All Intensive Purposes

[Its] immodest ambition puts Google among a growing band of technology companies that believe they can own it all. Ebay executives are fond of describing their potential market as the entirety of global commerce. Period. Michael Dell has been only marginally less of a megalomaniac. When his personal computer company’s revenues got to $40bn or so a year, he sketched out plans to get to $80bn. Servers, printers, televisions – Dell would make them all.

What all these companies have in common is a belief in method: a confidence that what sets them apart is not the services or products for which they are currently known but a way of doing things. If Dell makes cheaper PCs by collecting customers over the telephone and internet and building machines to order, then why not apply that principle to any type of electronic product? If Google has used technology to bring a higher level of targeting to advertising, why not use that brain power to squeeze the inefficiency out of other corners of the advertising industry?

Grand plans such as these run into a couple of problems. One is that a process perfected in one market often does not transfer quite so neatly into another. Take Dell, which has not made much of a splash in consumer electronics. It turns out that people do not want to buy large-screen TVs over the internet, sight unseen.

In Google’s case, it may be that search engine advertising will prove to have been the purest expression of its technology. When people type keywords into an internet search engine, they are exposing a specific need for information, often linked to a desire to buy something. Deliver the right advert at that moment and the chances of a sale are high.

Any attempt to extend targeted advertising to other media will represent a dilution of this ideal, particularly as Google tries to address the off-line world. . . .

The second problem is that, as competitors catch on, they erode the technology or cost advantages of the pioneer – or they are quicker to apply the lessons to new markets.

Ebay, for instance, has run into problems in China, where a local internet auction company, TaoBao, has stolen a march by letting sellers list their items free of charge. Google now has Bill Gates to contend with: Microsoft has not perfected its search engine advertising technology to anything like the degree that Google has, but it may be able to start using it as a weapon to undermine pricing.

// posted by t.s. @ 10:05 AM