Yes, Virginia, Google Does Devalue Everything It Touches

February 14, 2009
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Mike Masnick at TechDirt just published a post entitled “WSJ Editor Claims Google Devalues Everything” in which he objects to Wall Street Journal managing editor Robert Thomson’s claim on the Charlie Rose show that “Google devalues everything it touches.”

His  main objections:

This is wrong on so many levels it’s hard to know where to begin. Google doesn’t devalue things it touches. It increases their value by making them easier to find and access. Google increases your audience as a content creator, which is the most important asset you have. It takes a special kind of cluelessness to claim that something that increases your biggest asset “devalues” your business. Thomson’s mistake seems to be that he’s confusing “price” and “value” which is a bit scary for the managing editor of a business publication. Yes, the widespread availability of news may push down the price (that’s just supply and demand), but it doesn’t decrease the value at all. It opens up more opportunities to capture that value.

In a word, no. And he’s wrong on so many levels that it’s hard for me to

Mike Masnick at TechDirt just published a post entitled “WSJ Editor Claims Google Devalues Everything” in which he objects to Wall Street Journal managing editor Robert Thomson’s claim on the Charlie Rose show that “Google devalues everything it touches.”

His  main objections:

This is wrong on so many levels it’s hard to know where to begin. Google doesn’t devalue things it touches. It increases their value by making them easier to find and access. Google increases your audience as a content creator, which is the most important asset you have. It takes a special kind of cluelessness to claim that something that increases your biggest asset “devalues” your business. Thomson’s mistake seems to be that he’s confusing “price” and “value” which is a bit scary for the managing editor of a business publication. Yes, the widespread availability of news may push down the price (that’s just supply and demand), but it doesn’t decrease the value at all. It opens up more opportunities to capture that value.

In a word, no. And he’s wrong on so many levels that it’s hard for me to know where to begin! But I’ll try.

He’s right that Google makes it easy to find a news article, but only in the limited sense that it’s easy to find if you’re explicitly looking for it. That’s only a marginal improvement on the pre-Google world. Google also makes it easy for readers to find commodity information on a particular subject–and frankly, the real innovation there is Wikipedia. Google has never made serious investments in supporting exploratory search.

Google doesn’t do much to help users appreciate the differentiation among competing sources for news–or for products in general. For users, this may achieve a satisficing outcome–with minimal effort, they obtain the gist of the news from good-enough sources. But for content creators, this is commoditization: because the interface de-emphasizes the differentiation, users perceive a set of undifferentiated choices.

Masnick complains that Thomson is confusing price and value, but in fact Masnick is confusing value with breadth of  distribution. There are numerous examples where controlling distribution increases value: first-class seating, peer-reviewed publication, and even Google’s PageRank measure. In fact, to the extent that Google helps identify the best sources of information, it adds value, But Google destroys far more value by reducing the notion of value to a single, scalar (i.e., one-dimensional) measure.

By analogy, think of what has happened to the retail industry as comparison shoppers started using online aggregators to compare competitors on price, but not much else. Other dimensions of utility started to lose value–most notably, customer service. Retailers have suffered, and consumers suffer too, no longer able to make trade-offs based on the utility they assign to dimensions that they can no longer observe. What shopbots have done for retail, Google has done for everyone, but most of all for media.

One can reasonably ask why publishers don’t simply opt out of Google, using robots.txt to turn away Google’s crawlers. The answer is that they can’t unless they’re competitors opt out too. Google has lowered the value of content by persuading everyone, en masse, to offer packaging that masks the content providers’ differentiation. Like Wal-Mart, they’ve made consumers happy with lower prices, but don’t be surprised that some content providers are concerned about being strong-armed out of business (cf. Vlasic Pickles).

There’s no point in whining about it, and I commend media providers who are struggling to create value under such hostile conditions. I also know the media players have made many of their own mistakes to help get them into this pickle, not least of which was collectively giving Google so much leverage over them. But let’s dispense with the myth that Google’s gale of creative destruction is creating value for media providers. At best, Google is creating value at their expense.

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