The secret behind Google’s profit growth has been revealed in a ZDNet report. The internet giant has launched an attack on smaller businesses who gain revenue from affiliate programs.
By favoring larger brands in its search engine results, Google has increased revenue by billions but, according to ZDNet, such combative tactics are costing jobs as smaller firms that profit from affiliate marketing are displaced. While analysts and media are preoccupied by the publicity of Google’s non-revenue schemes, including G+ and driverless cars, the plan to position itself as the largest affiliate has, until now, gone undetected.
During 2010, income from Google’s own sites was struggling to keep pace with Adsense, its partner network.
- In Q1 Google sites grew 20% and partner sites grew 24%
- In Q2 Google sites grew 23% and partner sites grew 23%
- In Q3 Google sites grew 22% and partner sites grew 22%
- In Q4 Google sites grew 22% and partner sites grew 24%
But for no outwardly obvious reason, the pattern is turned around within the space of a quarter.
- In Q1 Google sites grew 32% and partner sites grew 19%
- In Q2 Google sites grew 39% and partner sites grew 20%
- In Q3 Google sites grew 39% and partner sites grew 18%
By diverting traffic and income from its partner network to its own, Google manages to maintain all its revenues, rather than giving away 80 percent to Adsense partners. Other strategies to align Google as the principle affiliate for sales of branded goods online include banning tens of thousands of affiliates from its Adworks network and taking care not to upset the large brand owners, powerful lobbyists who could voice their discontent over Google’s business practices in Washington DC.
ZDNet reports that none of these practices have come under the scrutiny of journalists or analysts. For Google, such aggression towards small businesses in the current financial climate would be very damaging PR wise. The company has spent record amounts on lobbying this year and are keen to keep their business below the radar of the U.S government.
Reporting for the Los Angeles Times, Jessica Guyen stated “Google spent $5.9 million from January 1 through September 30, a 51% jump from a year ago. To put that in perspective, Google spent $5.2 million total on lobbying last year. Google has doubled its spending on lobbying in the last two years. It has also formed a political action committee to give donations to candidates and it has hired influential lobbyists such as Richard Gephardt, a former House Democratic leader.”
According to ZDNet, the fate of small businesses could lie with Facebook who are known to be more small business friendly, though long-term there is the possibility that they will be pushed towards taking a larger stake in revenues. To protect themselves from the same destiny as the small businesses in the Google environment, companies like Facebook and Apple fortify themselves against such moves as a larger partner providing web services and traffic, by retaining as much control of their ecosystem as they can.
One person who does comprehend Google’s anti-small business approach is SEOBook’s Aaron Wall, who wrote “At Affiliate Summit last year Google’s Frederick Vallaeys basically stated that they appreciated the work of affiliates, but as the brands have moved in the independent affiliates have largely become unneeded duplication in the AdWords ad system. To quote him verbatim, “just an unnecessary step in the sales funnel. It is worth noting that Google doesn’t consider itself “just an unnecessary step in the sales funnel” when they insert themselves as an affiliate.”
Jude Freeman writes from London.