There is a world-class irony in the fact that 99% of the revenues of $122 billion market cap Google are derived from its advertising sales business model, while at the same time the company is proud that it doesn’t buy advertising itself.
Yahoo, on the other hand, practices what it preaches and not only sells advertising, it supports the ad industry by buying advertising.
Google’s public facing mission statement seeks to portray the search advertising behemoth as an altruistic friend of the “world’s information”:
Google's mission is to organize the world's information and make it universally accessible and useful.
Contrary to the philanthropic image implied in Google’s crowd-pleasing mission statement, however, advertising sales is the raison d’etre of Google and, to be accurate, Google’s mission statement must be amended with the phrase: “and sell ads against it.”
Lots of ads, actually. Google CEO Eric Schmidt, Ph.D in computer science and electrical engineer by trade, has gotten advertising religion, as I discuss in “Google CEO's new paradigm: 'cloud computing and advertising go hand-in-hand'.”
For Schmidt, advertising enables a new cloud computing based paradigm:
what's interesting is that the two – cloud computing and advertising – go hand-in-hand. There is a new business model that's funding all of the software innovation to allow people to have platform choice, client choice, data architectures that are interesting, solutions that are new – and that's being driven by advertising.
Of most interest to Schmidt, of course, is ensuring that Google derives the most value from what he characterizes as a new ‘cloud computing and advertising go hand-in-hand’ paradigm.
Schmidt confirmed at the company’s Q2 earnings conference call:
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.
If the Google CEO embraces advertising and the Google business model is wholly dependent on selling advertising, why then is Google so averse to spending money on advertising itself?
Along with its mission statement, Google proudly declares it has become “one of the world's best known brands almost entirely through word of mouth from satisfied users.” In other words, without spending any money on advertising.
In “Google's shrewd product development and launch strategies: Free PR, free user testing” I suggest that Google’s unprecedented gross margins are due, in part, to a calculated strategy of eschewing paid advertising campaigns for cost-free, but lucrative, “influence-the-media” and “profit from the users” go-to-market plans:
Google enjoys an unprecedented public good will and it manages that valuable asset keenly. Google is highly secretive and does not provide meaningful responses to press inquiries. Nevertheless, Google’s infrequent, but targeted, announcements routinely receive massive, and generally overwhelmingly positive, cost-free press coverage worldwide.
Google leverages its influence on the media to save hundreds of millions of dollars in product launch marketing expenses and to gain the interest of the world’s biggest free focus group, Google users.
In “Why does Google pre-release breaking news via single, favored media publications?” and “Google news not 'universally accessible'” I put forth that Google’s shrewd free PR modus operandi is driven by a Google desire to “manipulate and control both news coverage and writers”:
Google's calculated strategy at currying favor with the chosen media few with the goal of writing its own press coverage mocks Google's vaunted mission…
Google's shrewd "launch via favorable media" strategy shows Google:
1) organizes the world's information to its own, direct advantage,
2) limits accessibility to the world's information,
3) restrains information usefulness.
What about Google’s chief competitor Yahoo? Yahoo proudly spends (a lot of) money to promote itself, purchases advertising and even “compensates” its users.
Yesterday Yahoo announced a strategic integrated marketing campaign that spreads advertising wealth across a variety of media and offers a little good cheer to Yahoo visitors as well:
an integrated marketing campaign that highlights the new Yahoo! home page and other recently launched services, including the new Yahoo! Mail beta and Yahoo! Answers. The multi-million dollar consumer campaign includes television, radio, cinema and online advertisements portraying an irreverent and playful look at life with and without the essential benefits of Yahoo!'s Internet services. In addition, the campaign includes a Dunkin' Donuts coffee giveaway for visitors to Yahoo.com on Friday, September 22.
In “Will Google ever build another billion dollar business?” I discuss how Google aims to take billions from the radio and television advertising markets.
Isn’t it time that Google give back a little itself?