Ken Auletta - Googled - The End of the World as We Know It

Irwin Gotlieb also dismisses anxiety about privacy. He is more focused on the ability of digital technology to generate more data, which will mean that “the value of data will escalate dramatically.” The critical questions to Gotlieb will be: “Who collects the data? Who owns the data? Who gets to exploit the data? Who’s the gatekeeper? Who’s the toll collector? These are key strategic issues that need to be resolved”-between the ad agencies and Google and the cable and telephone companies, among others. But the data will be crucial because it will allow advertisers to move from guessing about “multiple correlations”-income, demographics, television programs watched-to “intent,” which he described this way: “Today, if I decide I need to sell a high-end watch, who’s the prospect? I can identify people with discretionary income. I can identify males or females fifty or older. But down the road, I will know you’re a watch collector because I will have that data on you. How? I will know your purchase behavior. A lot of retailers have loyalty programs, and they will share this information. If consumers have searched on Google or eBay to look at watches, all these searches are data trails. So instead of assuming that because you’re wealthy you might buy a watch, I can narrow my target to the small percentage of watch collectors.” And mobile phones offer still more data. Whether the mining of this data will provoke a public outcry is an issue Gotlieb does not stress.

To make the sale, he believes awareness, or brand advertising, will remain vital. He has a stake in saying this, but he seems to believe it: “I am not a proponent of the belief that most advertising is wasted. If I don’t create a predilection in you for a Mercedes when you’re a fifteen-year-old male, you’re not going to buy a Mercedes when you’re forty and can afford to. Take disposable diapers. Should you just market to pregnant women? I would argue that maybe the grandmother has significant influence. And maybe you could make little diapers for Barbies, so the eight-year-old girl becomes aware of your brand. Both of these require you to substantially expand your target.” And expand the money clients spend on advertising. It also assumes that the public will accept such hard sells.

Gotlieb believes only the agencies possess the skills and experience to engage in such long-term brand building. He refers to his work not as media buying but as “media investment management.” Whatever name he chooses, it’s endangered, which Gotlieb reluctantly admits. “I’m terribly concerned about getting disintermediated.” It’s why he thinks his business has to change from middleman to a principal. “I’ve grown up in a business where the media agency was a pure service business. I was taught from day one to put my clients’ interests ahead of my own. It may have been appropriate for the time and place. But it is no longer appropriate today, because we’re competing with people who are both vendor and client, as well as agent. Microsoft is a vendor, but owns a digital ad agency. Google is a vendor, but deals directly with clients. As a consequence, unless you’re terribly naive, we have to morph our business from pure service to a mix of service and nonservice.” He ticked off several options, including producing and owning content, whether it be television programs or movies; investing in technologies, as his parent company has, to try to capture more data and receive not just fees and commissions but “participate in the profits.”

What if a client asks whose interests come first, Gotlieb’s or the clients? “That’s a really good question,” he responded. “But how many people ask Google that question? If we remain purely a service business, we won’t be in business.”

Advertising will look very different in coming years. New digital middlemen have already surfaced. Like Google’s AdSense, these advertising networks act as brokers, putting Web sites and advertisers together. Computerized ad networks can quickly cobble together Web sites or TV stations that, together, reach an audience the size of an ESPN but at a fraction of the cost. This is a threat not just to traditional media, but to middlemen like Gotlieb. Still another refinement among agencies like Gotlieb’s is that, increasingly, the media buyers are beginning to offer to create ads as well. Because the giant media-buying firms operate under the same corporate umbrella as the creative agencies, this could produce civil war within firms.

Gotlieb knows that if he doesn’t refine his business model, Google or someone else may grab his clients. Most media (and not a few other industries) are in a race to avoid becoming superfluous middlemen. No matter how much popcorn they sell, movie theaters might face this fate when Hollywood begins to release movie DVDs simultaneously with the theatrical release. It is the danger faced by local TV stations as broadcast networks air their programs online and threaten to sell them directly to cable, and by media buyers like Gotlieb as clients work directly with Google or perhaps Verizon. The Internet and digital technology allows people to download movies rather than buy a DVD, to bypass stores and travel agents and perhaps eliminate financial or real estate brokers, publishers, bookstores, agents, music CDs, newspapers, cable or telephone wires, paid classifieds, packaged software and games, car salesmen, the post office. The Web allows sellers and buyers to connect directly, as they have done on eBay. Inevitably, new technologies will cripple many old media businesses.

One day when I was questioning Eric Schmidt about the travails of old media, he calmly asked, “Do you feel bad that the pager business is in trouble? No, because you use your cell phone as a substitute. When you have a good substitute, it’s very, very hard to fight against that.” Unless old media companies want to fight their customers, try to deny their desire for new choices and new conveniences, they have no alternative but to figure out how to ride the wave.

Google is surfing a huge wave that seems not to have crested. Eileen Naughton is the director of media platforms for Google and works out of its block-long New York office on West Fifteenth Street. Before joining Google, Naughton spent more than fifteen years at Time Warner, where she held a number of senior positions, including president of Time magazine and vice president of investor relations during the merger of AOL and Time Warner, when everyone feared layoffs, turf battles, a stock price drop, and senior management at the joined companies vied to mirror the Ottoman Empire, where the wives of sultans poisoned stepsons. When asked to describe the difference between working at Google and at an old media company, Naughton offered a one-word reply: “Optimism.”

Google may not have an overarching strategy, but it does aim to be a disrupter. Google has always been guided by a vision enunciated as early as 2002, as we’ve also seen, when Larry Page told a Stanford class, “If you can solve search, that means you can answer any question. Which means you can do basically anything.”

When Google defines its informational mission so broadly, and enters businesses where engineering can eradicate inefficiencies, it is left with a shooting gallery of swollen targets. An “innovative” company like Google, said Brin, enters fields where “we scale,” meaning where they have the infrastructure to enter fairly cheaply and without huge diversions of resources. With millions of computers and servers processing searches and collecting and digesting data, this architecture makes it possible for Google to “scale” into cloud computing, to store and search and sell digital books, to host the fifteen hours of video uploaded each minute on You Tube-the equivalent, Brin said, of uploading eighty-six thousand full length movies every week. “Everything Google does extends its reach,” Bala Iyer and Thomas H. Davenport wrote in the Harvard Business Review. “It is informational kudzu.” And although Google likes to say they don’t compete with media companies and prefers to call them “partners,” Iyer and Davenport write that by working with advertisers and newspapers, magazines, television, radio, mobile telephones and Web sites, it “is quite possible that what Google learns across various media as it solves problems for the ecosystem partners may position it to become the competitor that it now claims not to be.”