Google unwisely brought closer scrutiny to Google's public representation of its business model by pushing WSJ columnist, Holman Jenkins, to run this footnote/correction:
- "Google objected to a line in a column two weeks ago that summarized its business in part as "collecting data it can sell to advertisers." We didn't say "user data," but Google nonetheless wants you to know it doesn't sell any data directly to advertisers, and doesn't employ user data to sharpen the efficiency of its search advertising, but only its display ads."
With all of the controversy surrounding Google's business model (WiFi privacy-invasion investigations on four continents... a massive private data spill from Chinese hackers stealing Google's password security system... and increasing calls for the DOJ/EU to bring an antitrust case against Google), it seems particularly ill-advised for Google to be nitpicking about how Google wants to represent/misrepresent its business model to the public.
Let's parse Google's misleading nitpicking.
First, Google is being too cute by half in insisting its business is not as Mr. Jenkins succinctly encapsulated it to be: "collecting data it can sell to advertisers."
- Google absolutely is in the business of selling the knowlege/data it gains from collecting massive amounts of private information on consumers to advertisers in the form of search advertising -- how else could Google offer advertisers the most personalized and targeted advertising ever?
- Google's making a distinction without much of a difference.
- Mr. Jenkins accurately summarized Google's model as "collecting data" that it packages into services so that it "can sell to advertisers." Google does not work for users, it uses users use of Google's free services, to work for advertisers.
Second, in being defensive about descriptions of Google's business model that stray from Google's PR script, Google unwisely focuses more interest in why they are so defensive about a simple summary of their business in a column about another company. I believe Google is being so hyper-defensive, because it knows that consumers don't want Google to be effectively selling their private data to advertisers, but in effect, that is basically what Google does.
- The proof of this enormous misrepresentation problem can be found it the results of the Zogby poll I published this week. (Poll results in italics.)
- "Nine in ten (88%) believe that tracking where Internet users go on the Internet without their permission is an unfair business practice, while 7% believe it is a fair practice."
- "The large majority (88%) believe consumers should enjoy similar legal privacy protections online as they have offline, while 4% do not."
- Google knows its entire business model depends on consumers not enjoying any of the legal privacy protections online that they are accustomed to enjoying offline.
- "Eight in ten (79%) support a national "Do Not Track List," similar to the current national "Do Not Call List," to prevent tracking where people go on the Internet, and 6% do not."
- Google knows that if consumers actually had a real say in, or substantive legal control over, their private online behavior and information, 80% of their user base would not allow Google to abuse their privacy for Google's profit.
- "Eight in ten (80%) are concerned with companies recording their online habits and using the data to generate profit through advertising, and a fifth (19%) are not."
- Google is so defensive about how its business model is publicly characterized, because it is conducting its core business in a manner that its users overwhelmingly oppose.
- If Google's users actually knew what Google was doing, they most likely would opt out of tracking, if given an easy and simple way to do it, like a national "Do Not Track List."
In other words, Google may not formally "sell" consumer data to advertisers, but it clearly "launders" consumers' private data through its "black box" search and display advertising operation that has minimal transparency or accountability to the users whose privacy has been invaded.
Third, Google unwisely invited new focus and attention on its display ad business in complaining to Mr. Jenkins:
Google "...doesn't employ user data to sharpen the efficiency of its search advertising, but only its display ads."
This Google explanation indicates that Google is leveraging its market power in search advertising to collect private data to better target its display advertising.
This could become highly problematic for Google because when Google bought DoubleClick it had about $300m in revenues. Analysts covering Google are now estimating that Google's display advertising is approaching a billion dollar business. That extremely high implicit annual revenue growth rate, about 75+% (through they great recession when Google's competitors publicly reported double digit percentage declines in display advertising revenues) suggests that Google is extending its monopoly market power in search advertising into display advertising, exactly what the FCC did not expect Google to be able to achieve in approving Google's purchase of DoubleClick.
Moreover, Google will be able to leverage all this collection of private data to extend its market power to mobile display advertising via its acquisition of AdMob.
In sum, Google has a big problem with its business model. Google's entire business model -- targeting advertising better than any other advertising medium/company -- depends on the unfettered and clandestine collection of users' private data, that consumers are unaware Google is collecting on them, and that consumers don't want collected on them.
Mountain View... you have a problem.
