Google's Death Throes

Sure, you can read analysts' reports, examine P/E ratios, look at insider stock holdings, and listen to the CEO conference calls. But if you want to know how Google and eBay are really doing, you might just pop over to Fred Wilson's site. There you'll see that one of the companies is selling fraudulent crapola - and the other one is buying it!

To wit, here's the Google AdSense advertisement I saw on Fred's Weblog today - see if this one makes any sense at all:

Blog Rss
Great deals on Blog Rss Shop on eBay and Save!
www.eBay.com

If you hold stock in either of these rocket-fire Internet companies (and I do), this little ad on Fred's site has to make you very nervous. That's because Google's entire revenue stream (just about) comes from serving ads on other people's Websites that have some sort of context, and collecting money on a pay-per-click basis. And eBay relies on wired consumers continuing to make their marketplace (the largest unregulated marketplace in the United States) the place to go to sell junk someone doesn't want. Back in my business reporting days, this little item would be what I'd use to lead a critical analysis of their prospects. It's a mini-alarm bell that speaks volumes about the piss-poor defensibility each company has in their sectors - and the clear lack of hands-on human quality control.

Fred has, btw, done a terrific job (better than most of the trade press) of covering the poor value proposition that Google's automated AdSense offers to the market, as he experiments with it over the course of a year. I've also been trying it out, with very mixed results indeed. So if you click on this ad and send Google its 20 cents (while costing eBay it's four nickels) what do you get? "0 items found for blog rss." What a shock.

UPDATE: Turns out that crappy "contextual" ads may actually make sense for both Google and eBay - but for how long, I wonder? Anyway, to my eye, Tony Gentile has an excellent rebuttal to my post that analyzes the current numbers and what they mean - good blog as well.

Comments

[Tom]

I can't speak to Google, but I think you need to justify any description of Ebay's defensibility as "piss-poor" considering what's happened in international markets like Japan, where Ebay lost out to Yahoo. It's /extremely/ hard to dislodge an incumbent online auction provider. You could offer the service for free and it would still be in the interest of sellers to go to Ebay over you, because the extra margin from competitive bidding far outweighs the loss to Ebay's fee levels.

As long as Ebay can attract an order of magnitude more searching and bidding activity than other auction sites, there isn't even a game to play. I'd post they're doing the _right_ thing with those wide-blast Google Ads -- most people who click on obscure matches /will/ be a good lead for Ebay, as opposed to your clicking on the ad simply to prove it's a bad positioning. Nor do those people have to complete a transaction on Ebay to make the lead profitable -- simply having them looking at items, and possibly increasing the bidding pool (immensely driving up price relative to a single-bidder auction) makes it worthwhile for Ebay.

You can criticize Google, and you can criticize Ebay. But I don't think lumping them together in the same category simply because one is a customer of the other is a rational approach, nor do I think they should be put in the same basket in terms of the viability of their business plan and market caps.

[Derek Scruggs]

This is probably not an eBay ad.

There are lots and lots and lots of affiliates who buy up any keyword they can find for 5 cents and use some basic text replacement tricks in Google AdWords to substitute the search phrase or content "trigger" into the ad. I know some people who make a lot of money doing this.

If the ad doesn't attract a 1% click rate, then Google discontinues it. It's pretty much a self-healing process. This is why, for example, a search of "Britney Spears" usually only has one or two ads - many advertisers buy that keyword, but their ads usually don't attract enough clicks for Google to run them longer than a day.

[Brad]

Google made about $2b in net revenue in 2004. $1.6b came from paid clicks on Google.com not "serving ads on other people's websites."

[Tony Gentile]

An interesting perspective. Here's a different take on it:

http://www.buzzhit.com/2005/03/another-perpsective-on-googles-death.html

[MLCole]

We don't mourn our dead because we are not reminded that they are dying. It's being kept a dark and dirty secret. To publically mourn the death of someone who died in Iraq is considered to be unpatrotic...it's sending the wrong message to our enemies...it's telling them they are winning.

IT STINKS !!!

We are a country of cowards and bullies!

regards

.

[MLCole]

Sorry for the mis-post...ISDN in Europe is causing me a whole lotta problems today

MLCOle

[India Design]

Also think of amount people spend on buying LINKS from the High PR web sites.

Google gets benefits of all these PR crazy activity.

I TOO :)