Strategy and Technology

Google’s Search Engine Monetization

2020-01-29 by Roberto Zoia Leave a Comment

More than 20 years after its founding, Google’s advertising business remains the largest source of Alphabet’s income. (Alphabet is Google’s parent company.) While 2019 results have not yet been disclosed, for 2019 advertising is expected to contribute 83% of Alphabet’s total expected revenue of $171 billion¹.

As a public company, Alphabet is expected to show consistent growth quarter after quarter. Alphabet has been growing over 20% each year for the past 10 years. As 80% or more of Alphabet’s income comes from advertising, it’s no surprise that Google changes to its search engine and its result page through the years aim to grow this revenue stream even further.

Maximizing advertising income

Thanks to its accurate search results, Google is the most visited website on the internet and the internet’s front door. According to Sparktoro, as of 2019 Google has a 94% market share of total searches on the Internet.

Top space in Google search result’s page is the most valuable, because people tend to check just the first few result on the page. For years now, the top spots of the search engine results page have been reserved for Google ads.

Google advertising system is clevery engineered to maximize advertising revenue. “Google Ads runs an auction every single time it has an ad space available –on a search result, or on a blog, news site, or some other page. Each auction decides which ads will show at that moment in that space. Your bid puts you in the auction.²” This advertising model drives the cost for advertisers up, effectively transfering value from the businesses/advertisers to Google.

Internet adoption is slowing down

Internet adoption is slowing down in Google’s most lucrative markets like North America and Europe. Asia is still growing, but some years ago Google closed operations on China, Asia’s biggest market. To continue growing its advertising business, Google needs both to charge more for each click, and increase the volume of paid clicks on their results page.

Internet usage 2009-2019. Source: Statista

Consider this quote from Google’s co-founder Larry Page, from the company’s S-1 filling in 2004:

(…) Most portals show their own content above content elsewhere on the web. We feel that’s a conflict of interest, analogous to taking money for search results. Their search engine doesn’t necessarily provide the best results; it provides the portal’s results. Google conscientiously tries to stay away from that. We want to get you out of Google and to the right place as fast as possible. It’s a very different model.
We built a business on the opposite message. We want you to come to Google and quickly find what you want. Then we’re happy to send you to the other sites. In fact, that’s the point. [In contrast] The portal strategy tries to own all of the information.”

This is not true anymore. Google has been changing their search engine from a place where you find links to the answers you are searching for and leave, to a place where you find the answers you are searching for and stay.

Ads own the best places on the results page

For years now, ads have been given the top spot on the search results page, displacing organic search results. At first, ads were clearly differentiated from organic search results, but recent changes in styling make differentiating organic search results from ads harder.

Google changes in Search Ads styling — Google search ads styling make it hard to distinguish between ads and organic results.

Depending on the search category, after the ads Google places an information block, with information automatically compiled by Google by scrapping the most relevant pages. In other categories like flight search or hotel booking, a special module is shown where the user can directly book a flight or an hotel with one of Google’s partners.

Google's information module — Google information module shows reponses scraped from other webpages

Google partners are companies that most times pay Google to appear in such a spot, or where Google earns a fee after a sucessful booking, which implies another advertising-related income stream for Google.

Organic results appear after these blocks and modules. On mobile, this may be on page 4 onwards. Good luck trying to drive traffic to your site by using SEO (Search Engine Optimization) to rank high on the search engine’s organic results. Most users searching on Google will never see those results. A recent example of this is Expedia, which reported lower-than-expected profit margins in 2019 due to increased Google Ads spenditure thanks to an important reduction in organic search traffic to their site.

For businesses, the opportunity is to provide a better experience than Google’s for specific sectors or needs. This doesn’t mean it’s easy, only that it may be one of the few ways to compete with Google. One of the reasons customers head directly to Amazon over Google and even over product brands’ own webpages is the superior shopping experience.

From Search Engine to Answer Engine

In 2019, 68% of Google searches were done on smartphones. This is one of the reasons why Google pays Apple several billion dollares each year to be the default search engine in iOS³ and of Android being heavily subsidized so it’s essentially free, but in Google’s tight control.

