Tuesday, October 18, 2005

John Battelle’s The Search

I recently read The Search by John Battelle. It’s about how search has become central to the Internet economy and why today’s search businesses, epitomized by Google, are the beginning of something even bigger.

John talked to me for the book, so I’m not trying to be Mr. Objective here. I’ll just offer a perspective on its main theme.

To start, let me say that The Search dishes generous helpings of insider history about Google and other search players, past and present. John had access to most of the key people involved, so a lot of the quotes represent first-hand, new stuff. Given today’s rampant Googlephilia, the book would have been plenty successful if it stopped there.

The Search’s distinction, however, is that it threads Google’s story into a larger theme about what John calls the Database of Intentions: “the aggregate results of every search ever entered, every result list ever tendered, and every path taken as a result.” (For the technical crowd, he does not mean “aggregate” in the analytical sense of summarizing/abstracting data; rather, he is referring to all the disparate bits of detailed behavioral data, accumulated together.)

No one company owns the Database of Intentions. It is spread among millions of Web sites, each of which collects its own data, as well as other network-based media (mobile applications, Tivo-style services, and so on). It turns out that the big search companies have among the largest concentrations of such data. Moreover, John argues that Goto.com/Overture was first, and Google has so far been best, at commercializing it on a large scale.

They have done so in a simple but extremely effective way, selling advertising associated with search keywords. When you search for “Sony VAIO,” you are expressing intent, massively qualifying yourself to a certain set of companies: How much is it worth to Sony to appear next to search results for “Sony VAIO”? What about Sony’s competitors? How about all the possible retailers of Sony VAIO products? Bidding is open for this and a practically unlimited number of other keyword combinations. And the kicker is, companies only pay when you click their ads, so the incentive to participate is high. Even a one-person small business can sign-up with a credit card. Hundreds of thousands have.

Now, let’s reinforce two important points:

  1. This new ad marketplace allows targeting down to super-specific niches. An example: In an attempt to get highly obscure, I searched “Charles Fourier,” the utopian-socialist philosopher of the 1800s. I got an ad targeted to people researching him. The company behind this ad might have paid a nickel for my click on its ad, but as John summarizes the business model, it’s “a billion dollars, one nickel at a time.” A substantial number of those nickels represent new spending in the ad economy, from small businesses that have never had a venue beyond the yellow pages, or from bigger business (like Amazon.com) that can efficiently sell products with niche appeal along with mainstream products.
  2. Companies pay for ad responses, not ad impressions. This is a major change. Because a large percentage of advertisers can calculate what an ad response is worth to their business, they are ready to spend more on advertising than ever, for as long as it continues to pay back.

That last phrase—“as long as it continues to pay back”—is crucial. It brings us to The Search’s big idea: that the Database of Intentions, in primitive form, is the key factor behind the current system’s rise. Whereas a traditional advertising venue would be bragging if it could offer 31 flavors of content or demographics, this new system allowed search engines to sell millions of flavors of intent. These were sufficiently targeted to make the pay-per-click business model a winner. And the whole thing was automatable enough to allow a marketplace where anyone could participate.

It’s a powerful combination of factors, yet John’s bigger point is that these factors are only starting to play out. They will apply to other media, like television, soon enough. And as the Database of Intentions evolves and is mined more intelligently, it will make “as long as it continues to pay back” go longer and longer for the average advertiser. With billions of extra dollars awaiting ever more efficient forms of advertising and micro-targeting, further growth is at hand.

This extra efficiency can come from many angles. The Googles of the world will get smarter about mining and leveraging full clickstreams, not just your keywords-of-the-moment. Sites, or networks of sites, specialized in certain areas will make search and advertising more powerful by injecting domain-specific knowledge into their systems. John cites GlobalSpec, a site specialized in engineering parts, as an “intelligent island” that has manually created associations of concepts from its world. These associations—a Semantic Web (that is, web of meaning)—in turn can make searching and advertising smarter. Meanwhile, an informal version of the Semantic Web is emerging with user-created tags for various Web pages, which provides yet another kind of grist for the intelligence mill.

Finally, I would not underestimate the potential of people taking their data into their own hands, something that John does not delve into. In a world driven by data about intent, your intent becomes a kind of currency. As I’ve written elsewhere, the next Google may be a company that does not use data about people as a proprietary asset but rather becomes an asset manager for people’s data. Given the Database of Intentions’ privacy and societal implications, which John raises in the book, this type of approach has much to offer. It may well also be economically optimal.

Whatever happens, The Search makes clear that we’re far closer to the beginning than the end of this important story. Kudos to John for going deep to tell it, conceptualize it, and popularize it.

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