Google`s Grand Channel Designs

A little more than a decade ago, Larry Page and Sergey Brin set out to “organize” all the information online, making it more easily accessible than the hunt-and-peck Internet of the late 1990s. To support their grand Internet index, the Stanford grads developed an advertising business that had disrupted all of the traditional media models and turned Google into a cash-generating juggernaut.

While Google has dabbled in other businesses and launched a series of tangential business initiatives, Page and Brin—along with their high-flying Chief Executive Eric Schmidt—have maintained that Google is a search-centric business. The other businesses and products—such as Google Apps, Gears, Chrome and Earth—have been, if you would believe, a byproduct of their largesse. 

Now Google is entering the channel with a program around Google Apps, its Web-based suite of productivity applications—word processing, spreadsheet, e-mail, instant messaging, etc. It’s thought that Google is trying to get a head start on Microsoft in the battle for Web-based productivity applications by leveraging the power and reach of the channel.

This certainly isn’t Google’s first entry into the channel, nor is it the last it will make. In fact, some could argue, as I will, that this is the foundation for a much broader channel initiative that will, in fact, disrupt more sectors of the traditional economy. Google’s next stop: local advertising.

Google’s cash machine is dependent upon the contextual presentation of paid advertisements to Web users. Google’s algorithms and AdSense program have placed global advertising in the hands of everyone from the largest corporations to the smallest mom-and-pop shop. The Internet may have made the world flat, but it didn’t make it accessible. The reason small concerns that once did business exclusively on Main Street could never break out of their geographic boundaries was simply visibility. Google—through its affordable and moderately effective AdSense keyword and contextual search advertising—opened global e-commerce to everyone.

While Google does a really good job of serving up ads for the likes of Hewlett-Packard and General Motors, it’s not so effective at helping you find a local drycleaner, dentist or auto repair shop. The vaunted Yellow Pages was once the means for finding local services and resellers, but even the online adaptation of the phone book is only good for those willing to pony up hefty display advertising rates. More times than not, the results presented by online phone books are not local enough and obviously incomplete.

Inside Google, plans are being shaped to bring Google professional services to the local level. Rather than having local businesses completely self-serve their AdSense campaigns, Google wants to engage technology resellers and solution providers, local advertising agencies and marketing companies, and local newspapers to provide AdSense architecting and optimization services. Google has disrupted traditional marketing and advertising models by charge pennies for ads and premiums for click-through rates. It all works great if you’re marketing to the world, but the model falls apart when you bring it down to Main Street. Google knows that the small businesses of Main Street trust their local peers to provide expert advice and service, so tapping that virgin field of potential agents would ensure Google’s revenue engine remains primed.

Local marketing and media companies are a natural fit for this strategy, but why solution providers? That’s simple: small businesses equate the Internet to complex technology, so getting AdSense services from a solution provider would be just as natural as buying gas from a gas station.

Selling solution providers on the idea that they can make money by picking the right words for customers to buy against to promote their businesses is fraught with complexity and nuance. The model simply doesn’t exist today and, as many have told Google, an AdSense channel needs to be couched or complemented with something that solution providers understand. Hence, the Google Apps channel.

But don’t start counting your pennies just yet. AdSense truly is a value-add service, but it won’t scale the same for solution providers as it does for Google. Google makes money on advertising by collecting billions of pennies; solution providers can only hope for a fraction of that stream. And, should the program fail for the local business, it’s now the local agent’s fault—insulating Google and tarnishing the solution provider’s reputation.

Just as Microsoft, IBM and other vendors of the previous generation learned, Google is now discovering that it needs a channel army to maintain its momentum, achieve market dominance and solidify its future security. While Google’s “Don’t Be Evil” motto doesn’t apply to its competitors, solution providers need to ensure that it does apply to them. On the outset, Google’s grand channel designs appear entirely tilted in its favor and not those of its potential partners.

Lawrence M. Walsh is vice president and group publisher of Channel Insider.