When using mobile devices for searching the web, it’s more convenient for users to have the answers to their queries in the same search results page, because otherwise they have to click and load additional pages.

SparkToro’s Rand Fiskin points out that Google is “moving from search engine to answer to engine and now to a direct competitor for an enormous number of websites and businesses. (…) The largest source of traffic on the web — free and paid — is becoming a walled garden, intent on not only keeping people on its own properties, but competing directly with those that helped it become a dominant, monopoly power.”

Is Google succeeding at keeping people in their website? According to Sparktoro, it is. In 2019 more than 50% of Google searches where zero-click searches, which means Google showed enough information on the results page itself so that the user didn’t need to click on any further link. 4% of the time, the user clicked a link to another Google property or partner.

Long-term thinking

From the user’s perspective, the changes Google is introducing are not bad per se. Why wouldn’t someone like Google summarizing the information for her, saving time and effort? Most people will see this as a benefit, and don’t care much what’s going on behind the curtains. As long as results are unbiased, aggregating the relevant information on the results page offers convenience for the user.

This strategy may benefit Google advertisement revenues for some years. However, in the long run it can lead to a loss of value on Google as a search engine. Advertisers bidding for ads don’t aim at providing accurarte search result, but converting leads into clients. People searching on Google won’t see the best answers, but the answerss of those companies that paid more. (Forget about someone doing a great review of an hotel in her personal blog.)

When Google was founded in 1998, portals like Yahoo! and Altavista owned most of the Internet’s traffic, and offered paid results. People were not happy and Google seized the opportunity. As Seth Godin points out, sooner or later, the shark gets jumped.

The other question is: is Alphabet/Google remaining an advertising company in the long run, or will it be able to grow another business that can rival the $170 billion generated anually by Google Advertising?

Este artículo está también disponible en español con el título Google y la explotación de su motor de búsqueda

Featured image photo credits: Rajeshwar Bachu on Unsplash.

cfr Alphabet’s Revenues: How Does Alphabet Make Money?. Google other businesses make up 16.3% ($27.9 billion) for 2019. Other non-Google businesses, which are emerging areas in various stages of development, are reported collectively by Alphabet as Other bets and make up 0.4% of Alphabet’s revenue. ↩
cfr Google Ads on Google’s Support page. ↩
Several articles estimate that Google paid around $9 Billion in 2018, but the only hard data I found says it paid $1B, which is nonetheless a lot of money. (cfr Google reportedly paying Apple $9 billion to remain default search engine in Safari on iOS and
Google to Pay Apple $12 Billion to Remain Safari’s Default Search Engine in 2019: Report.) ↩

33 Books in 2019

2020-01-06 by Roberto Zoia 1 Comment

As I’ve written before, we live in an age where self-learning becomes more relevant every day. As less people read books, reading becomes a real competitive advantage. It’s a very effective way of standing on the shoulders of giants.

In 2019 I completed a total of 16 books (non-fiction) and 17 novels. From the non-fiction list, these are the ones I enjoyed very much and consider worth recommending:

21 Lessons for the 21st Century by Yuval Noah Harari.
This Is Marketing: You Can’t Be Seen Until You Learn to See by Seth Godin and Ken Blanchard.
Building a Better Business Using the Lego Serious Play Method by Per Kristiansen and Robert Rasmussun.
Atomic Habits by James Clear.
Keep Going: 10 Ways to Stay Creative in Good Times and Bad by Austin Kleon.
AI Superpowers: China, Silicon Valley, and the New World Order by Kai-Fu Lee.
Information Doesn’t Want to Be Free: Laws for the Internet Age by Cory Doctorow, Neil Gaiman and Amanda Palmer.

These are the books enjoyed most in the fiction/fantasy category. If I had to choose one, I would pick the Remembrance of Earth’s Past trilogy by Liu Cixin.

