Google is an ad platform company that is driven by ad revenue, and Facebook, which offers personalized advertising services, is its true competitor. Facebook has an advantage over Google because of the voluntary contribution of information and community building by its users, and Google has a disadvantage over Facebook in the legitimacy and usefulness of its data collection. As a result, Facebook has a greater advantage as an advertising platform.
Google (and its holding company Alphabet) is the largest company in the world by market capitalization. Who can compete with this behemoth, whose market capitalization easily exceeds that of the average country? Would you believe me if I told you that Google is at a disadvantage in that competition?
One of the best books on IT I’ve ever read, The History of Almost Everything IT, describes the history of the IT industry from its inception to 2010 as a triumvirate of three countries: the Apple Kingdom of Stephen Jobs, the Microsoft Empire of Bill Gates, and the Google Republic of Sergey Brin and Larry Page. Other companies are not possible in small and medium-sized countries on the periphery, or in countries that come and go. As you’ll see in the book, Google’s competitors are usually Apple and Microsoft, and now that Chinese companies have grown so much in the past few years, smartphone maker Huawei is often mentioned. But are any of these companies Google’s true competitors?
In order to identify Google’s true competitors, we need to understand the nature of Google as a company. Google, Apple, Microsoft, and Huawei are working in similar fields. They develop proprietary OSes, make smartphones, provide many IT-related services, and are now turning their attention to artificial intelligence. They are competing in the same field, but they are different companies at their roots. A company is an organization that exists to make a profit – to make money – and is sustained by money. Google, Apple, Microsoft, and Huawei have similar areas of research, but they have very different revenue streams that sustain them. Companies like Apple and Huawei are manufacturing companies before they are tech companies. Most of their revenue comes from manufacturing and selling hardware. For Apple, iOS is nothing more than a service to help them sell their hardware, the iPhone. Microsoft is a typical software company. Most of their revenue comes from selling the software itself or from users of the software. When we buy a laptop with Windows and MS Office on it, some of our money goes to MS, or we have to pay to use MS Office in our business.
Google is not like these companies. Google is an advertising company that makes most of its astronomical revenue from advertising. More precisely, it’s an “ad platform” company. An ad platform is a bulletin board that allows advertisers to advertise to potential customers. If you look at Google in terms of its revenue structure rather than research, it’s more like a broadcaster than Apple or Microsoft. BBC, CCTV, and KBS are also ad platform companies. They offer a variety of programs to attract audiences, and they get paid by advertisers to show their ads. Doesn’t this sound exactly like Google?
However, broadcasters are not Google’s real competitors. In general, the advertisers are the ones with the money, and the broadcasters are the ones without. Since they don’t have any information about their customers, they can only advertise indiscriminately. Google, on the other hand, has a lot of information about each of its customers. It knows where you are and what you’re looking for, not to mention your personal information, unless you’re careful. As a result, it can deliver personalized and customized ads that broadcasters cannot. The effectiveness of personalized advertising has been revolutionary, and since Google has your information, it turns the tables on advertisers. Unless broadcasters improve their current systems, they will not be able to compete with Google.
Now, some of you may have guessed the answer correctly. If you don’t, think about it one last time before you answer. Which ad platform company has a similar revenue structure to Google and offers personalized advertising? I’m sure half of you used it on the bus this morning. The answer is Facebook, the social networking service. It’s funny, isn’t it? On the surface, there’s no power struggle between Facebook and Google. Facebook is not interested in creating an OS like Android, it doesn’t make smartphones, and it doesn’t provide services like Google Search, Gmail, or Google Drive. It just manages one social network well. Similarly, Google is not interested in SNS. How can an SNS service company like this be a real competitor of a transnational corporation?
How do Google and Facebook compete in the personalized advertising platform service, which is their revenue structure? I believe that Facebook not only competes equally with Google, but also has an advantage. There are two reasons for this.
The first is the usefulness of the information they collect. Google and Facebook collect information about individuals in different ways. Google can get information about search keywords and pages visited through Google Search, and Google Maps and Android phones can get information about your location. Facebook, on the other hand, gets information from your profile, posts you’ve liked, and hobby groups you’re a part of. Now, think about the difference between Google’s information and Facebook’s information. It is. On Facebook, information about individuals is very “active”. ‘I live in Seolip,’ ‘I’m 00 years old and go to Seoul National University,’ ‘I’m a student and don’t have much money,’ ‘I like soccer and I’m interested in soccer paraphernalia,’ ‘It’s exam time and I want to keep watching funny videos. ‘ Every single thing you do on Facebook is very useful information for advertisers, and you don’t hesitate to express it. Google’s situation is different. It would take a combination of location information to figure out where you live, and a lot of hard work analyzing your Google Search and YouTube search keywords to figure out your interests. Even then, there are many variables, such as the user’s refusal to log search keywords or not logging in. Google users are very “passive” about expressing their information to Google, so the information Google gets is much less useful and of lower quality than what Facebook gets.
The second is the legitimacy of the data collection. As I mentioned earlier, Facebook users are very active in expressing their information, and this is necessary for them to use the service well. They fill in their school majors to connect directly with their classmates, they join their favorite soccer groups, and they “like” their favorite hobbies to stay informed. So, Facebook’s data collection process is user-driven and therefore justified. Google, on the other hand, is different. Most of Google’s services require a Google account to collect information from users, and many users don’t like it. They don’t want Google to have their personal information when they can use Google’s services seamlessly without giving it away. I think Facebook has the advantage when it comes to justifying the collection of information. The collection of personal information by IT service companies is actually an issue, and for personalized advertising platform companies that require personal information, it is a matter of life and death. Therefore, if the regulations on personal information collection are strengthened, Google will definitely suffer a big blow.
Facebook also has a powerful weapon in its arsenal: the ability to build communities based on user interactions. The power of this community is an important factor that makes Facebook more attractive to advertisers. The data generated by users spontaneously creating content, sharing it, and constantly interacting with each other is a very attractive asset for advertisers. This community dynamic is something Google can’t easily match, and it makes Facebook’s ad platform more robust.
While Facebook and Google have their own strengths, Facebook has an advantage over Google when it comes to personalized advertising. This is due to the usefulness and legitimacy of the information it collects and the power of its community. In the future, the competitive landscape will continue to shift as the IT industry changes and regulations evolve. But for now, there’s no denying that Facebook is a real competitor to Google.
