Is Google Really Good for Small Business?

I keep reading and hearing from business and success gurus how Google Adwords is the greatest thing to ever happen to small business. According to these people, who by the way run seminars and not online businesses, all that an entrepreneur has to do to succeed these days is start an Adwords pay-per-click campaign and then stand next to the money volcano with an open butterfly net to catch all the money that will shower down on him. These people appear to be trapped in a 2003 time-warp. The reality today is a bit more complicated. With this fact in mind the muse inspired me to craft this fable about Google and small businesses.

A Fable: Doing Business in Google-land

Josef K had dreamt of owning and operating his own shop in the capital for a very long time. He studied the subject for years and once enough money had accumulated in his savings account, he tendered his letter of resignation and moved to the great city where it was rumored success could be achieved by anyone willing to learn fast and work hard.

His first order of business after finding accommodations was to obtain the required permits. Despite arriving early at the Ministry of Licensing he had to stand in line for three hours before finally working his way up to the clerk’s cage. After he had explained his plans, the clerk paused before replying while her eyes darted furtively from side to side. Upon establishing that no one else was within earshot, she leaned forward and whispered to Josef K, “Herr K, I could lose my job for telling you this, but tell you I must. Here in the capital all business traffic is strictly controlled by one man we call “Crazy Ivan”. He has sole discretion over how many customers a merchant gets. Moreover, Crazy Ivan never explains how he makes these decisions—and even worse—he’s maddeningly fickle. One day you are the apple of his eye and enjoying a flood of customers; the next day he turns on you and shuts it off. Crazy Ivan can make your business disappear in an instant if you cross him either intentionally or unintentionally.”

Josef K was taken aback by this disclosure from the licensing clerk. However, nothing was going to interfere with his long cherished dreams of opening a shop and joining the ranks of the capital’s mercantile class. After a slight hesitation, he replied, “Thank you for your kind words of caution, fraulein. I will look into this Crazy Ivan in order to understand how I may gain and keep his favor.” The clerk accepted Josef K’s money and issued the license without uttering another word.

Within a month the new shop was open for business. Prior to this event, Josef K had joined a merchant's trade group focused on learning how to garner favor with Crazy Ivan. He was shocked to discover that its members lived in mortal fear of being vaporized by Crazy Ivan. Reports circulated daily through the group about the latest shops to disappear for reasons never explained.

Through this group Josef K learned that Crazy Ivan offered free listings in the Crazy Ivan Free Yellow Pages. Josef K had high hopes for a listing in this service as it had rapidly become the most important advertising medium in the capital. Everyone relied on it to find merchandise and services. Indeed, the phrase “Crazy Ivan it” had become synonymous with finding the best deals.

However, Josef K was quickly disappointed with the results. Curious as to why his free listing wasn’t bringing in any business, he opened a copy of the latest Crazy Ivan Yellow Pages and was horrified to discover that his shop was listed 12,978^th in a category with 14,739 merchants.

At this point Josef K was beginning to feel financial stress. Without sales he would have to close his shop and return to his old job out in the country—if they would have him. Some fellow merchants advised hiring consultants from the newly emerging profession of Crazy Ivan Free Yellow Pages Optimization Wizards. These wizards promised to place a spell on Crazy Ivan which would cause him to steer more business to their clients’ shops. Josef K decided not to go this route because their fees seemed exorbitant. Moreover, he simply could not get them to commit to any measurable results no matter how hard he tried. So he focused on learning how to cast his own spells with the result that his ad rose to 25^th spot over the next six months, but still the business traffic evaded him because few customers looked beyond the first two pages of ads.

Then one morning a Hummer 1 stretch limousine pulled up and the chauffeur stepped outside to open the rear door for a man with a slightly sinister look. The man entered the empty shop and introduced himself as “Crazy Ivan, the Solver of All Business Problems”. He explained that he was aware of Josef K’s traffic problem and wanted to offer a solution. The solution was for Josef K to join Crazy Ivan’s new advertising program “IvanAds ” in which he could bid auction-style for customers. The highest bidders would have all the traffic directed to their shops. Merchants relying on the old free listings  would find themselves without customers. To make it as easy as possible to use, merchants only needed to supply Crazy Ivan with their credit card numbers. He would then do the rest which included deciding how much they actually paid per customer as well as how many they received each day. All the merchant had to do was wait in his shop for the sales to cascade in.

