June 29th, 2006

Google Is A Very 1.0 Shopping Engine

by

With the launch of Google Checkout, Google is clearly aiming to be the world’s online shopping engine. The strategy has all the hallmarks of AdWords — Google doesn’t care what you’re looking for, what you find, or where you buy it — so long as Google can make money off of every step of the process.

Here’s the problem with this strategy — from the consumer perspective, Google is not an efficient way to shop online. Google’s blog mentions Starbucks are one of the merchants that signed up for Google Checkout, so let’s try searching for “gourmet coffee.”

Google Gourmet Coffee

There’s nothing wrong with the ads in the search results — each of these gourmet coffee merchants is potentially relevant. The problem is that I have no way to compare them — all I can do is click and browse, click and browse.

Google revolutionized search by leveraging the network effect of hyperlinks to determine relevancy — but the 2.0 efficiencies of page rank are completely missing from AdWords. Sure, advertisers compete on keyword relevance, but I as a consumer am unable to benefit from the network effects of the larger online shopping community. Which of these merchants has the best value proposition for people like me? Where do people like me most often shop? Which has the most relevant products? Which has the best prices?

Navigating Google ads feels like Yahoo circa 1997 — a lot of clicking and browsing in hopes of finding the right fit. The organic search results may be super-relevant, but the “sponsored” results are of limited value because the cost-per-click bids are too big a factor in ranking and there is no information available from my peers. The advertisers are in complete control. The ads are relevant to a degree, and certainly more relevant than the random interruption of old media models, but as a consumer, I’m still at the mercy of the system. And the return on my attention is marginal at best.

To put it simply, shopping through Google is a very 1.0 experience.

Here’s Umair:

Media is deeply personal, social, cultural, human, creative – and so it’s economics aren’t those of simple technological scale, because, more often than not, technological scale kills those things (think Clear Channel roboDJs). The real opportunity is in leveraging the new forms at the edges of the firms – markets, networks, communities – to explode just how personal, social, cultural, human and creative media can be.

It should be painfully clear that, in the Googleverse, media is none of those things – it’s just a commodity filtered, sorted, and “processed” by machines. Which is deeply reminiscent of the 20th century’s scale and scope driven Great Rationalization of consumer industries, where goods ultimately became “commodities” which were “processed” by machine, assembly line, and bureaucracy (think meat-packing, clothes, and cosmetics).

I don’t want an algorithm and a bunch of ad copywriters determining what’s “relevant” for me. I want my peers — people like me — to determine what’s relevant.

If Google increases its dominance of search advertising by dominating checkout, it will drive up the costs of search advertising, which, even in a new cost-per-action model, will ultimately be passed on to me as a consumer.

So Google gets more profitable. And we hand over more data to Google for not a whole lot of return. As Marshall Kirkpatrick observes:

The biggest question then appears to be whether consumers trust the Google brand enough to look to the company for more than just access to the rest of the world’s data, but as a repository for our own data kept private from a world of online shopping vendors.

This of course, brings me back to Jellyfish’s vision — they want to create a system that rewards peer reviewers who help people make smarter buying decisions by putting money in the reviewer’s pocket — a value per RELEVANT transaction — this creates a virtuous cycle, increasing the network effect of information and in turn helping me find what I really want at the best price.

The obvious implication here is that Google is becoming the new Microsoft — far more focused on its own dominance than on innovating and creating life-changing value for it users.

  • I thought the analysis was right on. This is a typical Google "dip your toe in the water" 0.5 pre-beta release effort. They are trying to leverage mostly their existing infrastructure and the appearance of a full new service, when in fact they have cobbled together a few existing bits with a few new bits to come up with a half-ass solution that I suppose they expect to succeed based on their dominant position in mindshare and the search audience. Of course, from a financial standpoint this might seem ingenius as the infrastructure to serve an infinite product catalog with an active community of reviewers (Amazon) or a similar e-bay type auction market (again with an active community), plus the transaction system, would be extremely expensive to develop and implement, not to mention a lengthy endeavor before any traction could be realized. This approach sort of lets them off easy to make a quick buck without a real investment of money, time or a human touch.

    The previous poster had a very good point--Google is more like a series of roads and not places, but the problem is there is no one to tell you which is the best road to take to get to the right place.

    I don't think Google can really excel here without a real investment and effort to provide the full expereience and benefit of an Amazon or ebay. It's like 80 percent of their other non-search offerings: it's only half a commitment.

  • I'm aok with making amends, and recognizing that human interactions are infinitely complex. And yep Google isn't God :)

    But you are conflating YouTube and MySpace with the web itself. And we, the people that are on it.

    You are absolutely right that YouTube is powerful, pricelessly for the reason you state.

    Google doesn't have a community of participants per se.

    It is an avenue to *multiple* communities of participants.

    To put it another way, Google is a series of roads. And not places. And nor do I think they want to be thought of as a series of places.

    Their whole focus is to send you away from their service to someone else's. And that's their strength.

    A Perl motto comes to mind here: There is more than one way to do it.

  • Lukas, I didn't say that Google is stupid -- they are masters of their algorithm-driven domain, and are doing the best they can for their users. My point is that what they can do for their users is fundamentally limited because it is so purely technology driven -- the new 2.0 paradigm is technology-enabled-peopled-driven (if that makes any sense).

  • Karl, just because they can see all of these connections, doesn't mean they can fully understand them or interpret them -- they are still trying to play the omniscient force that observes what you are doing and in a 1.0 patriarchal way delivers to you what the algorithms, in their wisdom, have deemed most relevant. YouTube is so powerful because it is people helping EACH OTHER determine what is relevant.

    And, yes, Google is indexing our conversation as we speak -- but do you think IT understands that you annoyed me with the tone I inferred in your comment, which led me to somewhat unfairly pull and editorialize your quote, which in turn annoyed you? And if we make amends (which I'm doing now), do you think Google is following along?

    Human interactions are infinitely complex. Google is not god -- as much as it may want to be. Why do you think economics as science has so much trouble predicting human behavior?

  • Lukas

    In the new model, Google only makes money if people actually buy things. Right? So Google *is incentivized to return relevant results*. Microsoft is only incentivized to maintain its monopoly. I don't see a parallel here.

    You might think Google is stupid for being so oriented toward automated solutions - but that doesn't mean they're working against the best interests of their users. Their economic model is set up in such a way that their interests are precisely aligned with those of users.

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