Are we at Peak Google?

Last week, Google was called before the US Senate, ostensibly to discuss many bad deeds and purported bad deeds and ill effects produced by the company's dominant position on the web; particularly web search.

I expect little to come of this. Our duly elected President has visited the homes of Google execs and cheerfully taken their money. During Chairman Schmidt's appearance, Senator Feinstein made it supplicatingly apparent that she considers Google a net positive for her very large, very powerful state.

Government intervention or now, I contend that we are at -- or near -- peak Google.

Admittedly, much evidence suggests otherwise. In their last quarterly earnings statement (Q2 11), the CEO revealed:

“We had a great quarter, with revenue up 32% year on year for a record breaking over $9 billion of revenue,” said Larry Page, CEO of Google. “I'm super excited about the amazing response to Google+ which lets you share just like in real life.”

Larry is always super excited or supercharged. This will happen when you have $15 billion before you reach 40. The numbers further revealed the following:

Google-owned sites generated revenues of $6.23 billion, or 69% of total revenues, in the second quarter of 2011. This represents a 39% increase over second quarter 2010 revenues of $4.50 billion.

Google’s partner sites generated revenues, through AdSense programs, of $2.48 billion, or 28% of total revenues, in the second quarter of 2011. This represents a 20% increase from second quarter 2010 network revenues of $2.06 billion.

Impressive. Despite spending billions on Android, the company did not break out Android-specific costs/revenues/margin numbers. Since I have been the only one requesting these, you should not expect them. Still, all in all, Google continues its march. Like Microsoft, it earns billions each quarter, its margins remain high, growth continues.

You should notice, of course, that revenue from Google sites grew 39%, whereas Google partners grew only 20%. Is this representative of a crack in the Google business model? The fact is, Google makes nearly all its money from advertising (97%), and nearly all that from PCs and the wired web. Both of which have already entered no-growth mode or soon will. Indeed, we can already witness Google's response.

First, Android. By giving away Android, rapidly iterating the platform, offering multiple free, integrated services (app store, maps, search, mail), cutting deals with carriers, Android has quickly taken the top spot in smartphone market share. If I am correct, a core reason for Google's $12 billion purchase of Motorola is to develop a "Android Lite" and begin pumping out free feature phones and split any revenues with carriers.

Only, will there be any revenues?

Google refuses to provide details on what revenues they make off Android, if any. SEO experts that review the data, suggest that nearly every penny Google makes is from PC-based (non smartphone) advertising, and of that, nearly 50% of paid clicks occur due to five rather mundane keyword categories:

• Insurance
• Loans
• Mortgage
• Attorney
• Credit

In our brave new world of smartphones, the mobile web, real-time data interaction, social recommendations, location-based applications and automated personal assistants, is it at all reasonable to expect that these five words, and the billions they generate for Google, year after year, will continue to earn Google its monopoly profits? Any group of keywords?

And, even if Google is able to shuttle its monopoly search profits into social platforms, smartphone platforms, group buying services, mobile money, mobile identity and the like, there is *zero* guarantee that the money -- and profits -- Google earns from its keyword searches today magically shift, in like numbers, to the 'new" Google of tomorrow. Despite their lauded brain power, monopoly profits and firm hold over today's Internet, the odds are not great. Few companies survive transformational shifts in computing fully intact.

It is no wonder that Google is spending money to acquire and/or destroy new and innovative services. Unable to buy Yelp they created a mirror copy. Unable to buy Groupon they created a mirror copy. Unable to stop Facebook, they continue to pour resources into their own social platforms. The fact that Google insists upon calling social media and online friendships a 'signal', however, just as Microsoft insists upon calling smartphones and tablets 'PCs' in another form factor, should serve as an early warning. Google is more focused on protecting their business model than in innovating.

You should not be surprised, then, that you are seeing more and more advertisements from Google, featuring Lady Gaga and others, urging users, anyone, to spend more and more time not on the web, but on Google owned properties. Google+. Youtube. Docs. Blogger. Gmail, etc. Google is not simply growing its own services, growing revenues from organic and acquired properties. This is, I believe, a capitulation to the radical shift now taking place on the Internet. A shift that came much faster than Google ever considered, if they ever considered it at all. The web as Google knows it, knew it -- once owned it -- is shifting beneath them.

Already, Facebook is at 750 million members, including 500 million active members. It is probably the most popular website/web property in the world, and does not wish to, nor need to, share with Google. Twitter, which Google Search was *not* designed for, has about 200 million members; millions of whom are active and who use Twitter search and Twitter relationships to find and learn and share. In place of Google.

And, of course, there is the iPhone (and iOS). On its way to 250 million paying customers. Likewise the iPad, already selling in the tens of millions, and with no competition to date. Together, these are shifting how people find, consume, read, buy, download. True, Google Android has well surpassed iOS in total numbers. However, it plays by Apple's rules, not Google's. Both are "app phones" -- with Apple constructed. And the app has become the *primary* means for smartphone users to access the web and all the web contains. This is a direct assault upon Google's revenue base. It is not simply because the smartphone cannot present a list of links and ads on its small screen. Rather, the app, which many originally derided, *opens up* numerous additional opportunities to promote and monetize content; opportunities that fully leverage the mobile, local, social and real-time nature of the device.