This sounded too good to be true, especially considering the low bid prices estimated for his advertising category, so Josef K asked a few questions about how the auction system worked. Crazy Ivan didn’t like these questions. In fact, they made him angry. He told Josef K, “Look, you don’t need to know how my system works. I do all the calculations in my head. It’s proprietary. Capisce!? All you have to do is provide your credit card number and I do the rest.  Trust me to use a system that is totally fair to everyone. Take it or leave it, chump.”

Crazy Ivan then walked out and got back into his Hummer.

Feeling that he didn’t have much choice at this point as even his 25^th spot in the Free Yellow Pages was basically worthless, Josef K signed up for IvanAds.

Since Josef K was an early entrant, for the first year traffic came in at reasonable bid levels and Josef K was happy to be making a living. Finally, he was moving closer to realizing his dream.

In the meantime, IvanAds business was so good for Crazy Ivan that he upgraded his private aircraft from a Learjet 36 to a slightly used Space Shuttle. The only thing that grew as quickly as his profits was merchant paranoia about displeasing him and being vaporized as by now Crazy Ivan had complete control of the advertising market.

Then the performance of IvanAds suddenly began to deteriorate as the get-rich-quick meme started to spread: just open a shop and IvanAds will make you rich, rich, rich! Josef K quickly realized that bid prices were being driven upwards to uneconomic levels not by the program’s actual value to merchants but rather by a steady barrage of market hype from the clueless Talking Heads on the Lobotomy Box as well as a host of get-rich-quick gurus selling courses and seminars to the masses on “how to reach your peak potential as a millionaire with IvanAds”.

Unfortunately, the masses had no idea how to calculate what they could actually afford to pay per customer, so they started bidding wars which squeezed the serious merchants out of the coveted top eight ad slots in the secret auctions. Everyone was jumping aboard with Newbies happily spending $100 on IvanAds to sell products retailing for $100. Josef K responded initially by raising his bids in order to secure at least the last spot in the first eight slots. But this quickly became impossible as more Newbies joined the program on a short term basis, drove the bids up still further, then quickly went bust. Every month there was a fresh wave of Newbies trying to outbid each other for the top positions in IvanAds. Josef K knew the maximum he could afford to bid before he started losing money on each transaction, so after a while his position slipped to the little seen second page of IvanAds.

It was at this point that he started experimenting with other methods to bring customers in and backed off on his IvanAds expenditures.

Despite all of these problems with the program, the clueless Talking Heads continued to hype the Crazy Ivan Bubble which was growing bigger than anyone in their right minds could have ever imagined. Newbies were now tripping over each other for the opportunity to pay $200 for every $100 in sales. Crazy Ivan used his bonus check to purchase the USS Ronald Reagan for his personal yacht and retained the entire 6,000 man crew and air-wing.

Meanwhile the actual performance of IvanAds--from the perspective of merchants--continued to plummet for a variety of reasons while the Talking Heads continued to tout it as the best thing that had ever happened to small business. Shysters started selling IvanAd seminars and manuals for $999 to the get-rich-quick crowd.

By now Newbies had pumped up their IvanAd expenses to $300 for every $100 in sales. Crazy Ivan continued to make money hand-over-fist and that’s all that mattered to him. He acquired Switzerland for his “Christmas home”.

Finally, the savvy merchants, realizing that IvanAd's 15 minutes of fame were drying up, started to quietly shift towards more viable promotional strategies known only to a few. The masses, as usual, caught on and followed five years later.

One day, Crazy Ivan awoke to the fact that he had killed the goose that laid the golden eggs. Shortly afterwards, the sheriff came by to repossess the Space Shuttle, USS Ronald Reagan, and Switzerland. The citizens of the great capital had finally learned the hard way that one man must never again be allowed to dominate the market so completely.

The End—with my sincerest apologies to Franz Kafka.

All Copyrights - Peter Ireland

adwords pay-per-click advertising entrepreneurship

Comments

[Scott]

Hey that's funny yet true. You missed taking a swipe at Adsense as well which is even a crappier program than Adwords.

[Caprinardo Delirio]

When there are hour-long infomercials on late night TV selling "courses" on how to get rich on Google ads, then you know that things have gone horribly wrong.

And I saw one last night....

[Nigel]

http://www.theregister.co.uk/2007/07/09/google_keyword_subpoena/

Google pressed to reveal AdWords secrets

Google may turn over information about third-party keyword purchases after being subpoenaed by a recreational flooring company.

Santa Clara University law professor and tech law blogger Eric Goldman alerted readers to the subpoena in a recent blog post last week, warning that this sort of legal action could give businesses access to private information about the advertising habits of competitors.

