Most people think of Google as a search company that offers other nifty tools and services, such as Google Apps and Google Translate, for free. But those of us in the IT industry know it’s really an advertising company that just happens to do search and other stuff. That latter view becomes abundantly clear when you read Steven Levy’s absorbing new book, In The Plex: How Google Thinks, Works, and Shapes Our Lives.
Like many success stories, the company did not initially understand its true mission in advertising. As detailed in chapter two, “Googlenomics,” it more or less backed into the ad business, thinking it might, at best, make up 10-15% of the company’s revenues. It now generates close to $3 billion per month in advertising-related business, approximately 97% of the company’s revenue.
But that unprecedented success, however unintended, has been driven because Google’s leadership believed in two things above all else: data and customers. Only, unlike most advertising venues, such as television and publishing, which consider the “customer” to be the advertiser, Google considers its users as its primary customers. And by keeping its users uppermost in its mind, it radically changed the business of advertising.
Just one example in the book underscores that adherence to a user-first philosophy. Although Google already had a successful keyword-bidding system in Adwords Premium where “the bulk of Google’s revenue came from,” it was wiling to change it dramatically. That is, some companies paid for premium placement at the top of a page of user search results, not unlike print advertisers who pay to have their full-page ad across from a magazine’s table of contents. Adwords Select keyword buyers were relegated to the “ghetto” on the side of the search results. But when premium ads had less than 1 percent click through, Google’s algorithms would swap them out for the less expensive but better-performing advertisement.
The company did this even though the premium advertisers were only paying for exposure not click-through. That is, Google would not be paid by the premium advertiser whose ads failed to generate interest from users. According to Levy, “The policy reflected the different philosophy Google brought to advertising in general. Google ads were answers. They were solutions.” That’s a radical change from a century-long philosophy that treated ads as, essentially, bait to lure customers.
This preemptive switch did not sit well with seasoned advertisers who thought they knew what good advertising was. But Google knew differently because they had the data to prove to them that their ads were failing even as bait because users did not click on them.
Reading about Google’s success as a business proves, once again, that the best business opportunities are not necessarily those that you have planned for in advance. Sometimes they just happen from circumstances. And another key lesson from Levy’s book is that if you have a clear understanding of who your customers truly are and have the data to prove what makes them happy, your chances for success might just surpass your wildest dreams.