Google and the cold equations
Listening to Ken Auletta speak about his new book, “Googled: The End of the World as We Know It,” on the same day as Freedom Newspapers announced it would be shuttering the East Valley Tribune seemed inextricably connected, rather than just random occurrences in a busy day. No comments yet. You can be the first!
Auletta, who writes the Annals of Communication column for The New Yorker, was being interviewed on NPR’s “Fresh Air” on Monday.
In describing the book, interviewer Terry Gross quoted Auletta’s text: “Google has eliminated barriers to finding information and knowledge, and its way of building its business — making it free and attracting users before figuring out a way to make money — has become the template for Web startups. But … for the many companies Google has encroached on — such as magazines, newspapers and book publishers — Google can be perceived as the Evil Empire. Any company with Google’s power needs to be scrutinized.”
This is a company that takes in $22 billion worth of advertising revenue and makes more than $4 billion in profit, Auletta tells Gross.
At one point, Auletta describes the difference between Sergey Brin and Larry Page, the co-founders of Google, and Bill Gates of Microsoft, saying that Gates was a “cold businessman,” while Brin and Page are “cold engineers.” Essentially, he says, Gates wanted to kill his competitors, while Brin and Page are driven by an engineer’s desire to do things more efficiently.
In the process, that raises disturbing questions about privacy of information, copyright and the concentration of power.
“Google believes in transparency, but they’re not transparent,” Auletta tells Gross, as he likens the company’s reaction to simple questions like, “How much do you pay engineers?” to trying to pry state secrets from the CIA.
Google’s ascent in a little over a decade — whether you date its start as 1997, when the founders renamed their BackRub search engine as Google, or 1998, when they filed for incorporation — obviously is one of the biggest business stories today. The company, Auletta says, was not profitable for its first three years. Today, he adds, it represents two-thirds of the search market in the United States and about 70 percent worldwide.
Google’s a-ha moment came when the engineers realized they could sell advertising related to searches and charge the advertiser only when people clicked through to the ad. As Auletta tells Gross, that beats the “scattershot” approach of print media.
It’s no secret that the “everything’s free on the Internet” idea, which has been key to Google’s development, accelerated the slide of newspapers into insolvency and, probably, obsolescence.
Just two decades ago, newspapers were among the darlings of Wall Street, lured by 20 percent profit margins. According to a June 17, 2006, article by Frank Ahrens in The Washington Post (“A Push Toward Private Control of Newspapers”), “The newspaper business was relatively stable over the last half of the 20th century, controlled by a handful of chains that steadily added newspapers and recorded profit margins of 10 percent to as much as 30 percent.”
Even in the late 1990s as the Internet increased its hold on readers, the Orange County Register was considered a major success story in defining how a suburban newspaper could grow and thrive. It was the flagship newspaper of Freedom Newspapers, the owners of the East Valley Tribune.
There’s no denying the trend. Advertisers — some more quickly than others — are abandoning print media for the Internet, where rates are about 10 percent of what print charges.
So R.I.P. East Valley Tribune. Maybe Google’s “cold engineers” can figure out a way to make job searches more efficient and successful.
03 Nov, 2009 >