Of all the monies generated via Apple's App Store, a shockingly high 72% come from in-app purchases and nearly 50% of revenues are generated from in-app purchases of originally free apps. This is a business model that essentially did not exist in the "open" Google web!

Subscriptions. Purchases. Recurring services. In-app buys. There are now over 1 million apps and this number is growing. Well over 10 billion apps have been downloaded, and this number is growing. Not a one has to share their data or their revenues with Google to survive. "Open" advocates and Google fanboys can talk all they want about the perils of "closed" systems. But the benefits to users reveal the truth. Low-cost apps, higher functionality, instant purchases, ease of use. Before "closed" systems, how easy was it to buy and download a book? A CD? Stream a movie? Video chat? We have benefitted significantly from the innovation of 'closed' systems.

Whereas Google continues to suggest that the *only* path to content/data survival is to place ourselves upon the "open" Web, have Google scan us, have Google send "eyeballs" to us and, if we're lucky, get a small cut of any revenue generated in the process. Yes, this model has served them well, but I am not at all surprised by the fact that non Google sites are no longer experiencing the same growth, as shown above, as Google's own properties are receiving.

Last week, Business Insider revealed it has secured an additional $7 million in funding. Business Insider embraces the Google model. Or, rather, the model of content aggregation, presentation and delivery that any site must embrace if they have any hope of generating semi-decent returns using the (once all powerful) Google business model. Business Insider is a seasoned practitioner of content aggregation, of content copying, link bait stories, of forcing two paragraphs of content into a 12 page slide presentation, and of drowning any content, good or bad, in ads and ad links.

To survive on the Google model, it appears, it is unlikely you can maintain your integrity.

Also last week, yet another site, this time from an established publication, the Baltimore Sun announced it was putting up a paywall. All the smart, seasoned tech bloggers mocked the company for its obvious foolishness; noting, with glee, that the company was merely hoping to protect its (dying) print business and that it just didn't "get" the web. What these shills for the Google model did not tell you, of course, was that whether the Sun "gets" or does not get the web is not the issue. If you live by the Google model, offer your content for free, rely upon Google to send you readers -- and revenues -- than you either abandon your integrity, and/or abandon your research and reporting and/or abandon writing based on quality and importance. Google is based on fast, and SEO and freshest and site design and link backs.

Is there any site, of the millions and millions of sites in the world, that can actually live off Google monies, and only Google monies, that isn't a piece of shit -- or quickly heading in that direction? What more evidence do you need that we are at peak Google?

How about this: at last week's Senate hearing, Google informed us that 2/3 of *all* their mobile phone searches came via iOS devices. Despite Android's overwhelming numbers. This should reveal to everyone that the "web" is not the web, in fact. Yes, Google has the best search engine. However, it is of far less value, as even Android users make clear, unless it is integrated with a highly functional, highly intuitive device that is always connected, with an easily accessible 'app' that takes the user to Google. The days of everyone, whether on a netbook, a PC, a Dell, HP, MacBook, etc., and all pointed to Google, are gone. Apple would not do its customers any favors by kicking Google off the iOS platform. That said, users would rather have Bing, I suspect, on their iPhone, than have Google on a non-iPhone device. That user base, don't forget, is already hundreds of millions strong.

What else? Later this week, Amazon is expected to announce the release of a fully functional Amazon tablet. Pundits see this as a direct assault on Apple. This is only partly correct. In my view, it is more a threat to Google. Amazon has about 200 million users, with credit cards on file. They offer books, music, movies, television programs. They have possibly the world's best platform for buying, selling -- and pricing. Customers can leverage Amazon's amazing product recommendation services. None of this information -- and Google lives on information -- is available to Google.

The user's information, credit card information, purchase history, product recommendation, streaming, content downloads, gift list and street address; kept hidden. How many tablets will Amazon sell? Millions? Like Groupon, and like Google's copy of Groupon, Amazon is launching a daily deals service -- one that can be delivered every day to every Kindle user and Amazon tablet user. Again, fully bypassing Google. Is this a 'web service'?

As I look at how radically the web is transforming, and how quickly, I remain skeptical that even with its monopoly profits, even with the billions it is throwing around to acquire and/or crush innovative companies, that Google can remain as powerful, have as tight a grip over the "web" as it has to this point. How much did Google spend on building and releasing and maintaing Google+? And it's sole purpose, near as I can tell, is to force users to hand over their personal identity. Just as hundreds of millions already happily do with Facebook. Google+ isn't merely 700 million users or so behind Facebook. It's behind even on something as elemental as the user's name and friendships.

Google continues to try and bolt features onto a platform, admittedly an extremely powerful and profitable one, but one built for a web that no longer exists. Our government may not intervene, but innovation already has. We are at peak Google. Embrace the new web.