Google economist on Google’s success: Huh?

Hal Varian is an economist at Google, and I’m sure he’s a good one.   However his Freakonomics and Google blog analysis of why Google has done so well in search leaves a lot to be desired.    After knocking down a few straw man items that obviously have nothing to do with Google’s search   monopoly   dominance, he goes on to conclude that Google is just better than the competition because they have been doing search for so long.

Hal – Excuse me but you call that economics?    I doubt this would be your internal Google explanation (assuming you want to keep your economics job, let alone your degree).  In fact it was so thin and almost bogusly “cheerleading” that it raises for me the ongoing questions about Google’s questionable mantras about doing no evil and transparency:   Transparency in all things except those that might affect our bottom line!

As I’ve noted ad nauseum I do NOT think Google has more than a modest obligation to be more transparent, but I’m tired of how often Google *witholds information* to protect Google and then pretends this is in the interest of users.  Google screws users and webmasters regularly – this is common knowledge in the search community.   The most glaring challenge is with ranking errors, mistakes, penalties, and rules.   In this area literally tens of thousands of mom and pop websites, and sometimes larger enterprises, are indexed in questionable ways by Google leading to serious economic challenges.   Unlike almost any other business however Google has only a tiny team of specialists who generally can only offer vague and often useless canned information, even when the problems are fairly obvious to an experienced search person.   

But I digress into ranting….!  

My working hypothesis about Google’s success is simple and I think would hold up far better than Hal’s silliness:  Humans are creatures of habit, and Google was the best search at the time when most formed their internet search habits.   Yahoo, LIVE, and even Ask are only marginally inferior to Google search now, but there were dramatically inferior a few years ago when the online ranks swelled with people looking for information.   Google provided (and still provides) high quality, fast, simple results. 

This hypothesis helps explain the following facts:
Google is not the search of China where traffic is dwarfed by
Even as Yahoo improved search quality they did not improve their search market share. 
Quality differences are slight, yet Google search share in USA is very large.

Another indirect factor in the Google success equation is that Google’s monetization remains superior to the competition by a factor of more than 2  (per Mike Arrington .09 vs .04 per search at Yahoo).   In this monetizing sense Hal’s “we are better from experience” would ring very true, and if he had written about *economics* he would have noted that Google’s brilliancies in monetization are a lot more notable than in other areas, and are more of a key focus area at Google than is generally talked about.    In fact such a focus area that they are downright opportunisic in the effort to monetize the heck out of the searches.  My favorite examples are when Google violates their own guidelines to bring users …. non-information from advertisers.   I ran into this last week with the following search for airline tickets.   

Google Query: “Xiamen to Beijing”

The top result on the left side, which is supposed to be reserved for non-commercial results, at first seems helpful, giving you the ability to order tickets from several places:

Flights from Xiamen, China to Beijing, China

Departing:   Returning: 


Unfortunately though, you can’t order the tickets because at least some of those clicks lead to commercial websites that do not offer that route.  

No big deal?  I guess not, but this is a clear violation of the Google Guidelines which call for clicks to a page where you can really get the thing advertised.  Also it would be refreshing for me if Google stepped down at least half way from the high horse of claiming they never put money ahead of users, and more importantly used some of the enormous profits to bring more transparency and helpful information into the mix.

In summary I want to be clear:  Google has the right to make big money online.   They also have the right to be very aggressive in making money.   However with their success goes an obligation for quality communication and transparency.   They are failing in that obligation and perhaps as importantly are not even recognizing that they are failing.   Google is a great company.  But they can do much better by users whose habits have made Google the most successful company of this generation.

2 thoughts on “Google economist on Google’s success: Huh?

  1. Interesting analysis from Freakonomics, but I don’t think it’s that rational. Google functions like an online clique or club (or perhaps sibling group). BY googling, the consumer-searcher vicariously participates in the phunn that, like Google alpha-executives participate: you, for a few nano-moments, are sort of a virtual executive! The name itself (some massive number with millions of zeroes following it, ah believe) connotes geekiness. Billy Bob and Daisy Mae now with a few points and clicks may join the Yakuza, or something.

    Academic economists often suggest that they are doing something like science, but a closer inspection of consumerism shows that the supposed “rational choice” is anything but rational: it’s more like higher-primate consumption patterns or something (and there is, for the few empirically-inclined among us, data suggesting that consumer preferences often operate sort of unconsciously, if not in some nearly Darwinian fashion). Veblen had suggested as much a few decades ago, with his theory of “conspicuous consumption.” (perhaps not “true in all possible worlds”, but accurate in most market contexts).

  2. “Caution, has been shown to be habit forming.” – that’s certainly a far more plausible story than “heck, we’re just so good, what can I say?”

    Transparency is tricky – and I’d say despite talk of transparency, as you say, there’s a fair amount of opaque on that slide…

    Like most, I’m addicted to google for web search as well – it’s far too easy to “just google it” – even though, as someone covering enterprise search, I make sure I change it up from time to time and specifically explore alternative tools, both personally, and in presenting options as examples in research documents or literal presentations.

    For anyone to ever believe their own marketing so deeply as to not question their status, is the path topples giants. Recall Hotbot? Excite? Altavista? Excite could do no wrong, for a while, until the wheels fell off.

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