The Artima Developer Community
Sponsored Link

Weblogs Forum
Google Fail: Commission Ads and E-Commerce

4 replies on 1 page. Most recent reply: Apr 20, 2009 8:01 AM by James Watson

Welcome Guest
  Sign In

Go back to the topic listing  Back to Topic List Click to reply to this topic  Reply to this Topic Click to search messages in this forum  Search Forum Click for a threaded view of the topic  Threaded View   
Previous Topic   Next Topic
Flat View: This topic has 4 replies on 1 page
Bruce Eckel

Posts: 875
Nickname: beckel
Registered: Jun, 2003

Google Fail: Commission Ads and E-Commerce (View in Weblogs)
Posted: Apr 18, 2009 1:17 PM
Reply to this message Reply
The Internet accelerates everything. We now watch companies go from "the next great thing" to "meh" in the space of a few short years.

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!").


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.

Faui Gerzigerk

Posts: 9
Nickname: fauig
Registered: May, 2006

Re: Google Fail: Commission Ads and E-Commerce Posted: Apr 18, 2009 11:32 PM
Reply to this message Reply
It's not the shareholders. Shareholders want returns but they will trade lower returns today for even higher returns in the future and they will accept greater risk for higher returns. So, as long as wild experimentation appears promising, shareholders will be on board.

It seems quite obvious to me that a company with existing products and customers is by definition more conservative than a young company that has to win all its customers by offering something better than the incumbants. Young companies have nothing to lose and nothing to conserve.

But in the case of google, I don't really see that they have ever been wildly experimental. Their approach to web search is pretty conservative in comparison to what's out there. They create a simple model, collect as much data as possible and apply well established statistical methods. That's today's mainstream approach to natural language understanding. It works well enough but it's not experimental. Of course they tweak and tune and try this and that, but that's very incremental.

gmail and google reader are not what I would call wildly experimental either. They are good products. Solid conservative products with a few carefully applied small innovations. Nothing ground breaking.

Arguably, the real innovation coming out of google is related to _how_ they do things, not the products they create. Their innovation is to figure out a way to run massive load on top of cheap hardware without causing excessive administrative burden. The other innovative idea, I think, is that unobtrusive text ads work.

Casper Bang

Posts: 12
Nickname: mrmorris
Registered: Nov, 2007

Re: Google Fail: Commission Ads and E-Commerce Posted: Apr 19, 2009 3:09 AM
Reply to this message Reply
> What Google has stopped doing is solving the non-obvious problems.

Not sure I agree, to me Google still excels at thinking outside the box. An example is GWT, a technology that completely encapsulates the core technologies of the current Internet in a programming model suitable for... programmers. It has the potential to undermine all the current RIA attempts by Adobe, Sun and Microsoft. Indeed Microsoft must think so too, since they recently created their own clone of GWT called Volta.

> Companies Get Old Just Like People Do

Interesting, no mentioning of Sun in this section. If Google is the company that thing outside the box, Sun would be the company of missed opportunities.

Florin Jurcovici

Posts: 66
Nickname: a0flj0
Registered: Feb, 2005

Re: Google Fail: Commission Ads and E-Commerce Posted: Apr 19, 2009 11:38 AM
Reply to this message Reply
Idunno. If google checkout has become comparably expensive to paypal, maybe that's what the fair price is.

As for ads paid upon sale as a percentage: I think here the fundamental flaw of google comes to light. IMO, web ads are overrated. I think it's unreasonable to put that much money in web ads that a giant like google can live of it. IMO, the moment people will start realising this, google will collapse - unless they develop something else they can live of until then. If they started charging a percentage of every sale, besides some complicated technical issues (how do you split sales across ad suppliers, if you advertise through more than one advertiser? What if you also do ads using traditional media?) would also expose the weakness of their business model sooner.

Then there's one more thing: why would google not act by common sense and market laws? As long as there's no other supplier which charges less than they do, why lower prices?

As for google solving obvious/non-obvious problems: IMO, the solution to obvious problems is always solving another, non-obvious problem. Google solved not only the obvious search engine problem but also the obvious web services (as services provided over the web to web users) problem by solving the non-obvious problem of managing a huge infrastructure with an effort orders of magnitude lower than was required before them. That's IMO the only real breakthrough they had, and this is what they build all of their services on. Any obvious problem which can be solved by simply deploying/running it on top of google's infrastructure is likely to be solved by google, provided there's some money to be made of it, either by selling ads or by charging for usage.

James Watson

Posts: 2024
Nickname: watson
Registered: Sep, 2005

Re: Google Fail: Commission Ads and E-Commerce Posted: Apr 20, 2009 8:01 AM
Reply to this message Reply
> Then there's one more thing: why would google not act by
> common sense and market laws? As long as there's no other
> supplier which charges less than they do, why lower
> prices?

One reason is to prevent other suppliers from entering the market. There's a whole branch of economics called "game theory" that explains why you would want to do something like that.

Flat View: This topic has 4 replies on 1 page
Topic: The Adventures of a Pythonista in Schemeland/19 Previous Topic   Next Topic Topic: Seven Steps to Disaster

Sponsored Links


Copyright © 1996-2019 Artima, Inc. All Rights Reserved. - Privacy Policy - Terms of Use