How Google Gained Control over Content Distribution by Stealing Links

There is so much misunderstanding flying around about the economics of content on the web and the role of Google (GOOG) in the web’s content economy that it’s making my head hurt. So let’s see if we can straighten things out.

Google isn’t stealing content from newspapers and other media companies. It’s stealing their control over distribution, which has always been the engine of profits in media. Google makes more money than any other media company on the web because it has near monopoly control over content distribution (i.e. like a metro newspaper in the pre web era).

Those who argue that Google is a friend to content owners because it sends them traffic overlook the basic law of supply and demand. The value of “traffic” is entirely relative. The more content there is on the web, the less value that content has — because of the surfeit of ad inventory and abundance of free alternatives to paid content — and thus the less value “traffic” has.

The more content there is on the web, the less money every content creator makes, and the more money Google makes by taking a piece of that transaction.

Nick Carr sums up the problem well:

What Google doesn’t mention is that the billions of clicks and the millions of ad dollars are so fragmented among so many thousands of sites that no one site earns enough to have a decent online business. Where the real money ends up is at the one point in the system where traffic is concentrated: the Google search engine. Google’s overriding interest is to (a) maximize the amount and velocity of the traffic flowing through the web and (b) ensure that as large a percentage of that traffic as possible goes through its search engine and is exposed to its ads.

The debate over whether Google’s excerpting content on its search result pages is a violation of copyright law, i.e. whether Google is effectively stealing content, overlooks the much more valuable asset that Google is appropriating. Google makes money less by its ability to display that snippet of content and much more by its ability to know that snippet of content is relevant to what the content consumer is looking for — it makes money by its ability to efficiently distribute that content.

And just how does Google know what content is most relevant, trustworthy, and valuable? How does Google know where to send the traffic that yields such diminishing returns?

Everyone talks about Google’s algorithms as if it were some giant artificial intelligence that had its own ability to judge the value of content.

The greatest irony of the web content economy is that Google by itself doesn’t have a clue what content is good or bad. Google is able to deliver relevant search results only because every site on the web helps them figure it out.

Google’s algorithm is based on reading “links” as votes for content. Every time a website links to another website, Google reads that link as a vote. The brilliance of the Google algorithm is its ability to figure out which votes should count more.

But without those links, without those “votes,” Google has nothing.

What Google “steals” from every website isn’t the content — it’s the links.

It’s the links, stupid. And everyone gives Google their links to read — for free!!

Google doesn’t really need your content, because there’s plenty more where it came from. What Google really needs is your links, i.e. your votes for content — it needs your help separating the wheat from the chaff on the web.

The backlash against URL shorteners and site framing (e.g. DiggBar) is all about who controls the links, and which links Google is going to read and credit.

The key to Google’s monopoly control over content distribution on the web is its ability to judge what’s most relevant in an increasingly large sea of content.

If media companies want to compete with Google, they need to look at the source of its power — judging good content, which enables Google to be the most efficient and effective distributor of content. They also need to look at Google’s fundamental limitation — its judgment is dependent on OTHER people expressing their judgment of content in the form of links. Above all, they need to look at sources of content judgment that Google currently can’t access, because they are not yet expressed as links on the web.

The balance of power on the web can shift — but only by understanding what the real sources of power are.

UPDATE

Just to clarify, the use of “steal” and “stole" is in the sense of “stole the game.” The point of this post is to explain how Google won, and not at all to suggest that they didn’t deserve to win. Google’s success is a direct reflection of how much value they create, i.e. A LOT — they solved a problem in the market that nobody else figured out how to solve or even recognized as the huge opportunity in the market. This post is also intended to help media companies understand better how Google works so that they can better compete in the web content marketplace, not to justify any feelings of “sour grapes.”

Comments

[TeresaE:]

Nicely put.

Google, while still the most popular is overflowing with crap sites thrown together by marketers.

Small real business sites can be lost in the shuffle.

New reality.

Apr 13 09:31 AM

[Howard Stevens:]

I agree that Google's devastating impact on the newspaper industry is a result of their ability to disintermediate the traditional news distribution channels. By doing so they have created a more efficient market, which in turn has enabled an abundance of supply to proliferate. They have commoditized news. (Ironically, the Associated Press is the biggest culprit of commoditizing news; but now that they no longer have the monopoly on distributing information globally, they’re crying foul rather than attempting to adapt.)

However, while I agree that Google values the links over the actual content, I do not understand your suggestion that media companies should compete with Google. Learning from Google's success? Absolutely. Competing with them? Probably not a good idea for a beleaguered industry.

Obviously, publishers can't expect to succeed by clinging to a business model based on limited distribution--those days are gone. But there are ways in which they can be successful. Context is the primary reason that Google's distribution (and ad program) is so successful. Publishers must also learn to leverage the opportunities that the digital economy has made possible--they need to sell context in addition to content. I elaborate more on this concept at www.howardstevens.info...

Apr 13 10:07 AM

[carey_jim:]

'Time Warner, Disney, Murdoch's News Corporation, Bertelsmann of Germany, Viacom (formerly CBS) and General Electric's NBC are the top owners of the entire media industry, which includes everything you read and hear in newspapers, magazines, TV and radio stations, books, records, movies, videos, wire services and photo agencies.' articles.mercola.com/s...

You said,

'If media companies want to compete with Google, they need to look at the source of its power — judging good content, which enables Google to be the most efficient and effective distributor of content.'

'Compete with?'

The Big Five oligarchies rely on advertising to tell people what is good and people then go out and, more or less, purchase what they are told to purchase and what everyone else is purchasing.

The Internet will resemble that model in ten years. Why rush it?

Apr 13 11:10 AM

[carey_jim:]

This is no different from what monopoly businesses have been doing from the beginning.

There was a brief, probably finished, period when people thought the Internet would 'change all that.'

Only people who have not studied history have illusions like that.

The telephone, radio, television, .... didn't 'change all that' either, except for a few years after they were introduced.

The only way to 'change all that' is to change it politically, or to have another American Revolution.

And I'm not talking about socialism, but the opposite: More freedom, more free enterprise and more small businesses. We need to break up as many monopolies as possible.

Unfortunately, that is a revolutionary idea. Hence, we need another American Revolution.



On Apr 13 09:31 AM TeresaE wrote:

> Nicely put.
>
> Google, while still the most popular is overflowing with crap sites
> thrown together by marketers.
>
> Small real business sites can be lost in the shuffle.
>
> New reality.

Apr 13 11:18 AM

[wavelength:]

This is a great article in terms of explaining the core premise - how Google "stole" the game by leveraging links - something created by others. however, I disagree that small niche content providers cannot make a profit from Google's advertising. The power of contextual advertising on quality niche sites is huge. Yes it would be nice if Google paid out a higher share of their revenue but I am am earning a good living through Google AdSense - and so can can many others. It is still a fantastic opportunity. It is rumored that the new Microsft ad program pays a more generous share and hopefully will provide some competition. I can think of no easier way to become gainfully self-employed than to put up a high quality niche content site and receive revenue from contextual text ads. It is also true that there are a lot of "crap" MFA sites thrown together, but over time these will lose SE rank and be overtaken by real content sites. I know some would argue I am a mere Google Serf, but so far the rewards are worth it and I know my content provides a huge value add for my visitors. (But yes, I would rather be Google.)

Apr 14 05:15 PM