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Computing Thoughts
Google Fail: Commission Ads and E-Commerce
by Bruce Eckel
April 18, 2009
Summary
The Internet accelerates everything. We now watch companies go from "the next great thing" to "meh" in the space of a few short years.

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This is not to say that Google isn't providing valuable services. I use gmail, calendar, reader and of course search all the time. But I still use Word and Powerpoint and Windows, too. Microsoft isn't solving any new problems; they can't manage the problems they themselves have created.

Google is still solving problems. Android is a perfect example; it will break the stranglehold that the service providers have on applications. That's huge and important ... but it's also very obvious. You see the problem every time you use your phone and ask "why can I buy ring tones but I can't move my address book and calendar back and forth? Whatever happened to bubble mail (voice messages you can send just like text messages)?"

What Google has stopped doing is solving the non-obvious problems. The two most important examples are the ones that, when some other company does it, will rocket the newcomer up into the same stratosphere as Google.

Commission Ads

What kind of advertising would be simply irresistible? How about an ad that you don't have to pay for until you actually make a sale, as a (low) percentage of that sale? What would possibly keep you from running such ads? Indeed, the only thing that's better already exists: free ads on Craigslist.

This should be the holy grail of advertising, because it has absolutely no resistance to buying. I believe it would also be great for the economy, because it would create sales where they might not otherwise exist. Amazon already does something like this, a little, with its referral rewards, but that relies on Amazon selling the thing. The model needs to be turned upside down.

Even though advertising is where Google makes all its money, there isn't a peep out of them that such a thing will ever happen. Of course, it might be because that's where all the money is that it would be too risky to try something new there.

Instead, we see the really awful adwords interface (which I'm still trying to find a way to escape). And Google is removing incentives to advertise with them (someone in the company is shouting "We're the king of the world! We can't lose!").

E-Commerce

When Google entered the E-commerce space with Google Checkout, I had great hopes. Paypal was the only easy game in town (other than contracting with your bank to process credit-cards online, which I've done and I highly un-recommend). But Paypal didn't (and still doesn't) cover quite a few countries where I have customers. And Paypal never solved the e-delivery problem -- you have to go through third parties, and I've had to use the not-so-great Payloadz service, which regularly causes me problems and costs way too much (suggestions for alternatives are greatly welcomed).

Google started out as a free service, so you didn't have to pay a commission for processing credit cards. What's not to love about that? And there's still money for Google to make since the credit card racket extracts fees at every juncture. So Google wins and the customers win.

Alas, over the last couple of years Google has started changing things. First, the service became free only if you ran a Google ad. But any ad, even just a few dollars a month. Fine, still beats Paypal. But recently they changed it again so that it's only slightly connected to whether you are running an ad, and there's a percentage. It's now very unclear whether it's a good deal or not.

Lando: This was never part of our agreement.

Darth Vader: I have altered the deal. Pray I do not alter it any further.

Lando: This deal is getting worse all the time.

In addition, Google was working on something that would allow an easy programming interface to Google Checkout. They came up with something which was ostensibly easier than programming against the Paypal API. But it wasn't radically or obviously easier. In fact, if it was easy they should have provided an e-delivery service themselves. And the fact that the use of the Google Checkout API hasn't proliferated lots of applications strongly suggests it's not easy (and no, I don't consider "lots of shopping carts" to count as more than one application).

What we've ended up with is basically a checkout button the same that Paypal has, with a cost that is roughly the same as Paypal (and apparently converging all the time). Another Paypal, whoopdeedoo. Better than banks, but only slightly.

The winner will change the space radically, so it becomes a no-brainer to abandon Paypal and Google Checkout. It won't cost anything to use, there will be lots of services (e-delivery being only one), and the programming API will be layered from dead-easy to "only slightly complex" in order to promote the development of third-party apps.

Companies Get Old Just Like People Do

What's meta-fascinating is the process that has started moving Google away from being the new kids building the cutting-edge stuff to the company that's decided that many things are just too hard to do. I guess I find this depressing because I'd like to believe that a company can maintain its youthful enthusiasm; its excitement about the world and its possibilities.

The most likely story is that the financial MBA types that were originally brought in to "just manage the money" have gotten a toehold, so they are now moving into the position where they are able to say "hey, wait a minute, I don't see the profit maximization strategy here!"

Perhaps it's inevitable, once you go public. After all, going public means "selling the company to the shareholders," and once you do that you are legally obliged to serve the interest of those shareholders. Shareholders look at a company in financial terms, and they want the most return, fastest, for the least risk. That strategy doesn't support wild experimentation, regardless of how strongly you try to build it into the company culture.

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About the Blogger

Bruce Eckel (www.BruceEckel.com) provides development assistance in Python with user interfaces in Flex. He is the author of Thinking in Java (Prentice-Hall, 1998, 2nd Edition, 2000, 3rd Edition, 2003, 4th Edition, 2005), the Hands-On Java Seminar CD ROM (available on the Web site), Thinking in C++ (PH 1995; 2nd edition 2000, Volume 2 with Chuck Allison, 2003), C++ Inside & Out (Osborne/McGraw-Hill 1993), among others. He's given hundreds of presentations throughout the world, published over 150 articles in numerous magazines, was a founding member of the ANSI/ISO C++ committee and speaks regularly at conferences.

This weblog entry is Copyright © 2009 Bruce Eckel. All rights reserved.

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