Google is trying desperately to come behind in “social.” New CEO Larry Page tied every employee’s bonus to the success of Google’s social strategy.
On one level it makes sense: Facebook is a huge, incredibly fast-growing and important business, and Google shouldn’t want to be left behind in social networking.
But on another level it’s also a bit puzzling: why should Google care that much about social networking? It’s nice, of course, but why should it be so vital to a search company to be into “social”? They’re not exactly losing money. Isn’t “social” a big, vague buzzword anyway?
There are peripheral reasons: Facebook is inventing new forms of advertising and looks set to grab a huge share of display advertising, which Google badly needs to grow beyond its maturing search business; Facebook has deep and valuable data on users’ likes and preferences, and Google wants comparable data. Facebook also competes very successfully with Google for top engineering talent, and Google needs to be seen as the most bleeding-edge company in the world to attract the best engineers. All of that is correct.
But none of that explains why Google should be treating Facebook as a mortal threat, which it increasingly is.
The big reason is in some ways so obvious that no one spells it out, so here it goes: on the internet, traffic is power and money and the company that controls the traffic gets the power and the money.
This is why “social” is more than just a buzzword (though it clearly is), and why it is actually hugely important. Social networks drive an ever increasing share of traffic on the internet, and that traffic is power and money.
In a narrow sense, people will always be searching for stuff on the internet, and that stuff will always include stuff to buy that companies will want to advertise against, and so there will always be tons of money to be made by being the biggest search engine.
But there’s money to be made building mainframes and selling IT consulting services, but no one thinks of IBM as the most powerful technology company on the planet, even though it was for decades, and even though it’s still huge.
Think about it from the perspective of a website owner, whether it’s a blog or it’s Amazon. For most of the past decade, the biggest source of traffic by far was search engine. So the thing that mattered the most to you if you wanted to make your site successful was search, whether it was search optimization or search marketing. The entire “ecology” of the web became turned around search. Entire businesses were conceived and built around this assumption.
Several years from now in retrospect we may look at the Demand Media IPO as the top of a decade-long cycle of search’s domination of the internet. But now businesses large and small are diversifying away from their reliance on Google.
Now social networks can be 30 to 50% of referrals to media sites. The fastest growing source of traffic to commerce sites, which is where the money is, is social, and the history of the internet teaches us that if something is small but growing very fast, it will probably be huge. Most startups today, recognising that they have limited resources and that SEO has made Google a victim of its own success, by overcrowding search results, are basing their distribution strategy around Facebook and Twitter, not Google.
When people talk about the threat to Google from social, they talk about people changing the way they search for information, asking their friends before going to Google. That’s overhyped. People will almost always be using computers to search for information, because it’s almost always efficient.
The threat to Google from social isn’t that social could replace search as search, it’s that it looks increasingly inevitable that social will become an equal if not bigger source of traffic, and therefore power and money, than search.
That might or might not pose a mortal threat to Google’s core search business. But it certainly poses a mortal threat to Google’s understanding of itself as not only the most powerful and profitable internet company, but as the most central internet company, the one that everyone gravitates around.
That’s what Larry Page is scared to death of.
And he’s right to be.
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