Google's Business Model

Mark Cuban appeared on CNBC the other day and succinctly described how Google makes money. He also pointed out a gaping technical hole in their business model that may jeopardize Google's earnings going forward.

According to Cuban, the vast majority of Google's revenue comes from Google AdWords. Google describes AdWords as follows:

"With Google AdWords you create your own ads, choose keywords to help us match your ads to your audience and pay only when someone clicks on them."

Owners and administrators of web sites can allocate space on their pages for Google to place the ads that advertisers create. They receive a portion of the revenue generated when someone clicks the advertising links. Google receives the rest of the "click revenue".

Cuban drew attention to the fact that competitors can game this system. I.e., a competitor to an advertiser can write an automated script that repeatedly "clicks" the link, thereby causing the advertiser to pay huge sums of money to Google for worthless clicks (clicks by a machine that will never purchase anything). If this problem becomes pervasive, companies will no longer want to advertise with Google, and Google's primary source of revenue will dry up.

Comments

Why Spreadsheets Suck for Prioritizing

The Goal As a company executive, you want confidence that your product team (which includes all the people, from all departments, responsible for product success) has a sound basis for deciding which items are on the product roadmap. You also want confidence the team is prioritizing the items in a smart way. What Should We Prioritize? The items the team prioritizes could be features, user stories, epics, market problems, themes, or experiments. Melissa Perri makes an excellent case for a " problem roadmap ", and, in general, I recommend focusing on the latter types of items. However, the topic of what types of items you should prioritize - and in what situations - is interesting and important but beyond the scope of this blog entry. A Sad but Familiar Story If there is significant controversy about priorities, then almost inevitably, a product manager or other member of the team decides to put together The Spreadsheet. I've done it. Some of the mos...

5 Ways Companies Make Product Decisions

In the last blog entry, we reviewed the four problems that companies face, or are trying to overcome, as they make product decisions . Now we'll look at the ways that most companies make their product decisions. Companies that develop, market, and sell products and solutions make strategic and ongoing tactical decisions. They decide what features to include in their products, what messages they will use to communicate the value of their products, what marketing tactics they will use, what prospective customers they will target, and many day-to-day choices. Whether or not these decisions are deliberate or ad hoc, most companies use some combination of the following ways of making product decisions. (A downloadable "map" that summarizes the product decision landscape is included at the end of this article.) Customer Wants Product decisions based on feature requests, focus groups, and what prospects and customers say they want. Companies are selling products to ...

Is Customer Development Pseudoscience?

The “Science” of Lean Startup Lean startup practitioners embrace the scientific method, seeking the "truth" about what business model and strategy will lead to product success. We do so by: Formulating hypotheses Crafting and running experiments to test them Learning from the experiments Iteratively feeding our learnings back into revised hypotheses Sounds pretty scientific, at least in spirit, doesn't it? Yet this process actually neglects a key ingredient in the scientists' mode of operation. To identify what’s missing, let’s examine “customer development”. Customer Development Steve Blank is one of the pioneers of the lean startup movement. He introduced into the lean startup lexicon the term “customer development”. Customer development consists of sessions and interactions with customers to test hypotheses. For example, a product manager might interview a prospect, asking if she agrees with the product manager’s hypotheses about the problem...

Cauvin

Search This Blog