Sunday, October 21, 2012

Just One Click from Extinction

In 1998, it was an interesting TED talk.  In June of 1999 Jeffery Brewer stated that the business model "has staying power" on the day of's DLJ underwritten IPO.  On Thursday, Google demonstrated the value of "staying power" when it destroyed billions of dollars of the value TED listeners and eager investors thought would be sustained on the pay-per-click (PPC) business model that was to revolutionize Madison Avenue.  Goto has become went from and all for a simple, yet deeply complex uncoupling between value and its exchange.  

What (subsequently Overture Services, Inc., acquired by Yahoo! for about $1.6  billion in 2003) and its founder Bill Gross (think Twitter, not PIMCO) thought would last forever was the presumed desire for internet users to transform enticing hyperlinks into consumer behavior.  And, when you look at the tens of billions of dollars poured into his thesis, you'd assume that he's right.  And if "right" is measured by how many billions of dollars flow in any certain direction, then cease reading.  But if you want to know why I'm so intrigued by Google's collapsing (over 11%) market cap in just a few short hours this week, read on my intrepid alchemist!

Pay-Per-Click presumes a few unsubstantiated preconditions.  First, one most devoutly hopes that the "right" siren is singing to the "right" object of seduction.  Second, one hopes that the "right" seduction appeals to said "right" object.  Third, one presumes that the "right" gratification stands behind the "right" seduction so that the "right" object acts according to plan.  And, tens of billions of dollars later, what we found out from Google's collapsing equity souffl√© was that this Homeric ideal has a half life of, well, less than a decade.

What's more fascinating than the loss of $20 billion in an hour or so - once thought to be "real" money - is what this illusion erasure portends.  PPC didn't really fail in and of itself.  PPC failed because the unconsidered assumption above was linked to an even more tenuous illusion - the value of "search".  

Now I'm dating my self here but I remember when the Yellow Pages was about 25% of the phone book.  In Los Angeles!  Once upon a time, somebody decided that adding advertisements to the Yellow Pages would be a great way to connect with customers.  This 1886 invention lasted 100 years with positive market penetration and revenue growth suggesting that R.H. Donnelley had 10 times the "staying power" of Bill Gross.  But, like the rotary telephone that it used to sit beneath, the Yellow Pages went the way of the clackety dial when your fingers stopped doing the walking and instead started doing the sweeping across the rounded-edged rectangular surfaces of your mobile device.

But before we get too hard on the spawn of the IdeaLab, it's worth taking a deeper look at what's wrong with Google (and, dare I comment on the likes of the zombie Yahoo!, the technologically deficient Microsoft bing, and the Mandarin behemoth Baidu?).  The real problem with PPC is the platform on which it's served.  That is the principle of "search" and the misnomer "search engine".  

Information - digital or analog - is a commodity.  Putting it on massive servers or in euphemistic clouds is warehousing - just like any other commodity.  There's nothing intrinsically wrong with either of these two foundational steps.  The market failure enters precisely at the next step.  We make the mistake of assuming that when looking for the thing we think we're looking for, we know what to call it.  Then we make the mistake of assuming that what we call it is identical to what others call it (and have called it in multiple times, markets, cultures, languages, etc.).  Then we make the mistake of assuming that if we're presented with a page of 15 hyperlink options, we'll recognize the thing we're looking for as the "right" expression of that thing.  And then, in our sloth, we concede any future inquiry by confirming that what we were presented matches our expectation and we pay NO attention to what we didn't know we didn't know we could have been interested in.  And then, we're invited by PPC to transact in this mediocrity and pretend to be satisfied.  And, by the way, far from being equanimical, we live in a world where search engines have sold seduction premiums to purveyors of words wholly contaminating any chance of actually making a considered selection.  Like a small bird eating the regurgitated worm from the vomit of its caring mother or father, we wonder why our search engine experience tastes like puke.  Well, here's a thought.  Maybe because it is.  There's no way that Wikipedia is the most relevant thing I should see when I'm looking for the Banking Act of 1933.  I should actually be shown the Banking Act!

Which brings me to the point.  The PPC failure which has cratered the market value of Google, Yahoo, Facebook and all the other greats is a failure not of advertising but of complacency.  These companies, rather than focusing on advancing the human condition and experience, have elected to harvest the most accessible fruit at the most voracious pace.  And in so doing they've fouled the very nest that was supposed to have given them persistence.  At the end of the day, that's really the point.  What PPC teaches us is the cost of low ecosystem IQ.  If you don't factor in the conditions required for a system to operate, the neglect of the ecosystem will ultimately destroy the entire enterprise and this destruction will be complete.  PPC is dead because it was the cover-up for the failure of search.  When search fails, all the parasites attached to it fail too.

It's time for something new.  I think of this week as the clarion call for an Network-Inspired Holographic-Integrated Linguistic Ontology (NIHILO).  In this paradigm, I would communicate as much as I can about myself and what I'm doing.  The engine takes the artifact of my communication and immediately links me to those who are already doing things that are similar.  My next impulse is to reach out to these individuals I've never known and see what we can do together.  And when we get together, we just might find out that the impulse that linked us is LESS interesting than what we find we could do together.  In short, we'd actually create something from nothing… but our shared lives!  And that would have "staying power".  Stay tuned because we've got the design for this already running and we're working with some amazing friends in Oakland to take it to a whole new level!

And, just for fun.  I was amazed at the end of my bike ride yesterday afternoon (during which I hit my third fastest land speed record of 48.3mph) at the fact that in my yard, nature had applied its alchemy to unveil a rainbow!  Truly all the colors of the spectrum greeted me as I rode up that last 100ft climb.  So, here's a little autumn gift… just for fun.

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Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave