Posted by Dr-Pete
As SEOs, we spend a lot of our collective time afraid of what Google might do next. This Halloween, I thought maybe it was time to turn the tables. It’s easy to think of Google as an unstoppable force, but, like any company, Google has weaknesses and their behavior suggests some very real fears about the future.
Fear #1: Lack of revenue diversity
Google does everything, right? They’ve got Chrome, Android, Google Glass, Motorola Mobile, self-driving cars, flying WiFi, and now they’re even trying to make you immortal. It all makes for great PR, except for one very important factâ€”this is how Google’s revenue broke down in Q3 of 2013:
Factor in profitability, and the situation gets even worse (Motorola Mobile operated at a loss in Q3). Compared to physical products or even traditional advertising, AdWords and AdSense are as close to magic money-making machines as you’re going to find. Google didn’t just find a pot of gold—they found the only key to Leprechaun City, and the door locks from the outside. If the leprechauns escape, Google is in trouble, and no self-driving car is going to find them.
Fear #2: Falling cost-per-click (CPC)
Even as Google’s revenues continue to rise, their average CPC has fallen for eight quarters in a row. So far, Google has managed to offset this CPC fall by increasing overall impressions and creating advertising enhancements that drive higher click-through rates (CTRs), but the trend is a very real problem and absolutely tops Google’s list of worries. What’s driving this trend? That leads us to #3…
Fear #3: Changing face of mobile
Traditionally, mobile ads have just been cheaper than desktop ads, and as mobile devices proliferate, average CPCs have fallen. This problem led Google to take an extreme approachâ€”they forcibly rolled out “Enhanced Campaigns” to all advertisers, effectively removing the option to have separate bids on mobile devices.
The problem for Google is that this sleight-of-hand doesn’t remove the reality of how consumers behave on mobile phones and tablets, where traditional search advertising is simply less effective (at least, so far). There’s also just less space for ads. Consider this desktop search result for “artificial christmas trees”:
Counting paid product placement, there are parts of 14 ad units visible on one screen. There are 19 total ad units on the page (the right-hand AdWords block contains 8 ads). Now compare this to the same query on iOS7 on my iPhone 5S:
On one screen of mobile results, there are only two visible ads, with five total ads (two before and three after the organic results). Google promotes the message that mobile is becoming more like desktop every day, as screen size and resolution increases, and hybrid devices (like “phablets”) become more popular. The reality, though, is that mobile is still a unique animal, and will be for the foreseeable future.
Google’s development also suggests that they don’t really believe this desktop/mobile unification story. Desktop search UI is being driven more and more by advances in the mobile UI. As smartphone traffic grows and Google dives into even more experimental directions (like Google Glass), consumer behavior is evolving quickly, and it’s unclear how this evolution will change our interactions with advertising.
Fear #4: Fickle investor confidence
Most days, Google is still a darling to investors, but as a publicly traded company their amazing history is both a blessing and a curse. Google’s core revenues (not counting Motorola) have been up every quarter since Q1 of 2011:
It’s a great story, except for one problemâ€”Google is a mature company with massive market share. The expectation that Google can continue to grow, quarter after quarter, indefinitely, is unrealistic bordering on ridiculous. Of course, investors don’t want to hear that. Google will have a bad quarter, and their investors have been trained on good news for far too long.
We tend to believe that someone has to beat Google at their own game, and that a competitor like Bing has to best them at search. The reality is that Google is fighting their own market expectations, and if Google fails to meet expectations by enough, they may start to unravel.
Fear #5: The Facebook factor
We tend to focus on whether Facebook can ever compete with Google on search, but there’s one area where the social giant dominates Google. People go to Facebook and stayâ€”they go to Google to leave as quickly as possible. Google’s entire model flies in the face of the traditional advertising philosophy of doing everything possible to increase pageviews and time-on-site.
Google is keenly aware of this problem. In addition to Google+, they’ve made many moves in the past year that seem to be designed to increase pageviews. For examples, carousels (including the local carousel) and related searches in Knowledge Graph boxes don’t lead to outside sitesâ€”they lead directly to more search results. Google is testing new Knowledge Graph entities that use data from third-party sites but then link prominently to more Google searches. For example, we recently spotted this KG entry in testing:
All of the blue links in this box (there are 7 visible in this image) go to additional Google searches. Only the smaller, light-gray links go to the original source websites.
Put simply, while Facebook may be struggling to define its revenue model, the social giant is a platform. It’s a place people go to do things, and it’s a place people spend a lot of time. For most of us, Google is a place we go to for quick answers and then leave. The faster and better Google is at search, the faster we leave, and for a company with 84% of its revenue tied up in advertising, this is a serious problem.
Fear #6: Government regulation (US/EU)
I put this one last for one reason â€“ while I think US and/or EU regulators could theoretically cause significant harm to Google, I don’t think either government has the political will to crack down on an industry giant. Google’s problem, though, is that they can’t simply play nice. They have to push the envelope with advertising, and that’s going to mean an ongoing battle with regulators.
Take this recent example of a paid shopping result we spotted in testing (the live version is a bit different):
Other than the “Sponsored” designator at the top, this paid shopping result looks a lot like a Knowledge Graph entry. The test version is even placing one selected provider and [Shop now] button before the specs and other information. With CPCs falling, Google is going to keep pushing harder, and they’re going to keep testing government regulators’ limits.
Why should we care?
This is not a “gotcha” post, and I don’t necessarily think that Google is doomed to fail. What I do think is that it’s vital to maintain a healthy perspective about Google’s motives and possible futures. Last year, I said that my #1 SEO tip for 2013 was to diversify. If I wrote that article again, I doubt I’d change much. If your entire business is built on Google, you’re riding a wave that’s eventually going to crash into the shore. It may be because Google changes the rules, or it may be because they fail, but you’ve built your future on something you absolutely can’t control. If you understand Google’s fears and aspirations, you may at least start to appreciate why it’s critical to build your business on more than one marketing channel.
Sign up for The Moz Top 10, a semimonthly mailer updating you on the top ten hottest pieces of SEO news, tips, and rad links uncovered by the Moz team. Think of it as your exclusive digest of stuff you don’t have time to hunt down but want to read!