"Were this to become commonplace, it could completely change the current equilibrium with respect to Google's AdWords program," Goldman told The Register.

[Brent]

If I had the time, I would write and sell one of these courses for the laggard demographic. It's 2007 and people are still just discovering Adwords.

[Anon]

The line "The masses, as usual, caught on and followed five years later" made me spray my beer over the keyboard. LOL! Five years is about right for how long it takes for the lemmings to catch on.

[Robotchampion]

I have to admit I love google for personal use. As for business growth Google really stinks. They dont want us cutting into their main cheese. I plan on using alternative ad sites that give me a larger slice of the ad pie.

[Chee Kui]

lol.. that's a good one ;) But, I still think that Crazy Ivan is not that bad. :p

[Adam Donkus]

Cool post, Love it. Stumbled. When is the next story in the series coming out.

[WizCoder]

nice article

[hssn]

nice info

[Anon]

Google buys Switzerland. It wouldn't surprise me at all.

[The Cayman Host]

Thanks for dropping by and leaving me this wonderful fable to read. Only time will tell if the golden egg laying goose will one day be cooked but the signs are certainly there.

Best post on the subject that I've read in a long time, thank you.

Mo

[Stacey]

Oh Ivan, how you torture us so. Falsifying statistics that our business will grow. Even though the truth is coming, it's slow. And how we allowed it we'll never quite know.

[Nathian Jackson]

Oh My god..you'rre soo right...Adsense has got to be the biggest scam going! luckily, i can rip google off too with my adsense program...

[Chris]

Eventually Google will crash just like the housing market has. No matter how successful your business/website is, it is becoming so inefficient to bid on certain terms.

[Asok]

Google now the official new Evil Empire.

Google is storing literally every single piece of unique info it can find every single day and datamining it so they can sell it and/or give it to the government.

[.]

isnt it cool how google has 90% of the search engine market?

and every business in america that wants to be online has to suck google's cock? and isn't it cool how google doesn't even have phone numbers where you can speak to a live human, but only automated emails?

having a monopoly of the internet is SO much better than microsoft's monopoly of desktop OSs..

i'm sure 10 years from now when we elect google's executive staff to be fuhrers for life, everything will be great.

[Casey Serin]

I remember back in the ninties there were alot of search engines. Can anyone name any that have gone under? My mind has drawn a blank.

hotbot
lycos
infoseek
excite

[.]

whatever happened to fuckedgoogle.com ?

i remember that dude harped on the fact that google's entire business model was essentially tricking users into clicking on ads because they looked just like regular search results or hyperlinks..

turns out australia is now accusing them of the exact same thing, saying that google's entire business model is based on making ads look just like the rest of the content. and in australia, that's illegal.

http://us.ft.com/ftgateway/superpage.ft?news_id=fto071320071624304580&referrer_id=yahoofinance

it's also illegal in australia to sell advertising based on someone elses' trademarked name, which is where google gets about 70% of its total advertising revenue..

[Anon]

i like using mamma.com for searching because they, unlike google, do not return info found in subdomains and filter out crap from sites like about.com, craigslist, and the rest of the garbage sites

[Don]

Google won't be around in 5 yrs time.

There is massive churn in the market place right now. Look at your search logs for crawlers. Everybody is attracted to this market.

[.]

Goog is a monster.
http://finance.yahoo.com/q?s=goog

172 billion dollar market cap, much? 5x larger than yahoo. 2/3rds as large as Microsoft.

[.]

except the search results ARE listed by who paid the most. the top 3 results on any google search are paid links. just because there is a slightly shaded background rectangle and the light gray words "sponsored results" waaaaay over on the right hand side of the screen is NOT enough to let most people realize those results arent organic.

that's what australia is fucking SUING google for. the entire point of their lawsuit is that google's business model is simply to make the ads look like organic content, blurring the line between information and advertising-which is illegal in australia.

http://us.ft.com/ftgateway/superpage.ft?news_id=fto071120070454504040

and every business in america that wants to be online has to suck google's cock? and isn't it cool how google doesn't even have phone numbers where you can speak to a live human, but only automated emails?

having a monopoly of the internet is SO much better than microsoft's monopoly of desktop OSs..

i'm sure 10 years from now when we elect google's executive staff to be fuhrers for life, everything will be great.

[X-caliber]

Indeed true,

Infact now Sponsored links land google into court

[Xavier]

Have you noticed your YPN revenues sinking of late? By fall publishers will be demanding that YPN and Adsense pay them a fixed space rental fee on top of the per-click fees.