Google and Web 2.0: win-win or win-lose?

Summary:Is Google a double-edged sword for Web 2.0?

Google makes no secret of its objective to obtain and control every piece of data in the world, including users’ personal data, and of its aim to obtain every business and every individual as a Google paying customer.

Google CEO Eric Schmidt, at last months Q2 earnings conference call, reconfirmed:

we are in the search business, so we need all of the information. We want to partner with people to get information so our search end users can see it.

We're also in the advertising business, and we'd like to provide advertising services to people who have their own proprietary content. So depending on where we are in that spectrum, we either do an advertising deal or a content deal or a hybrid deal.

But ultimately our goal at Google is to have the strongest advertising network and all the world's information, that's part of our mission.

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Google’s domination of the Web 2.0 ecosystem illustrates Google’s success in profiting off of every facet of a targeted sector.

In “Google AdSense: Web 2.0 biggest winner?” I discuss how highly trafficked, but undermonetized, Web 2.0 properties such as YouTube and Digg are fueling the Google AdSense money machine with high-margin incremental revenues.

I note, however, that it is not in the best interests of YouTube and Digg to sub-contract their advertising to Google:

By sharing the advertising pie with Google, Web 2.0 leaders are not reaping the full financial benefits from the traffic they are generating.

In “Web 2.0 monetization by Google AdSense, Where is the business model?” I posit that Web 2.0 start-ups are employing Google AdSense at the expense of their long-term viability:

‘Ads by Goooooogle’ are almost ubiquitous online and Google has succeeded in making AdSense the go-to monetization strategy for Web 2.0 properties of all sizes and styles, in lieu of solid business models…

Many Web 2.0 start-ups that make Web applications and services available to the public for free, first stake their claim to a piece of the Social Web real estate, and then, sometimes as an afterthought, look to Google to ‘show them the money’ through AdSense…

Monetization by Google AdSense may provide cash inflows, but it does not represent a business model…

While advertising-supported content delivery represents an established media business model, Google’s plug-in 'Just copy and paste a block of HTML and targeted ads start showing up on your website' formula is an ephemeral monetary crutch…

Rather than rely on Google’s algorithms to grasp the meaning of Web publishers' content, and receive an undisclosed share of revenue from Google for the ads it serves against that content, Web properties undoubtedly would be better served, for the long-term, by directly controlling advertiser access to their own content and not sharing their advertising revenues with third-parties.

Not only are Web 2.0 properties relying on Google to “show them the money” via AdSense, Web 2.0 start-ups also hope Google will show them the money, quickly, via lucrative buy-outs.

In “Web 2.0 dreaming: get rich quick, or fail trying” I recount how the recently folded online calendar Kiko was inspired by its financial backer to operate with the goal of a rapid-fire sell-out:

Y Combinator funding lets you sell early, if you want to. We think startups will increasingly opt to sell themselves when they're small for a few million, rather than take more funding and roll the dice again. Google and Yahoo both like to do this sort of acquisition, and we expect it to become increasingly common…

we thought that the release of Google Calendar might be good because it would push one of the other big players into acquiring a calendar application to compete. 30boxes had stated that they didn't want to be bought out so, as the #3 player, things were looking hopeful. Things didn't pan out, but that's okay. None of us were ever had a Lexus on hold.

In “Web 2.0: Who needs VCs?” I discusss how the Google cachet, and its $113 billion market cap, has the allure VC money had in the 1990's:

Google has been steadily acquiring home-grown Web 2.0 start-ups. The company’s primary motivation appears to be talent acquisition, however, rather than technology asset acquisition.

Google CEO Eric Schmidt commented recently, at the Herb Allen Conference in Sun Valley, on the steady pace of Google acquisitions of one-three person Web 2.0 start-ups:

The reasons…that they (start-ups) would choose be to be acquired are not what you might think. There is so much capital. And many of these businesses require no capital.

The reason to be acquired is that Google gives them (Web entrepreneurs) a platform that they might otherwise not be able to get. As markets consolidate these little companies often cannot get enough ‘mindshare,’ even though their technology is really good.

Google’s largesse may be a double-edged sword, however.

Google acquired the two-person start-up Dodgeball last year; The two young founders have been integrated into the Google engineering team, but Dodgeball, itself, has languished, as I discuss in “Google's Dodgeball, where is it now?”

MORE ON GOOGLE and MORE ON WEB 2.0

Topics: Google

About

A former ZDNet blogger, Donna Bogatin is the founder of online directional media properties VIPOffers.com and UrbanSavings.com. In addition to her own ventures, Donna has been advising companies on Web-based business development since 1997, when she created and led an "Internet For Entrepreneurs" workshop for the Small Business Administra... Full Bio

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