The challenge of Google

by Saul Devine on 10 December 2009  |  0 comments
Tweet

Google are on the attack, and it seems that aggregators/intermediates are the target. Will this change the landscape in the UK over the next couple of years? Why are they doing it, and what are the likely results?

Well before the days of huge television advertising budgets, the aggregators/comparison sites/intermediates were partly borne out by the ability to piggy back on the considerable number of searches emanating from Google.

So it seems somehow cathartic that Google are now posing a considerable threat to those very same companies. Will they taketh from them in the same way that they had giveth? Will Google decide to attack the intermediary market altering the search experience considerably and no doubt impacting hundreds, if not thousands of small businesses?

To consider this fully, I believe there are three key questions to consider:

1.       Why are Google looking to remove the "middle men"?

2.       Can Google remove the "middle men"?

3.       What next for "middle men" in the face of such Google adversity?

To track back a little, Google last week refused to rule out a move in to property sourcing in the UK, as they have been actively doing in Australia since 2007. This move seemingly creates problems for any intermediates acting between seller (and their respective estate agent (if using one) and buyer. The intermediaries under threat would be the likes of www.rightmove.com, www.propertyfinder.com , www.findaproperty.com . Certainly the market felt so, as the Right Move share price slipped after the announcement.

In the US, there is a lot of talk around Google considering an entry in to the home loan market, putting pressure on the American mortgage equivalent of www.moneysupermarket.com, www.lendingtree.com. If they start with home loans, where could they end up? Arguably the UK comparison market is even stronger (proportionately) than the US sector, so what on earth would happen if Google unleashed this anti-intermediation strategy in the UK?

Well, actually Google have already trialled something similar in the UK, through their merchant service. The trials surrounded secured loans and life insurance, with the Google merchant results being supplied above PPC advertisers and the natural results. Since that trial all has gone quiet, perhaps too quiet...

So, why are Google looking to remove the "middle men"?

Put very simplistically, the less people in the chain, the higher the value equation. The higher the value equation, the better potential split of that value between the provider (so lets say the bank in the UK price comparison scene) and the source of the customer (i.e Google). So there are just very basic commercial reasons to do this.  

Yet it is the reasons beyond the basic commercial that I believe are moving Google towards disintermediation. There is probably a lack of respect held by Google towards aggregators. It is understandable. Have aggregators really moved on? If their model is so fragile, then Google (despite being the source of the fragility) are correct to try and connect directly with the banks, they are (even with recent events) more stable advertisers.

Then there is the small issue of user experience. Google want to expand their users experience. They spend gazillions on R&D in new applications for their customers. They are pushing the boundaries of communication and they feel that user experience on the web has plenty of potential to develop.

Whilst Google have been busy thinking about the future, what has the aggregator market achieved? Collected more leads and sold them on multiple times to the highest bidder? That is barely a web experience, and as a general experience, it is best described as awful, yet it is still common place with aggregators. Awful on day one. Awful on day twenty (when you are still receiving calls from brokers).  And who are the beneficiaries of this awfulness, well, Google's customers. Problem. The experience starts with them (Google), and I think they know it. So in many respects, removing the middle men improves their customers experience, they can control the quality.

So they want rid! Can they really get rid of the "middle men"?

They can certainly start to remove them from Google, and they have already started that process.  The recent (selective sector) "Vince" alteration at Google started to return brand terms seemingly with a heavier weighting. Finance one was of the core sectors impacted. So now, when searching for core terms on Google, such as "loans", there are more direct loan providers and large brands returned, whereas before the picture was an aggregator one. There are rumours that the Vince alteration was in some way part manual! Could this be? Probably a different debate.

So if Google start sending less natural traffic to aggregators, and they were to start returning their own merchant results over their aggregator advertisers, then surely aggregator traffic would drop, and potentially the rates paid to the aggregators could diminish because of the value equation mentioned earlier. A double whammy.

How big a blow would this be to the aggregators. Well, for those that rely very heavily on search originated traffic, it would be considerable. For those comparison sites that spend a lot on above the line advertising, such as www.moneysupermarket.com, www.confused.com and www.comparethemarket.com the impact would be lower. Of course you can argue that because these aggregators are such established brands because of their considerable marketing spends, that they should be returned along with the other big brand spenders such as Virgin, Egg, HBOS, etc.

Would it be such a bad thing to loose the one hundred and one aggregators simply producing tables and filling them with affiliate links. No, probably not. They had their day in the sun, but their executions were and still are pretty naff. Google and its customers do not need them, so hopefully they saved up enough whilst they could make hay.

So, the big spending, deep pocketed exclusive club are ok. Where will the innovation come from though? In general, the large comparison sites don't really spend too much time innovating, because their model is so reliant on conversion metrics. Innovation has to be with conversion in mind. If Google nukes all of the smaller independents, then we will be left in a world of big financial brands, big comparison brands and Google linking to one or the other (if not both). Dull?

Where will the innovation come from and how do you survive the Google adversity?

I think we need to keep this in perspective. Google has always wanted to see innovation, so I believe it will encourage and support innovation in this space by delivering the correct people to the correct places. They want the bad parts of intimidation gone, i.e. price hiking and poor customer experience. Perhaps this will force some of the smaller aggregators to challenge themselves, and start to evolve their models in to something more customer friendly.

This is not excuse to drone on about www.lovemoney.com ,we have our own plans and are comfortable with them. However, www.lovemoney.com are definitely in the space of being an independent intermediate of sorts. We do not have vast swathes of cash to throw at TV. Our audience is mainly sourced organically, and so we are dependent on search engines to help people find us. Whilst we do have a retail part to our business, and we aggregate financial products, we also feel that we have three key areas which don't necessarily clash with Google, and would probably be encouraged by the search engine (if it could talk).

One: We produce content. Lots of content, and, crucially, great content. It is diverse, it is produced by our users and our in-house editorial team. It is focused on finance, but it covers all niche aspects. I often look at our content, and the wealth of it that is there (we have been producing it every day for ten years) and I believe that archive of knowledge to be very difficult to replicate. People should find our content, because our content will help them.  

Two: We have evolved our platform to be both personalised and have networking capability. We see "knowledge" on the web organised in a very personalised way going forward. Finance is niche, but there are so many permutations to every individuals situation (single to married, to children, to schooling, to food shopping, to future planning, and on and on it goes). The only way to get the full picture is by having a platform that lets you connect with similar pools of knowledge.

Three: Applications. As recently discussed, we have launched our online banking application on the site recently. We have more applications planned. The application market and local knowledge that these will bring can really evolve our customer experience. We intend to develop and innovate in the finance field. Give people the tools they require to organise their finances. The thing with finance is that it normally impacts people's lives, so it is an ideal area to introduce functionality and innovation. It matters.

So, perhaps the moral of the story is that if your business is only about finding people the best results on set criteria, then that is likely to be a small market going forward, and potentially Google can and will do this themselves to ensure their customer experience is strong. But I believe it should be viewed as a challenge to companies out there, to innovate and to think about the possibilities that the web offers us today. Work in niche areas and produce things that will really count. Aggregation is just so 2004 and Google knows it.