Googlenomics
July 15, 2009 by Raj Sheelvant
What is Googlenomics? Wired Magazine article by Steven Levy titled “Secret of Googlenomics: Data-Fueled Recipe Brews Profitablity” defines Googlenomics as dependency of Google on economic principles to hone what has become the search engine of choice for more than 60 percent of all Internet surfers, and then uses auction theory to grease the skids of its own operations. All these calculations require an army of math geeks, complex algorithms, and a sales force more comfortable with whiteboard markers than fairway irons.
Articles notes that Googlenomics comes in two flavors: macro and micro.
- The macroeconomic side involves some of the company’s altruistic behavior like giving away products like its browser, its apps, and the Android operating system for mobile phones. Anything that increases Internet use ultimately enriches Google.
- The microeconomics of Google is far more complex. It involves selling ads that generates not only profits; it also generates torrents of data about users’ tastes and habits. Google then sifts through data and processes in order to predict future consumer behavior, find ways to improve its products, and sell more ads.
Micro economic aspect of Googlenomics is not transparent to end users but it is the heart and soul of Googlenomics. With the data collected Google constantly performs self-analysis: a data-fueled feedback loop that defines not only Google’s future but the future of anyone who does business online. This is a classic use of Business Intelligence tool. Keyword and click rate are the bread and butter of Google. Google is using enhance BI to use that data to improve click rate.
In 2007 Thomas Davenport wrote a classic “Competing
on Analytics: The New Science of Winning” in which he argue that the frontier for using data to make decisions has shifted dramatically. According to Davenport the companies should use data-driven insights in building their competitive strategies. This in turn will generate impressive business results.
Google is that organization which is using Analytics: sophisticated quantitative and statistical analysis and predictive modeling to extend its competitive advantage. I only hope that Google does not put all its eggs in the basket of ‘analytics’. A new search model might emerge while they have their head deeply buried in the data. Google also needs to aggressively look at new ways to enhance search.
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