Tag Archives: busdev

Google is not Crazy

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Google is not Crazy

Last month, the New York Times ran an article which raised some questions about Google’s recent acquisitions and how they fit in with its larger strategy. Some analysts see Google’s acquisition of Nest in a positive light, however, the article noted, not everyone is convinced:

Colin Gillis of BGC Partners is more sceptical. “Do you trust Google’s management as visionaries?” he asked. The analyst questioned the Nest purchase. Making thermostats does not fit in with Google’s core advertising, he said. Neither does robotics.

In my view, this is not necessarily correct. Here’s why.

Google’s Vision vs Business Model

Google defines it’s mission as: “[…] to organize the world’s information and make it universally accessible and useful.” Their pursuit of this mission is clearly seen in Google Search, but also its academic publications search, e-mail, social, scanned books, and other services. It’s perhaps harder to see that mission in driverless cars and “thermostats” (assuming that’s what Nest’s business really is). Nevertheless, I think the mission is still there. But today I want to talk about Google’s business model. In terms as simple as its mission, what would you say Google’s Business Model is? Here’s my take:

Sell precisely targeted advertising.

The mission and the business model are not the same. That’s OK, they shouldn’t be the same. The role of the business model is to support the mission. Google’s business model is deceptively simple. Yes, they sell advertising. However for Google (and Facebook, and maybe Twitter), the point is that the advertising is precisely targeted, because of Google’s access to consumer intent through its search engine, Gmail, Google+ and other services.

Limits to Google’s Business Model

There is, however, a limitation to this business model. It is this: Most of what we do in our lives we do “offline” to Google. Most people, most of the time, buy products in physical stores. We drive cars, catch trains, visit friends & family and we do these things without necessarily letting Google know about it. If your business model was to sell precisely targeted advertising, and you realised that most consumer activity was actually happening without you knowing about it, what would you do?

Intermediation Model 2.0

What Google wants to do is intermediate our lives. A lot has been written about dis-intermediation as being the defining feature of the current change sweeping the business world. But it would be more accurately described as re-intermediation. In the past, newspapers aggregated consumer eyeballs and then sold those to advertisers. Then they got dis-intermediated (and unbundled, and out manoeuvred, and et hoc genus omne). But that hasn’t meant that you get your news directly from journalists. Rather, you get it from the new aggregators and intermediaries: Google, Facebook, and Twitter.

Similarly, Amazon disrupted the book retailing market, and with its Kindle service, is now in the position to cut out the publishers completely. But again, it hasn’t meant that you buy your books directly from authors. You buy them from the new intermediaries: Amazon, Apple, and Google. Google is in the intermediation business. By learning everything it possibly can about us, it’s able to sell very precisely targeted advertising, and effectively mediate consumer access to service providers. And it can make a lot of money doing it.[1]

Google is not “Predicting the Future.”

Let’s revisit the analyst’s reservations about Google:

“Do you trust Google’s management as visionaries?” […] Making thermostats does not fit in with Google’s core advertising [business]. Neither does robotics.

Except, yes they do. They fit because Google’s advertising is precisely targeted based on what it knows about us. What do you think a home thermostat connected to the Internet could tell Google about the people who lived there?

What correlations might Google discover between thermostat settings and, say, disposable income? What happens when the Nest product suite branches out to gather more than just temperature data? What about noise levels? Movement? Air quality? Could a Nest sensor infer the emotional state of a household based on voice intonations? Could it infer what people are watching or listening to based on background noise? Imagine having Shazam running all the time, only it identified more than just music but also news stories, movies, TV shows… Might that be interesting to an “advertising” company?

What could a self-driving car tell Google about where people went, and how often they went there? Would the car see interesting events on its travels? What would it hear people inside talk about? Do you think it might want to talk back? What would it say? Anything here interesting to an “advertising” company?

What about robots generally? Who will the robots work for and what will they do? If we delegated service consumption to an automated system that worked for us, would a company that wants to mediate your consumption of services want to know about it? Robotics is key for Google because it offers the potential for Google to break free of the digital interface straight-jacket that is mobile and desktop computing. The robot will be the new service interface. Does anyone really doubt that owning a slice of the new service interface wouldn’t make any company salivate?

Summary

TL;DR?

  • Google is not in the “advertising” business as traditionally described. It is in the business of service intermediation. They are one of the new service intermediaries.
  • The service intermediation business requires advertising that is precisely targeted for its advertiser customers to get real value. This targeting requires large volumes of data about the target consumers. Google is missing data about our “real-world” interactions, and sensor companies like Nest can fix that for them.
  • The (automated) service interfaces of the future are not the screens and keyboards we know today. “Online services” is going to break out of the constraints of mobile and desktop computing and into the physical world via “robots” and other automated services that can manipulate their physical environment.

Google will be able to learn more, and then mediate our service acquisition, in more places and more often. So no, Mr Analyst who asked a rhetorical question that I will answer anyway: No I don’t think Google’s founders are visionary. I think they are lucky to be where they are, and they’re following up that advantage with some very canny business development.

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We are the business

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An ex-manager of mine once pointed out that we need to stop talking about “the business.” Doing so gives leverage to those claiming to represent “the business” and limits the influence of the engineering team. His was more a political observation than a call to change our mind state, but ever since then I have noticed how commonplace it is for colleagues to make vague assurances that “the business requested it,” or “the business want it like that.”

When someone uses the term “the business” they invoke shadowy high priests with absolute knowledge — but they could be referring to a clueless HIPPO, an opinionated sales or marketing exec or equally to any end user of a piece of software. The engineer should have every right to question those requirements and to request exactly whom “the business” refers to in this scenario.

At Westfield Labs we are very fortunate to work in a ‘digital’ department which combines product, design, end-users and engineering resources as equal collaborators. Most recently we have moved to truly cross-functional teams where the only direction given to us by sponsors and stakeholders is high-level: e.g. bring us more customers and more conversions through focusing on streams x and y. Sure, the product team provide the ultimate direction from a product perspective but only after close consultation and collaboration with all other relevant parties.

In this scenario it is not hard for an engineer to think of oneself as part of the business and I positively encourage my team to stop using the term ‘the business’ to refer to others as it implies that we are not an equal partner. To take it further, I actively encourage my engineers to question and understand business requirements and to shout out if they don’t make sense.

Talking recently to an engineer from a UK online retailer, he noted that his company “think of themselves as a marketing company, not a software company” and see the engineering department as a necessary expense to realising their feature requests. In a business that is so dependent on the quality of the implementation and the iterative improvements upon that implementation, it is naive to think that engineers are not equal partners.

Obviously it’s not so easy when you are working in an agency (and let’s face it, sometimes you are working from a spec and clearly not ‘equal partners’) but any enterprise that wishes to succeed in the digital age will ultimately depend on the quality of its implementation – and the feedback from those that are doing the implementing. Otherwise it will be made irrelevant by a competitor that does.

So, I entreat software developers everywhere: let’s stop talking about “the business” and start talking about: customers, stakeholders, sponsors, sales team, marketers, product team, whatever. Make it clear that we consider ourselves part of ‘the business’.