You say you want to crush Google (Nasdaq: GOOG ) now, do you? Get in line behind the tech bellwethers that feel Google's warm breath against the small of their necks or the edgy upstarts that are nipping at the giant's heels and hoping to nibble away on style points.
Kill Google? Are you nuts? I'm sorry. You are a few years too late for that, my friend. Unless you can go back in time and topple Stanford to make sure that Sergey Brin and Larry Page never meet in grad school, you're going to have to deal with the here and now, and it's not all that appetizing if you approach Google as an enemy or mistake it for a friend.
Google is more powerful -- and more important -- than you think. It's like the mob boss you laugh nervously around or vow to avenge after being humbled, but you never get close enough to carry out your redemptive plan. It's complicated. But Google isn't an evil mob boss. Sometimes, it's not even a very bright one. However, it has rolled out the perfect blueprint to penetrate our collective sight lines and assembled an unlikely front line of defenders to keep it that way.
There has got to be a way to beat Google. There is, actually, but let's explore the current tactics being bandied about that don't stand much of a prayer.
Better search is a retractable dagger
I'll admit it. I had to shake my head when the market pummeled Yahoo! (Nasdaq: YHOO ) partly because it announced that it was delaying the release of an advertising technology upgrade. Then you have Microsoft (Nasdaq: MSFT ) also slaving away to make its MSN portal and suite of search products more relevant.
I can picture it now. Yahoo! and Microsoft are working late in their mad-scientist laboratories to brew some toxic Google killers. Thunderstorms batter the eardrums. Bubbly beakers percolate with promising elixirs. But the eureka moment is never going to come from inside a lab.
This isn't just about being the best search engine. IAC/InterActiveCorp (Nasdaq: IACI ) rolled out some pretty impressive features for Ask.com earlier this year, and it's still nowhere near medal-round contention.
A popularity contest, by definition, is quantitative rather than qualitative. Mickey D's doesn't flip the best burgers. Dunkin' Donuts doesn't roll the best doughnuts. Milli Vanilli wasn't the best new artist of 1989. A juggernaut leaves a mighty footprint, but rarely is it a matter of the best being the biggest. Several other factors come into play in executing the plan for global domination.
There is nothing wrong with improving your product. It clearly improves your chances, and thankfully, Microsoft and Yahoo! have billions of dollars in the bank to bankroll those efforts. It's just not likely to result in the discovery of a silver bullet. And even if it did, the chances are better than fair that they would shoot themselves in the foot.
In click fraud we distrust
Everyone is concerned about how paid search will weather the click-fraud storm. I've got the skinny on this. I seem to be on a lonely limb in believing that click fraud -- as a problem -- has been licked. I realize that Google is engineering settlements, refunding significantly, and coping with potentially flawed data from potentially biased third parties. It's a non-event.
Let me expand on that. The beauty of paid search is that it is fully accountable. If I'm paying $0.50 a lead for a product that delivers a $5 profit, I need 10% of my clicks to complete the purchase in order to break even. Oh, establishing a direct connection with potential buyer is valuable beyond the initial checkout, too, but let's stick to the basics here for illustrative purposes.
Let's say I wind up on the receiving end of bogus clicks. Instead of one sale for every 10 clicks, I wind up sealing the deal just once for every 20 visitors. I am in the hole, but only until I reset my keyword bid to $0.25 to price in the pilferage.
Click fraud is not a victimless crime. Lower bids hurt honest third-party publishers and force Google to devote resources to patrolling cyberspace. This is a disruptive issue, but it's not this white elephant that the media is making it out to be, because it is ultimately a self-correcting market for sponsors.
If anything, click fraud has helped Google by dissuading advertisers from a smaller site like MIVA (Nasdaq: MIVA ) that is serving up more leads than it was at this time last year but at substantially lower bid prices.
Google's minions in millions
The key to Google's seemingly impenetrable moat rests on an army led by a gray-haired fisherman who set up a website about the joys of trout fishing three years ago. I have no idea whether this site actually exists, but if it does, there's a fair chance that "Ads by Google" is plastered all over it.
Google helped inspire and empower Web masters of all sizes by granting them access to Google's inventory of contextual marketing ads in 2003. More than a third of Google's gross revenues come from AdSense. Even though AdSense represents a much thinner slice of Google's gross profits, it is free advertising and sponsor recruiting for Google's AdWords program.
Building a community of content-creating enthusiasts that have become Google banner wavers is no small feat. Yahoo! may have bought the paid-search pioneer in Overture, but Google is the one that has achieved the critical mass of sponsors that gives Google the same advantage in paid search that eBay (Nasdaq: EBAY ) does in the auction space.
Publishers won't be wooed away from Google as long as it is the best producer in terms of payouts and ad breadth and advertisers want that virtual real estate. It's the same argument at eBay, with bidders going to where the listings are and those listing flocking to where the bidders are.
Bidding on a silver bullet
How do you kill a vampire? With a stake? That's what Yahoo! and Microsoft need, a stake. They need to dust off the billions of greenbacks that they have resting in their coffer coffins and snap up virtual real estate before Google hogs up the Risk playing board everywhere short of Kamchatka. If there is a content site that is ripe for traffic monetization -- and preferably an existing Google partner -- Yahoo! or Microsoft needs to buy it out. We're talking about a portfolio of content sites like CNET (Nasdaq: CNET ) as well as that hypothetical trout-digging octogenarian.
What are you saving that money for? A rainy day? It's pouring outside. Don't wait for the floodwaters to rise and wash you out. This is the only game that matters, because Google has a clear path to hogging up more of the game board until you're left reminiscing about the days when you weren't teetering on obsolescence.
However, the biggest deal that needs to get done -- and Yahoo! and Microsoft can draw straws to see who takes the hit -- is to buy eBay. Yes, buy the eBay model that Google is feeding on at the moment. It's the easiest way to arm yourself with a potent army of potential advertisers and at the same time command the verb trio of eBay, PayPal, and Skype in one fell swoop.
Don't kid yourself into thinking that eBay won't sell if the combination is right. As standalone entities, Google is a bigger threat to eBay's way of life than eBay to Google. That is why bundling eBay with a fierce Google competitor is the only response that is appropriate if you are taking the game of self-preservation seriously.
Ignore me. Brand me a loon. You'll see. It will all become crystal clear in a few years as my voice echoes "I told you so" as you turn over your last army in Kamchatka.
Think Rick is crazy? His scenario poses some pretty weighty implications for some popular newsletter picks. CNET is aRule Breakersrecommendation. Microsoft is anInside Valueselection. eBay has gotten the nod forStock Advisorsubscribers.
Longtime Fool contributor Rick Munarriz knows what he's talking about, as he's had Risk games end at Kamchatka before. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.Rick does not own shares in any of the companies in this story. The Fool has a disclosure policy.