I enjoy reading Read/WriteWeb, but Alex Iskold recently published a much hyped yet ill-conceived article titled “Google – The Ultimate Money Making Machine“. The article had some very interesting points, but the main analysis was simply wrong.
Iskold’s claim that there is an infinite demand for Google’s goods and services is an erroneous claim. Google primarily makes its money by selling advertising, and there is certainly a limit to the size of online and other advertising markets. In 2006, for example, eMarketer estimated that the size of the online advertising market in the US was roughly $15.6 billion, and Google captured about a quarter of that pie. Undoubtedly, the world wide advertising market is bigger. And as companies move toward internet marketing from traditional advertising and as Google moves into traditional advertising, the pie will get bigger. However, this is a far cry from ‘unlimited’. Google’s market is neither unlimited nor is Google the only player. In fact, as stated above, Google only capitalized on a quarter of the online advertising market – its forte.
Google is not the darling, magical money machine that Iskold and others believe it to be. It is a very well situated company in a large market that is becoming increasingly competitive and will continue getting more competitive in the future. We do live in a free market global economy (roughly), and why would anyone pass up on the opportunity to eat from the succulent advertising money pie?