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How Google Makes Its Money: Ads, Links, Controversial Priorities
Posted on January 28th 2014
According to the Webster’s Dictionary, an oxymoron is a “combination of incongruous words,” such as cruel kindness. ‘Oxymoron’ comes to mind when we consider Google. Their motto is, “Do no evil” – but as the lawsuits pile up, privacy issues mount, and questions are raised about their ranking system, it might be time to ask a fatal question: Has Google backtracked on its well-meaning motto?
Mike Zammuto, president of brand management firm Brand.com, is one of many trying to solve this puzzle. “When Google first started in the business of search engines, they were like a giant breath of fresh air in the browser wars between Netscape and Explorer,” says Zammuto. “Their simple and seemingly altruistic purpose of making the search function easy and conflict-free bought the company a huge amount of goodwill.”
But now, says Zammuto, “with the very survival of some businesses depending on SERPs, it’s time to ask whether Google is acting in the best interest of the customer or exclusively in the interests of Google itself.”
In trying to answer this question, it’s best to heed the words of Watergate informant “Deep Throat” and follow the money. So how exactly does Google make money?
96% Of Google’s Profits Stem From Advertising
According to Google annual report, “We generate revenue (estimated at 96% of total Google revenue) primarily by delivering relevant, cost-effective online advertising.”
That’s all well and good, until you consider that Google is the largest provider of search results. If Google derives its revenue from advertising, from the very companies who are vying to get ranked highly, the conflict of interest becomes obvious.
Manipulating Rankings for Cash?
Consumers are told by Google the search results they get are based in mathematics, through a complex and constantly-changing algorithm.. Its purpose is described by the company as “counting the number and quality of links to a page to determine a rough estimate of how important the website is.”
Consumers will supposedly get the best possible match for their search queries by relying on this system. That is, unless a company with a lower “number and quality of links” buys advertsing from Google -- then their results will show up higher in the ranking.
So, evidently, the consumer is not necessarily getting the best result, but rather the most profitable result for Google.
Rip-Off and Yelp: Why Sleazy Content Sells
This is particularly controversial when product review sites, such as Rip-Off and Yelp, are consistently among the top search results. Zammuto believes that this boost is dangerous: “Giving a higher ranking to these review sites means customers will not be getting the best results for their search.”
When salacious reviews are prioritized, says Zammuto, “business can be irrefutably harmed by un-edited and often erroneous comments about their product.”
In theory, a company could be given great marks from professional associations, trade journals, and customer feedback only to have a toxic review on one of these sites rank ahead of the “quality links” returned by Google. As Zammuto points out, “There is often no way for a company to get the poor review removed.”
Zammuto feels this lack of a transparency is fueling the explosive growth in reputation and brand management for companies. “A single, often unsubstantiated review on a site like Yelp or Rip-off can be ruinous,” he says, “and if the sites are paying Google huge amounts for their high rankings, getting an understanding ear from Google is next to impossible.”
This conflict of interest has not gone unnoticed by the regulating bodies that govern commerce and Internet activity. Appearing before a Senate hearing in 2011, to determine whether Google’s search business “serves consumers or threatens competition,” executive chairman Eric Schmidt, instead of defending Google, launched a thinly-veiled attack on competitor Microsoft.
Referring to the 1990s case of U.S. V Microsoft, Schmidt said, “That company lost sight of what mattered and Washington stepped in. We get it.”
With the escalating number of complaints, both informal and legal, that have been launched since he uttered these words, users are left to wonder if they really do get it.
As more and more companies begin to question the reliability of the search system, the onus will be on Google to show customers and consumers that they provide the most accurate results to queries.
Will the search engine giant step up to protect consumers and searchers? Or will their interest in ad revenue eclipse their promise to “do no evil”?