Monetizing Data - The Race for Free

Listening to Eric Schmidt, Google’s CEO talking to John Battelle at the Web 2.0 conference, I was struck by his confidence in Google’s ability to *monetize everything*.

It’s not like Google doesn’t have great credibility in the monetization space. Google’s revenues are approaching $10 billion because they figured out how to monetize internet search.

In fact, it’s possible that all Schmidt is talking about is extending the monetization of search. Here’s my hypothesis:

• Potentially all data stored on the internet represents some value to somebody…this is the Longtail – stretching from ‘hits’ to the world’s most obscure niches
• The more data there is, the more difficult it is to find specific data
• The more difficult it is to find, the more important search advertising becomes to increase search visibility
• The more important that search advertising becomes, the more marketers are prepared to pay for it
• The more marketers are prepared to pay it, the richer search marketing networks become
• The richer search advertising networks become the greater the competition to be a search advertising network
• The way to win the search advertising network wars is to become the pre-eminent portal to the internet – the user desktop
• The way to become the user-desktop – sorry Microsoft - is to become the provider – for free – of everything a user needs – from applications like spreadsheets and word processing to hardware and maybe even the networks that users access.

Schmidt asks Battelle an interesting question – “why shouldn’t your cell phone be free?”. It’s interesting, because if the cell phone is free, how is Schmidt assuming that cell phone makers will survive?

My hypothesis, is this: he’s assuming pretty much what already happens today but with a twist. Today phone makers are subsidized by the network providers who in turn are subsidized by network users. In the future, I believe he’s suggesting that phone makers can be subsidized by network providers who are subsidized by network ADVERTISERS – organizations interested in increasing their network visibility through advertising. So, here's a question: if this is true could all network access devices including computers ultimately be free?

Schmidt made another interesting comment when asked why Google purchased YouTube. His answer was simple – “we noticed a sudden breakout in user-generated video and determined that video had become a fundamental data type”….and monetizing fundamental data is exactly what Google is all about.

So what is fundamental data? E-mail? Conversations? Software? Movie listings? Pictures?

I’m thinking yes, yes, yes, yes and way more. If it’s bit and bytable – it’s data – and from Google’s perspective it can be monetized through advertisers.

So what does this mean for – say – software companies or other businesses?

I don’t know. Perhaps Schmidt provides some clues…

Although he’s confident and high on Google’s potential, he’s clear they need to build better partnerships. I’m pretty certain that’s going to make sense for everyone. It will be difficult to be an ‘island’ and still be fundamental. Partnerships extend networks, build larger communities and ultimately increase search visibility.

Schmidt and Battelle also reference the power of Google’s immense and growing user database. Databases make filtering more effective and more efficient. Having good databases will be good thing. They will be valuable. So, I can see software and other companies creating and taking much more advantage – in their product, in their advertising, and in their partnering – of well thought out and carefully mined internal databases.

Finally, I can see a race for free. OK, maybe not free, but with value being created from other sources - data, partnerships and…even on-site advertising revenue – I can see makers of certain products adapting their business models to attract network traffic and visibility, not just product sales. I can see product pricing declining as this happens and as an increasing number of applications become readily accessible to all users, not just geeky open-source users.

What’s intriguing about what Google’s doing is the breadth of it’s target market. Companies like Microsoft make by far the majority of their revenue from large enterprises. They’re the ones who can afford the large ticket prices. By making advertising affordable even to individuals, and reliable networked applications available for nothing – large organizations maybe the last ones to adopt the Google model. But by entrenching so firmly on individual and SMB desktops, its possible that ultimately even large organizations will find themselves ensnared in Google’s ‘net’.

The Internet Advantage - Intent vs Content

Thanks to Google, 'search' has fundamentally changed how products and services are marketed and purchase decisions are made.

In his keynote address at WebMasterWorld last week, John Battelle, Chairman of Federated Media articulated simply what many of us have been struggling for years to get across.

What Battelle nailed is that traditional marketing is all about content - putting your product or service in front of your target audience and hoping that their next purchase decision will be influenced by your message. Advertising on Oprah is expensive, but it works to some degree.

What makes search marketing so powerful, and why more corporations need to pay more attention to their internet positioning is that search influences the buyer at the point of intent - when a purchase decision is being made. At this point, conversion rates are high, and thanks to Google especially, the search advertising models are efficient.

For corporations, successful 'intent' marketing means learning how get good rankings in Google and the other search engines and spending a few dollars - nothing close to what 'content' marketing costs - on pay per click and other internet advertising.

As a result, the world of SEO - search engine optimization - is exploding and corporations are being forced to adjust traditional IT vs Marketing organization design. Too many companies have turned execution of their internet strategy over to IT departments - when successful intent marketing requires a new set of highly refined technical skills - SEO - and strong collaboration with Marketing on goals, strategies and site design.

While search and intent marketing clearly drive sales, it's too early to see how they can be used exclusively to build brand. However, there appear to be tremendous opportunities right now for organizations who learn to put the right balance on both.

Pubcon 2006

Spent the past week in Las Vegas attending a convention called Pubcon. Pubcon is for web publishers - and suppliers to the web publising industry. Web publishers own websites. For me, a very interesting and exciting conference. Some general - and not very deep observations:

1. VERY entrerpreneurial crowd - this is still early days for making serious $ on the internet - the business models are many and varied
2. serious $ being made by web publishers who have found ways to 'monetize' their traffic - in many cases from advertising - whether through Google or through successful affiliate and/or referral programs
3. the heart of this crowd is programmers - entrepreunerial geeks who have shunned corporate jobs and bosses to do it on their own - and have found making serious $ is a realistic goal
4. corporations need to figure this stuff out and tap into these geeks - there's some serious marketing and advertising implications to what these people are doing - when forward thinking corporations tap into this crowd, they will create a lucrative competitive advantage
5. the crowd is limited - I foresee attracting and retaining people with internet advertising skills as a serious growth business
6. the high traffic web site mantra: content, links, links, links
7. most forward thinking and (at this point scary) web notion - destination sites - those sites you get to by typing in the url - will decline in importance with the advent of tools (called widgets) that will move site content easily to other community, personal and aggregator sites like Diggit and My Space
8. second most scary notion - success will be all about technologial innovation - new tools for making access to web content simpler, more usable, more accessible - where would YouTube be without the viewer??

All in all, very exciting space. Some key links to check out if this stuff interests you - and if you're a CEO - you should be interested:

• Webmaster World
• Digg Business
• John Battelle
• Danny Sullivan
• Matt Cutts
• Lawrence Coburn