Advertising is not traditionally sold on a self-service basis. It is traditionally sold via Big Enterprise Sales processes, caricatured above as "steak dinners between advertising sales and ad buyers at big brands." This is enormously big business: ever bus ad, every TV ad, most newspaper ads, etc that you've ever seen was sold this way.
Google is the alternative model for advertising, and (as such) is overwhelmingly remnant inventory: that which we still have to sell after the Enterprise Ad Sales is over with. Google makes 97% of their revenues -- read their annual reports for how many billions of dollars that is -- through a) creation of remnant inventory (primarily on their search engine) and b) monetization of remnant inventory (2/3 on their own properties, 1/3 all over the public Internet).
Do you really believe this?
There is a little bit of exaggeration and understatement for comedic effect -- specifically, the words "biproduct" and "non-trivial." I absolutely believe, in my heart of hearts, that Google is primarily an advertising company which makes excellent use of technology, not a technology company which makes good use of advertising. That is easily the most controversial opinion about our industry that I have. I also think that Google has created more value for more people than probably any other company in history. I respect that you may think differently about either or both of these points.
...Google is primarily an advertising company which makes excellent use of technology, not a technology company which makes good use of advertising.
I absolutely agree with that, and don't really see anything controversial in that statement.
I also think that Google has created more value for more people than probably any other company in history.
If they are in fact an advertising company (which we agree) then the value they have created has been extracted from more people than probably any other company in history.
Advertisers don't create value out of nothing, the value comes from distracting people and devaluing their browsing experience. Even traditional "big enterprise steak dinners" advertising companies have worked this way, selling 30 second TV spots and filling your mailbox with junk. Google is able to extract a lot more value than ever before only because the Internet contains so many users and so much content that they can do it in such tiny units that it pretty much goes unnoticed. (Until it passes someone's personal threshold for annoyance, and they write a blog post about it.)
My personal (selfish) opinion is that it is sad, and that the overabundance of advertising on the Internet has made it a worse-off place for me. My browsing is inefficient, and my search results are less relevant, and my time is ill spent (either scrolling past things I don't want to see, or waiting for pages to load, or actively installing ad blocking software). Yes, I know I'm being selfish. Still, I do see it as a necessary evil, and I don't see how things could be any other way.
I may be wrong but I think Patrick was referring to the people who can put up a minor website and earn 'lifestyle' living dollars out of it. Google has created this industry with their AdSense for Content system. Prior to this a small player (read small web site) would have no chance of selling advertising space to a 'big name' and conversely a 'big name' would never seek out the small guys (well their ad agency might or might not).
The 'value' creation is the small web site owners. And they filled the money pot for that eco system with remnant advertising dollars.
The 'value' creation is the small web site owners. And they filled the money pot for that eco system with remnant advertising dollars.
I think it's great that small website owners can use AdSense to monetize what they do, but that really doesn't support the claim that "Google has created more value for more people than probably any other company in history."
Your argument, though, doesn't make Patrick's point necessarily false.
Even if Google take more value from people than any other company, they can still provide a portion of that value to n other people, and assuming n is larger than any other company's n, Patrick's point still holds.
Also, it is not obvious how much much of Google's ad profit is extraction (via being the monopolistic intermediary running an auction) vs creating genuinely novel introductions between buyers and sellers.
Also, Google's value creation is not just in the money they pay to websites, it is also in their products (search, mail, etc)
Not only adsense, but the simple google search engine itself. "A free worldwide massive search engine available to anyone on the internet that works almost instanteneously" is like far out science fiction a few years ago.
They also give people free, massive, email accounts that has allowed many people to communicate, for free, with millions (billions?) of other people.
The ad consumers experience an externality to the transaction between google and the publisher. The sum of the game may be negative or positive. Which do you think it is, and why?
Google's ads are the single easiest-to-block set of ads in the history of mankind, online or meatspace. The simple fact that most folks don't bother to block then show that either they aren't too negative, or people are so dumb and lazy that humanity is a lost cause anyway.
really, how?
...which a multinational advertising company which occasionally produces industrial biproducts of advertising...
what?
...which generate non-trivial amounts of value for almost every human alive.
wat? Do you really believe this?