A Year and a Day in Old Theradane by Scott Lynch. (Fantasy.)
The Murderbot Diaries by Martha Wells (All Systems Red, Artificial Condition, Rouge Protocol, Exit Strategy). (Science-fiction.)
The Quantum Evolution Series (The Quantum Magician, The Quantum Garden) by Derek Künsken. (Science-fiction.)
Lady Astronaut series (The Calculating Stars, The Fated Sky) by Mary Robinette Kowal. (Science-fiction.)
Delta-V by Daniel Suarez. (Science-fiction, techno-thriller.)
Remembrance of Earth’s Past trilogy (The Three-Body Problem, The Dark Forest, Death’s End) by Liu Cixin. (Science-fiction.)
The Technologists by Matthew Pearl. (Historical mystery.)

Photo by Nong Vang on Unsplash.

Problem Solving Skills for the Future

2019-08-28 by Roberto Zoia 1 Comment

Learning complex thinking is uncomfortable. Complexity is, after all, the realm of unknown unknowns.

The Cynefin Framework is a conceptual framework created in 1999 by Mary E. Boone and Dave J. Snowden while working for IBM Global Services. It classifies the issues leaders face into five contexts, defined by the nature of the relationship between cause and effect. It offers decision-makers a “sense of place” from which to view their perceptions, and make better decisions.

Obvious or simple is the domain of best practice, or known knowns. Problems in this realm can be solved by applying rules or best practices. There is rarely disagreement or doubt about what needs to be done.

Complicated is the domain of experts, the realm of the known unknowns. Relating cause and effect requires expertise and analysis, but once the problem has been analyzed, the course of action is clear: apply the appropriate good operating practice.

Complex, on the other hand, is the context of the unknown unknowns, where the relation between cause and effect is known only in retrospective. “Complexity is more a way of thinking about the world than a new way of working with mathematical models¹.” Complex systems are dynamic. They involve large numbers of interacting elements. Interactions are non-linear. The whole is greater than the sum of its parts.

Political entities, organizations, markets, the rainforest… are examples of complex realities.

Solutions to complex problems can’t be imposed. There is no ‘right solution’. Deciding on the criteria to be used to evaluate possible solutions is part of solving problems in this realm.

Most situations and decisions in organizations are complex because some major change—a bad quarter, a shift in management, a merger or acquisition—introduces unpredictability and flux. In this domain, we can understand why things happen only in retrospect².

Finally, a problem is chaotic when it’s too confusing to wait for a knowledge-based response. Because cause and effect are unclear, we need to establish certain level of order first, sense where stability lies, and try to turn what’s chaotic into the realm of complexity.

Guess what kind of problem solving skills will give you an unfair advantage and won’t get you replaced by a robot, automation, or a clever machine learning algorithm anytime soon. “Work is moving yet again. The move from Simple to Complicated that was a hallmark of the twentieth century is being outpaced by a move from Complicated to Complex and Chaotic³.”

To learn to navigate the sea of complexity, you need a sense of curiosity and the habit to notice the nature of things around you. You need to nurture the ability to learn new things. Expose yourself to complex situations, where identifying the problems is part of the challenge, leaving behind the shallow and safe waters of what’s just complicated and tactical.

Photo by Samuel Zeller on Unsplash

cfr HBR, November 2007. A Leader’s Framework for Decision Making. SNOWDEN, David J. and BOONE, Mary E. ↩
cfr HBR, November 2007, idem. ↩
Taylor Pearson, The Commoditization of Credentialism: Why MBAs and JDs Can’t Get Jobs. ↩

How to Prevent Hackers from Accessing Your Mail and Other Online Services

2019-08-18 by Roberto Zoia Leave a Comment

Online security is more relevant than ever. News from hackers breaching massive number of user accounts from an online service no longer surprises anyone.

Two important things that you should do today to improve the security of your online accounts are setting up two-factor authentication and using a password manager.

Two-factor Authentication

Two-factor authentication means that each time you log into an online service, before you can get access to your account, you’ll be asked to enter an additional code after you enter your password. This code is generated by an app on your phone¹, or sent to you by SMS, and changes every 30 seconds. With two-factor authentication enabled, even if your password is compromised, a hacker cannot log in into your account.

Ideally, security is based on three things: something you know, something you have, and something you are. Almost everybody uses usernames and passwords. That’s something you know. But as security experts point out, “passwords have outlived their usefulness as a serious security device”. Adding something you have to the login process, like an additional code generated by an app in your phone, greatly enhances security.

