June 10th, 2006

Popping the Google Hype Bubble

by

Seth Jayson at Motley Fool takes a scalpel to Google’s soft underbelly with a fascinating deconstruction of Google’s business model, the effect it’s had on the web, and the prospects for the future — or lack thereof. Some of the my favorite passages:

Whether or not you believe that the junk sites out there peddling AdSense ads are honest commerce or capitalizing on large-scale click fraud, there’s little doubt in my mind that we’ve got Google to thank for it. There’s simply no reason for people to set up these sites if they can’t skim dough via third-hand revenue sharing enabled by Google’s business model. With Yahoo! and others set to get in on the same gig, I don’t think we’ll see this trend abate.

Moreover, targeted, structured data behind the scenes will be the new source of high-worth information, which means that businesses will be a lot more interested in the user-generated recommendations that Netflix (Nasdaq: NFLX) and eBay (Nasdaq: EBAY) offer their millions of customers. That’ll be a lot more useful than what Google knows about 5,000 boy-crazy girls on MySpace or Blogspot who’ve been trading reviews on Justin’s latest single.

With AdSense providing so much of Google’s revenue, I don’t think Big Goo is in any hurry to flip over the rock and show everyone out there what’s underneath. And that’s where those stock sales come back in. Why do insiders continue to drop all those billions if the sky’s the limit? Diversification? Ha! Go ahead, pull the other one.

Take a hard look at this problem, and a hard look at those insider sales, and then ask yourself why on Earth Google is spending time on doodads that no one needs, like an online spreadsheet. I think the answer is “because it needs news that looks like the future.”

Read the whole article — it’s mind expanding. Even if you’re not a big fan of “house of cards,” “things are not as they seem” theories like I am, this is a facinating piece of analysis.

Read it and remember — the hype machine is all around you.

Comments (14 Responses so far)

  1. mean, ultimately, that Google will paint (or choke) itself into a corner – but that, if we’re not careful, an awful lot of users will be stuck in that corner with them. For a much fuller and more cogent version of this argument, read Seth Jayson (viaScott). One point in particular stood out: Google (Nasdaq: GOOG) insiders are continuing to drop shares on the public at a rate that boggles the mind. It’s true. Over the last year, as far as published records show, Sun insiders have sold $50,000 worth of

  2. – posted at 08:31 pmPopping the Google Hype Bubble via Publishing 2.0 – posted at 08:06 pm

  3. ItÂ’s all about the click After reading this Boston.com piece on no-longer-stealth NameMedia, Scott Carb thinks that Google Is Killing the Economics of Content: When Seth Jayson at Motley Foolsuggestedthe other day that GoogleÂ’s AdSense is killing the internet by driving the creation of sites that exist solely to squeeze money from AdSense, many people scoffed. Pay-per-click advertising is destroying the economics of content, making it more

  4. – posted at 08:31 pmPopping the Google Hype Bubble via Publishing 2.0 – posted at 08:06 pm

  5. [...] I’ll admit that I’m as much of a fan of the contrarian argument as anyone — maybe even as much as my buddy Scott Karp over at Publishing 2.0. But I think he and some others are a little too quick to congratulate Seth Jayson of Motley Fool for his insight into how Google is “killing the Internet,” as the Foolish columnist put it in a recent missive. [...]

  6. I predict within a decade that Google, unlike a Googlezon behemoth, while still being a major player in search, will be a less imposing figure in advertising as new technologies and business models make it clear that Google’s PPC system isn’t worth it given the click fraud and sham AdSense splogs.

  7. I agree with Brian. My perception, as an advertiser spending non-trivial amounts on Google AdWords and AdSense, is that the ROI is decreasing. We are starting to look seriously at alternatives, and allocate more of our online budget away from Google. In 3-5 years, the landscape may yet be different.

  8. Well, that was a very interesting article. And I’d bet that the mainstream press really doesn’t get the problem very well. I’m sure they’ll be getting around to covering this, though, as the problem worsens. I think Seth Jayson does a very good job of describing the problem. The worth of his conclusions? That’s hard to predict. He could be right on.

    Maybe net neutrality is not such a good thing.

    What effect would a change from net neutrality to some other system affect scam sites? Would that improve Google search results at the expense of their short-term revenue? Is Google different now that it’s listed on Wall Street?

    I noticed that Google is in favor of net neutrality enough to go to Washington to argue for it.

  9. [...] I defintiely agree/disagree with Scott Karp here. As Google continues to destroy the value of branded content, individual media brands may be the last line of defense. Individual talent as media destination may be the only viable alternative to search and social networking as portals to the web. [...]

  10. [...] Scott Karp has an interesting post on indivdual as brand: “The blogging phenomenon has made it possible for an individual to become a media brand — even for blogs that have an institution-like name….As Google continues to destroy the value of branded content, individual media brands may be the last line of defense. Individual talent as media destination may be the only viable alternative to search and social networking as portals to the web”. [...]

  11. [...] As Google continues to destroy the value of branded content, individual media brands may be the last line of defense. Individual talent as media destination may be the only viable alternative to search and social networking as portals to the web. [...]

  12. [...] When Seth Jayson at Motely Fool suggested the other day that Google’s AdSense is killing the internet by driving the creation of sites that exist solely to squeeze money from AdSense, many people scoffed. But here’s more evidence that he’s right: A venture-backed Waltham company that’s quietly amassed more than 650,000 Internet domain names is stepping out of stealth mode today and unveiling its plans to build a substantial Boston-area Web 2.0 business around the emerging field of “direct navigation.” [...]

  13. [...] Leyendo este articulo de Motley Fool tan negativo y critico con Google y los consiguientes 2 posts mas “blogosfericos” en Publishing 2.0, solo veo clara una cosa : [...]

  14. [...] An fascinating critique / opinion / analysis / deconstruction of what’s really going on inside Google. Link to Motely Fools via Publishing 2.0. [...]

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