The Wizard of Oz

Citation

Mandell, S. (2014), "The Wizard of Oz", American Journal of Business, Vol. 29 No. 3/4. https://doi.org/10.1108/AJB-08-2014-0050

The Wizard of Oz

Article Type: Executive viewpoint From: American Journal of Business, Volume 29, Issue 3/4

This year marks a watershed for both the advertising world and the digital space as spending on internet advertising has surpassed that of broadcast media according to the Interactive Advertising Bureau. All growth projections for the two different medium predict that the gap will continue to expand at an increasing rate. Therefore it becomes even more important to understand the ecosystem surrounding internet advertising and recognize the monopolistic position held by one organization, Google. In fact it can be argued that not only are their actions contrary to a free market environment but also incestuous in nature as they control both the number of visitors to a web site as well as the monetization of that visitor on the web site. The Wizard of Oz never had the power to send Dorothy back to Kansas or defeat the Wicked Witch while Google has the ability to crush all competition as well as any market player given its dominant and pervasive position. In fact the entire internet publishing industry quivers in fear whenever Google issues the unilateral edict “Account Disabled”.

In the beginning of the internet (before Al Gore) there were many groups offering methods for organizing and accessing information utilizing different software technologies combined with human intervention and decision making. The goal was to provide a voyeur on the internet with an easy unbiased method for finding the appropriate information that was being researched. Google was not the first search engine developed to crawl internet web site through software robots or spiders to organize the relevant sites, but it was the best funded and most publicized as well as supported by Stanford. The user of a search engine entered either a term or terms to help the system identify and list the appropriate web sites to visit and provided the identification, description, and link. When Google was originally released, the founders stated that there would be no commercialization of the search results and that placement was totally determined by a several criteria including relevance and back links leading to a page rank. Other search engines at the time had already moved away from this idealistic position and offered placement based upon payment of money through bidding approaches. The rest is history as can be attested to by the size and scope of commercialization of the Google search engine.

There are several important aspects of the monetization process that need to be understood to fully comprehend the dominance of Google. The initial interaction of a user into the internet is through a browser that allows for the important connection via a gateway. At that point, the user may either directly navigate to a web site by entering the URL or utilize a search engine for finding a list of web sites that meet the informational criteria requested. Because many individuals have set their home page or default search engine to Google, this has many times become the primary starting location. The market game at this point is rigged because the results of any search often provide a list of over several million relevant web sites that are listed in the very important order of ranking. The distribution of clicks by a searcher from the first position to the 20th position on the list would make a statistician blush as the graph looks like the edge of a cliff. Therefore, the top positions in the ranking should be the most relevant to the request. However, they are not because Google has wired the top results based upon the site that has paid the most to receive the proper positioning. Only because of intense pressure from both internet users and government regulators has even a modicum of distinction become required to identify paid vs actual results. Google initially made their largest percentage of money through AdWords and still does through these paid search results. So the gate keeper is now the toll taker to begin the process and this still remains the largest single source of advertising revenue amounting annually to nearly $20 billion.

Google was not satisfied to remain in this position and decided to participate in the other aspects of monetization. Currently there are two types of advertising on a web site: display where you see a box containing advertising material in fixed or animated format and video where you see an advertisement. The display advertising amounts annually to around $8 billion while video comes in around $3 billion. Google is a predominant player in these areas through programs such as AdSense and YouTube which sell the advertising as an agency and take a significant portion of the funds. But even more insidious is their ownership of the leading adserving infrastructure platform DoubleClick that takes a fee for every advertisement that is actually shown. The trend towards mobile sites and advertising is rapidly increasing and Google is also the predominant player in that market.

Therefore from cradle to grave: paid search to get the visitor to your site; display and video advertising on both the agency and delivery side; and infrastructure control to offer the advertising on the site. In addition, Google owns or controls the most widely used analytics tool used by web masters, the largest imaging and map collection, as well as the most used e-mail and calendar sharing systems. These services Google provides free of charge as any benevolent dictator provides cake for the masses to show their largesse. But the extension of power by Google is never ending as witnessed by the recent partnership with ComScore that provides the unbiased evaluation of the real-time metrics across platforms. So they now will become the score keeper in addition to the player.

This paper started with the premise that Google was like The Wizard of Oz. However, in retrospect the situation is much scarier with the curtain removed. This is no corporation projecting the all-powerful image but rather the actual OZ. Short of governmental action, class action lawsuits, or a major publicity debacle, the centralized power and control of Google over the future of internet advertising is guaranteed. A sobering thought for free market forces is that Google accounts for the majority of advertising revenues generated through the internet and they account to nobody. Visit the message boards where publishers who have received the “Account Disabled” notice are left financially destroyed with no recourse. Or read where Google has just purchased another competitor or expanded their offerings into another segment of the market.

Dr Steven L. Mandell, Bowling Green State University, Bowling Green, Ohio, USA

About the author

Dr Steven L. Mandell, DBA, JD, is a former Professor of Information Systems at the Bowling Green State University and the holder of five degrees including a Doctor of Business Administration, a Law Degree, and an Engineering Degree. In addition to being a senior level executive at three publicly traded corporations, he has been a partner at a major law firm. As an entrepreneur, Dr Mandell has founded six corporations and currently serves as Chairman for Streaming Revolution, a video platform and infrastructure company, and Dealer 24/7 an internet marketing company targeted to the auto industry. Dr Mandell is the author of over 100 books on technology and educational software which have been used at most of the major universities in the USA. In addition to earning educational honors from multiple universities, Captain Mandell was awarded the Army Commendation Medal during his time in service. Dr Steven L. Mandell can be contacted at: mailto:mandelldr@aol.com