for Local Brand searches. That certainly puts an exclamation point on your sentiment about the world that legacy IYPs confront.

David: Google is far from the only company that’s going to be losing ad revenue in this new paradigm. And IYPs and media companies will need to make a comparably-large pivot in business model as Google is trying in order to stay afloat.

Mike: I think that says it all. Till week after next then?

David: Yep. Looking forward to hearing your review of Crux Fermentation Project at Swivel!

Got an idea for what you want Mike and David to discuss next time? Send it to either davidmihm@gmail.com or mike@blumenthals.com, or just leave a comment below and we’ll put it in the hopper!

1 thought on “Can Google Shift Its Revenue Model From Advertising to Products?

  1. David, I can’t imagine you’d be looking forward to mapping a new Local Search Ecosystem that fragments away from IYPs and off into the digital ether!

    Great convo. Thought provoking for sure.

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1 thought on “Can Google Shift Its Revenue Model From Advertising to Products?

  1. David, I can’t imagine you’d be looking forward to mapping a new Local Search Ecosystem that fragments away from IYPs and off into the digital ether!

    Great convo. Thought provoking for sure.

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Name *