Google is learning too well from the master

Google shares rose above $700 this week, making the search giant worth more than Cisco, Intel, Apple, or IBM, but still less than Microsoft and General Electric, if just barely. Is the company really worth that kind of money or is this just the effect of a bubble market? Google is on a tear, that's for sure, but I see a few potholes ahead that the company could avoid but probably won't. Part of this stems from Google starting to look, in some ways, a bit like Microsoft. Uh-oh.

I think Google has in the works a global strategy so sweeping and audacious that it is breathtaking, but that's for a future column. This week I want to point out where Google is screwing up, why, and what they should do about it.

My first point is small but significant. If you are a resident of the U.S. you may have used a service called free411.com or 1-800free411. It is a simple service that looks up directory listings for free, saving callers fees of a dollar or more per inquiry. You can look up listings online, but most people call the toll-free number. Where free411 makes its money is by forcing users to listen to an ad before they get the number they are looking for. The service is incredibly successful averaging more than 25 million calls per month.

Free411.com has competitors, of course, and the most daunting just appeared on the market from Google - Goog-411. Goog-411 is actually a bit more sophisticated than free411, offering product and service classifications and suggestions, which, of course, also generate more revenue. But for the most part the two services are comparable.

They should be since Google took a long look at investing in or acquiring free411 under a nondisclosure agreement between the two companies, only to abruptly break off discussions and start its own competing service. Is this beginning to sound familiar? This strategy of getting start-ups to explain their business models and share their technologies was practically invented by Microsoft, which would then break off talks, start a competing product or service and use pressure on industry partners to put the smaller company out of business.

Google doesn't have to behave like this. At their current share price they can acquire any company -- and I mean ANY company -- for little or no cost. Killing little free411 after first cozying up to them is mean-spirited and, if Google continues to behave like this in the future, will hurt the company's reputation long-term. Maybe having a good reputation means little to Google, but it should.

It's time to grow up, kids.

Another problem at Google right now is algorithmic optimization gone mad with the probable result that many of Google's smaller AdWords customers will go broke this Christmas. Killing longtime customers is not a good corporate policy.

Before we get to the details of this little nightmare let's first consider the algorithm's religious significance for Google. Larry and Sergey begat PageRank which begat search which begat AdWords which begat AdSense, which begat the Global Google search and advertising empire that has grown too complex to further characterize in a single, strained Biblical analogy. At the heart of each of these programs is an algorithm embodied in a computer program with each algorithm automagically generating for Google billions of dollars per year. Algorithms -- the smarter the better -- are at the heart of Google's success. But Google's major failing nearly always comes down to confusing algorithmic efficiency with moral, ethical, or even business correctness. Sometimes good algorithms do bad things and the tendency at Google is to simply not care: it was the ALGORITHM's fault. But even worse, since algorithms can't be held responsible like the person who wrote or authorized the use of the algorithm ought to be, there is at Google a sense of unaccountability. Stuff happens, they'll say, when algorithms are fluxing toward optimization and producing collateral damage: it's not our fault.

Only it IS Google's fault. More specifically, it is CEO Eric Schmidt's fault when the company hurts its customers then either pretends it didn't or that the offending code was found under a rock somewhere. I have covered instances of this behavior in the past and it isn't how adult companies are supposed to behave.

Google AdWords used to be a simple and stable way for merchants to make money on the Internet. They'd buy search terms on the Google search engine, their ads would be posted near the search results, and one or two percent of searchers would click on those ads resulting in generally a good living for the advertiser. The system was simple, stable, and would run for months or years with little management on the part of the AdWords purchaser.

But recently Google started messing with AdWords, modifying algorithms and launching new programs that make the company look good to Wall Street, which is always seeking at least the appearance of improvement, but not to Google's AdWords customers.

AdWords customers are suffering from useless pages on unused and "parked" domain pages, or static pages simply filled with ads. The owners of these domains use AdSense participation to suck up more than 30 percent of the total AdWords market. This is one Google program working against another. Nerdtv.com is just such a parked page, owned by someone who won't even answer my e-mails and filled with AdSense ads that just sit there with no relevant page content to support them. And "content" is the issue here since AdWords advertisers have the choice of placing their ads on search pages (along the right side) or on content pages (on the top of the Google.com page, but also on other participating sites). But for some reason AdWords advertisers who opt out of doing content ads are still finding their listings on content sites, including parked domains and MySpace pages.

As always, it comes down to the algorithm. Here's what Google has to say: "Depending on the design of the site, a parked domain site will be classified as either a search site or a content site. That means your ads may show on parked domain sites if your campaign is opted in to the search or content networks." So opting out doesn't always opt you out.

Then there is the expansion of Google Broad Match, which seems to be putting local (geo-specific) ads on the results of national searches. This means if you run a bike shop in Charleston, South Carolina and someone hits your keywords on a search in San Francisco, Google may show them your completely irrelevant ad.

Google Personalized Search now uses the terms from previous searches to help fine-tune the next search, which seems good in principle, but if someone searches first on "childcare" then later on "insurance" they are likely to be served ads for insurance for children, which might not interest them at all.

There are other issues like problems with Google Analytics, and the blogosphere, if you know where to look, is full of this stuff (check my links to the right, please). But what's worst is that this is all taking place in the context of a Google customer support system that is effectively broken. They say it isn't broken, but if it takes weeks to get an answer, customer service is broken.

Google's defense, of course, is that the company will make everything right once you prove to them that they made a mistake. But Google is defendant, judge, and jury. And even if they face reality and do the right thing, it may already be too late for smaller advertisers. An algorithmic change by Google can result in AdWords budgets that worked well for years becoming suddenly depleted. All of the advertiser's money is gone, often with little to show for it. Worse still, there is no money left for ads that might generate revenue. Google says it will do the right thing, but doing that six months later has no effect for a merchant five months out of business.

Google appears to simply not understand this. Maybe with so many big jets parked at Moffett Field they've forgotten what it is like to run a business on little capital. Maybe they don't care.

At the heart of this problem is a flawed computer architecture that makes Google's customer service responses so slow. Google likes to pretend that its distributed architecture can handle anything, but that appears not to be the case here. When a change in the way Google does business bumps up the customer service load, the system becomes brittle and breaks. If Google acknowledges the problem, that generates more queries and the bad system gets even worse, so they say nothing. This isn't peculiar to Google, it happens at eBay, too, where they have to very carefully phase in changes for fear that partner reaction will bring down the system.

So Google says it will do the right thing and maybe even intends to do the right thing, but failures in its IT systems effectively keep it from doing the right thing, which brings us back to Microsoft, which has long been the poster child for inability to follow through because of IT failings.

It's not that Google learned this behavior from Microsoft. It may just be an inevitable part of having an IT monopoly.

There, I said the "M" word.

courtesy @pbs.org