April 11th, 2009

How Google Stole Control Over Content Distribution By Stealing Links

by

There is so much misunderstanding flying around about the economics of content on the web and the role of Google in the web’s content economy that it’s making my head hurt. So let’s see if we can straighten things out.

Google isn’t stealing content from newspapers and other media companies. It’s stealing their control over distribution, which has always been the engine of profits in media. Google makes more money than any other media company on the web because it has near monopoly control over content distribution (i.e. like a metro newspaper in the pre web era).

Those who argue that Google is a friend to content owners because it sends them traffic overlook the basic law of supply and demand. The value of “traffic” is entirely relative. The more content there is on the web, the less value that content has — because of the surfeit of ad inventory and abundance of free alternatives to paid content — and thus the less value “traffic” has.

The more content there is on the web, the less money every content creator makes, and the more money Google makes by taking a piece of that transaction.

Nick Carr sums up the problem well:

What Google doesn’t mention is that the billions of clicks and the millions of ad dollars are so fragmented among so many thousands of sites that no one site earns enough to have a decent online business. Where the real money ends up is at the one point in the system where traffic is concentrated: the Google search engine. Google’s overriding interest is to (a) maximize the amount and velocity of the traffic flowing through the web and (b) ensure that as large a percentage of that traffic as possible goes through its search engine and is exposed to its ads.

The debate over whether Google’s excerpting content on its search result pages is a violation of copyright law, i.e. whether Google is effectively stealing content, overlooks the much more valuable asset that Google is appropriating. Google makes money less by its ability to display that snipet of content and much more by its ability to know that snipet of content is relevant to what the content consumer is looking for — it makes money by its ability to efficiently distribute that content.

And just how does Google know what content is most relevant, trustworthy, and valuable? How does Google know where to send the traffic that yields such diminishing returns?

Everyone talks about Google’s algorithms as if it were some giant artificial intelligence that had its own ability to judge the value of content.

The greatest irony of the web content economy is that Google by itself doesn’t have a clue what content is good or bad. Google is able to deliver relevant search results only because every site on the web helps them figure it out.

Google’s algorithm is based on reading “links” as votes for content. Every time a website links to another website, Google reads that link as a vote. The brilliance of the Google algorithm is its ability to figure out which votes should count more.

But without those links, without those “votes,” Google has nothing.

What Google “steals” from every website isn’t the content — it’s the links.

It’s the links, stupid. And everyone gives Google their links to read — for free!!

Google doesn’t really need your content, because there’s plenty more where it came from. What Google really needs is your links, i.e. your votes for content — it needs your help separating the wheat from the chaff on the web.

The backlash against URL shorteners and site framing (e.g. DiggBar) is all about who controls the links, and which links Google is going to read and credit.

The key to Google’s monopoly control over content distribution on the web is its ability to judge what’s most relevant in an increasingly large sea of content.

If media companies want to compete with Google, they need to look at the source of its power — judging good content, which enables Google to be the most efficient and effective distributor of content. They also need to look at Google’s fundamental limitation — its judgment is dependent on OTHER people expressing their judgment of content in the form of links. Above all, they need to look at sources of content judgment that Google currently can’t access, because they are not yet expressed as links on the web.

The balance of power on the web can shift — but only by understanding what the real sources of power are.

UPDATE

Just to clarify,  the use of “steal” and “stole’ is in the sense of “stole the game.” The point of this post is to explain how Google won, and not at all to suggest that they didn’t deserve to win. Google’s success is a direct reflection of how much value they create, i.e. A LOT — they solved a problem in the market that nobody else figure out how to solve or even recognized as the huge opportunity in the market. This post is also intended to help media companies understand better how Google works so that they can better compete in the web content marketplace, not to justify any feelings of “sour grapes.”

  • It's true, imo Google '' owns '' the internet pretty much. They aren't at Monopoly stage but they are surely at 80% if not 90%. But what are you gonna do as a small entrepreneur, like myself I have to promote through Google cause it's the mainstream search engine, no search results, no sales. simple as that.

    Cheers!

  • I agree that google is stealing contents but on the other hand Google is providing an extraordinary to World users on just few clicks and which is not providing by any other search engine. Google Page Rank is one of the example.

    Now a days all search engies, directories and Link Buiilding webs are taking Google page rank is one of the primary thing to rank any website.

    So what you think if google is stealing contents on the other hand google is sharing every thing with users.

  • If google news is the main source of your complaint, I really don't get it. Google makes nothing when someone clicks on a link to a news organization at google news. Zero. Nada. Zilch. Further, I don't see any ads on google news. So google does not even make money when people browse the news link they have collected. Google is a fact of life for us all. Best to learn how to deal with it.

  • Scott, this is smart but wrong.

    The source of the problem is that newspapers are commodity providers, where they once had a monopoly. If they had unique content, they would generate their own distribution on the 'net, and Google would be their friend. But because they all publish the same stories, the market power shifts to Google.

    More depth here: http://seekingalpha.com/instab...

  • Blah

    I only read the first part and quickly came across two datapoints indicating that the author didn't think this through:

    a) just because the amount of content increases does not mean that the average quality or interestingness of the content remains constant.

    b) most people who claim to know search engines by now have grasped that page rank is one of many, many, many signals used for ranking and its importance is steadily decreasing. letting relevance be dominated by page rank creates a scenario that is too easy to exploit.

    No need to read the rest since it is likely to be more of the same.

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