The Demise of Google, Part 2

Google’s downfall will result from three fundamental business failures. Failing in any one of these areas is enough to tank a successful business but when all three combine, you have the elements for a spectacular collapse.

This article discusses Google’s flawed business model and how it is at odds with your right to privacy.

Flawed Business Model: User Privacy = Worthless Users

As discussed in part one of this series, Google has only one valuable product to sell: you. Through your use of Google’s services, such as search and email, and by tracking which websites you visit, Google builds up a detailed profile of who you are:

quote author:Google url: title:“Ads in Gmail and your personal data” We are always looking for more ways to deliver you the most useful and relevant ads - for example, we may use your Google search queries on the Web, the sites you visit, Google Profile, +1’s and other Google Account information to show you more relevant ads in Gmail. endquote

With this profile, it can predict what you want to buy, what you like to wear, what you like to eat, where you like to travel, and so on. Google then works with advertisers who pay Google handsomely to put their ads in front of people who are most likely to buy or use their products and services.

On the face of it, this seems like a win for all parties. Google provides services to you for free, advertisers optimize their expenditure of marketing budgets, and you, presumably, see ads which are primarily about products and services you are interested in. This is a pretty cool idea and the basis business plan for many dotcom startups, not the least of which is Google’s strongest competitor - Facebook.

The problem with this is related to privacy and the difference between implicit and explicit permission. Facebook has a pretty detailed profile of who I am also. For example, Facebook has a very good idea of what kind of movies I like. This is because I have explicitly gone into Facebook and “liked” all of my favorite movies, movie stars, directors, etc. I did this specifically to share this information with my friends and I understand that by putting this information into Facebook that Facebook will probably use it for something.

However, I don’t have control over what information shows up in my Gmail account. Consider the supportive emails that friends may send someone with a recent diagnosis of prostate cancer. Now Google knows that person has cancer. It’s not much of a stretch to imagine when this user goes into Google to search for “abdominal pain”, he sees an ad for a local oncology center:

quote author:Google url: title:“FAQ about Gmail, Security & Privacy” …automatic scanning and filtering technology is at the heart of Gmail. Gmail scans and processes all messages using fully automated systems in order to do useful and innovative stuff like filter spam, detect viruses and malware, show relevant ads, and develop and deliver new features across your Google experience. endquote

The difference between Google and Facebook is that the information Facebook knows about me, I’ve _explicitly_ given to it. The information Google knows about me I have little control over. If you use any Google service or product or visit any website that uses Google Analytics, it’s implied that your usage will become part of your Google Profile - whether you like it or not.

A business built on selling this sort of product is at odd’s with a user’s desire for privacy and their legal right to privacy. Privacy is like poison to a company like Google. A user shrouded in privacy is worthless to Google because advertisers cannot target that user with precision. If you don’t know anything about that user, you wouldn’t know to pitch them an Alaskan cruise or a Jamaican beach rental. Advertisers won’t pay any premiums for access to users like that and without those premiums, Google’s revenue dries up quickly.

But better privacy laws are coming, despite Google’s substantial lobbying efforts. Those laws will put a significant damper on Google’s revenues and, right now, I’m not aware that they have other sizeable revenue source.

This is a continuation of my 8-part series discussing how Google’s business practices and strategy could lead to Google’s eventual demise.

This is part two. You can read the first part of this series here.