Aug 24, 2006

Is Google A Friend or Foe?? - Perhaps Both......

What would life be like without Google. Many Small Business owners are still trying to figure out how to leverage online ad units - and along comes this Search Engine Juggernaut.

To many small businesses, Google is both friend and foe. Thousands of entrepreneurs now find most of their customers via search-based marketing. Other businesses-niche software and book publishers, for example risk imminent extinction thanks to Google's free software releases and an interestingly innovative approach to copyright law.

For many entrepreneurs here in the U.S., Google has helped make the Internet a viable place to do business. Roughly 500,000 U.S. small businesses rely on unpaid or "natural" search for the bulk of their revenues, according to John Battelle -(Author of "The Search").

Another half-million firms participate in Google's paid-search advertising program. Two-thirds of those are small businesses that collectively contributed $2 billion to Google's total revenues of $6 billion last year.

Google generates nearly all its revenues by selling ads. But businesses may soon balk at seeing Google leech away an ever-increasing share of their revenues. Yes, paying Google only if someone actually clicks on an ad is more efficient than a traditional TV or magazine ad, where you pay for eyeballs. Studies show that 1% or 2% of clicks generate paying customers. While more than double the typical conversion rates for print and TV ads, that's still a low percentage game. That said, thanks to Google, many startups have reached profitable niche markets at little cost.

As the blogosphere expands and matures, more entrepreneurs could discover that blogging is an efficient way to attract customers. Other small businesses may find that it pays to purchase ads directly from website owners rather than through Google. Say you run a home-building company. Placing an ad on a popular real estate industry site might be cheaper than paid search - and might prove a more direct route to your target audience.

Slowing The Juggernaut
Travel agencies. Newspapers. Realtors. Advertising firms. Software makers. What do these industries have in common? All face a serious competitive threat from Google.
Google is not yet a mature business," says CEO Schmidt. "Our pace of innovation is not slowing down, I assure you. If anything, it's accelerating."

Google's Rivals
Search under 'Google, competitor.' The list of prospective rivals grows longer every day. How these various clashes play out will have major consequences for small businesses

Microsoft: Google's free productivity applications (Gmail, Writely, and Google Spreadsheets) will offer ad-supported alternatives to Outlook, Word, and Excel. Can a free Google version of PowerPoint be far behind? Compelling scenario: Small businesses get free software. Google gets a fresh source of revenues. Microsoft's Live programs are reduced to also-rans in the brave new world of software as a service

Yahoo: This is a Coke-Pepsi rivalry. Google currently dominates the $9.5 billion search-term ad market, with a 60% share to Yahoo's 30%. But the two giants are duking it out in the ad-supported free software market, with competing e-mail, instant-messaging, blogging, and mapping services. Good news for small business: The rivalry should keep service quality up and prices down.

Craigslist & eBay: Many small Internet vendors would welcome a viable alternative to eBay. Hence the buzz over Google's new online payment program called Checkout. Meanwhile, Google's new Base service is user friendly and appears well suited for posting classified ads. Look out, Craigslist!

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