If you are required to use your fingerprint to unlock your phone, then you’ve introduced a third factor: something you are. This is probably the best scenario you can get without resorting to professional-level security.

There are several authenticator apps on the market, perhaps the most well-known are Google Authenticator and Authy. Microsoft also offers an app. My personal favorite is Authy, because it syncs across devices so you can generate tokens from your phone or laptop. (Authy’s webpage offers a handful of guides on how to activate two-factor authentication on popular services. Check, for example, their guide for Gmail.)

What if your mail service provider doesn’t offer two-factor authentication? Don’t hesitate, change to a provider that does.

Use a Password Manager

The second most important thing is to use a password manager. Writing down your passwords on a stick-it note or in your iPhone’s Notes app is not only inefficient but insecure.

Companies that require their employees to change their passwords every 30 days, and don’t provide them with a password manager, are simply encouraging their employees to use weak, easy to guess passwords, or to write them down in a note they stick to their laptops.

With a password manager, you only need to remember one password: the one for the password manager itself. The app takes care of storing the usernames and passwords for every online service you use. Thanks to browser extensions, they recognize which webpage you are visiting and fill in the proper credentials. It also keeps you passwords synchronized between devices. (And yes, you can enable two-factor authentication for the password manager itself.)

Passwords and hashes

To understand why password length and complexity is important, we need to dive into how online services store passwords, and what hackers do when they steal user’s credentials from a server.

When an online service asks you to enter a password to create your account, the password is not stored as-is in the company’s servers. Instead, the server generates a hash code for the password. This hash code, and not the actual password, is stored along with your username and other data on the server².

A hash is a mathematical function that takes a string of data as an argument, and produces a fixed-size series of numbers, which is call a hash code. Different passwords will produce different hash codes, and it is nearly impossible to deduce the original password from the hash code.

To verify your identity, the online service asks for your password, generates a hash code for the characters you typed in, and compares it to the hash code it generated when you created your account (or last changed your password). If both hash codes are equal, it means that the password you just typed and the password registered on the server are the same. You are granted access to your account.

Now and then, hackers break into an online service’s servers and steal data: email addresses, and password hashes, among other data. These stolen databases are sold in the black market for money³.

As computer processing power becomes cheaper, it is possible to try a brute-force attack against a stolen database and succesfully recover part of the original passwords from the hash codes. Brute-force means that the hacker will use a program to generate, systematically, passwords with every combination of characters, and compare their hash codes with the hash codes in the stolen database⁴. For every match, the attacker now knows he or she’s got the password for a given account.

To protect you from this kind of attack, password managers allow you to generate long and random passwords for each new service you sign in. If you are inventing passwords by yourself, then your passwords are probably not long or complex enough. A long enough password ensures that a hacker won’t be able to crack it for several years from today.

This comic by xkcd’s Randall Munroe illustrates the point.

If the hacker get’s to know your username and password, chances are he or she will try to use them to access your accounts on popular services: Gmail, Facebook, Dropbox, Instagram, LinkedIn, etc. Once he’s got access to your email, he can request a password reset from other services, which will send a link to for resetting your password to your now-compromised email account. (That’s another reason to enable two-factor authentication.)

Which password manager should you use? I can recommend 1Password, which I’ve been using for several years now. Also, LastPass has excellent reviews.

Two-factor authentication and using a password manager are the most important things you should do today to improve online safety and protect your accounts from being hacked.

Photo by Dayne Topkin on Unsplash

These apps are called, among other names, two-factor authentication or 2FA apps, authenticator apps, one-time password or OTP apps. ↩
There are some online services that store their customer’s passwords as-is, which is a terrible practice. You can detect such services when you forget your password and click on the ‘Forgot your password?’ link: they’ll send you your password by email, instead of generating a new one or sending a link to reset it. ↩
There are pages that will tell you if your email has been compromised in a data breach. Check, for example, \. ↩
The attacker doesn’t even have to be an expert hacker to do this. For $10, you can get a very good book explaining how to do it. ↩