The Origins of the Modern Ecosystem
Google’s ecosystem is more than platforms or 2-sided markets
In the late 1990s, a small Silicon Valley company called Google began to emerge as a strong contender in the search engine industry, a business it now monopolises. Google’s rise to dominance in this industry marked the origins, the very genesis, of the modern business ecosystem. A look at Google shows that platforms are not about two-sided markets or network effects.
Nor are they about the inter-industry ecosystems that James F. Moore had been writing about in the 1990s. Here was something completely different that marked the beginning of new ways to work.
The company arrived at a time when industry had been trying in vain for two decades to become more service-centric.
Google showed the way with a run of innovations in customer focused tools that it gave away (tools like Trends and Analytics, and self-service dashboards). Tools that shifted us away from old fashioned ideas about service and customer centricity to something also new — creating the conditions for customers to take charge of their own success.
This has since become integral to how we think about economic organisation. We still deliver products and services to target markets but we would be smarter to integrate customers into our ecosystems. And when we do we find we need completely new ways to think about work.
On top of those mechanisms it also created the largest business ecosystem that we had seen, right at the start of the 21st century.
Where Google led
Google was a start-up: two guys, an idea, and an algorithm. At the time of Google’s market entry, there was a wide choice of search engines that consumers could use to discover information on what was then a new network called the World Wide Web.
The available search engines included, among others, AltaVista, Yahoo!, Northern Light, Dogpile, Lycos, HotBot, Excite, AskJeeves, Infoseek, MSN Search, and AlltheWeb, popular in Europe. At the time Google launched, these were strong competitors. AlltheWeb competed well on information coverage and relevance. Yahoo! was the dominant name in the business. AltaVista was very stylish and popular. But Google won hands down and added to the (false) sense that platforms were going to be winner-takes-all phenomena.
Interestingly, Google did not edge out its competitors because of superior search technology at the time — in fact Google was not necessarily the best.
Tests at the time showed if you took the branding away from search engines, Google did not turn out tops. Nor did it invent many of the tools with which it is most closely associated. Pay Per Click advertising (called Pay Per Impression initially), the essence of search engine advertising systems, predates Google’s ad programs by about two years.
What Google did very well was to win the argument around relevance — that is, to be perceived as providing the most relevant search results. But perceptions were vitally important. And it helped monetise search and therefore laid a remarkable foundation for revenue generation from the Web.
First the issues of relevance: How do you know that what you have found through a search engine is truly the most relevant information for your needs? How can you be sure you have not left important data behind?
This was a critical question when the Web was young. The Web itself could not be trusted if search engines gave no promise of relevance. It was a mass jumble of documents.
Ultimately, Google instilled in users the confidence that the information they found through their search activity was truly the most relevant for their needs.
Google won the argument around relevance by becoming a platform and ecosystem company. It has continued to deploy platform and ecosystem strategies ever since. Here’s how it happened.
The rise of the platform and ecosystem model
By the late 1990s, the relevance of search returns had become a huge problem for users of the World Wide Web.
Predating Google’s arrival on the Web, marketing pioneers such as the Multi-Media Marketing Group (MMG) had already established some informal ground rules for making sites more visible online (though not necessarily more relevant, however, relevance and visibility are intertwined). This group was probably the most active group debating how the Web could be used effectively for marketing.
While the MMG and search engine optimization (SEO) experts debated best practice, the Web was also becoming a target for spam-type sites and black hat (manipulative) visibility techniques.
In this environment, Web search engines were bound to interact fractiously with the SEO community, who might advise clients to create content that would be of low value but nonetheless perform well in search returns.
So here were two sides to the coin. Create quasi-spam like content so advertisers could be found; create search engines that promised relevance.
Google, incorporated in 1998, offered a potential solution to this and to the issue of how to monetize search.
The answer to the first was PageRank. Named after Google CEO Larry Page, who developed the ranking algorithm while at Stanford University, PageRank gave each Web page a score based on how many other Web pages linked to it (and how important those pages were, as measured by their PageRank).
Prior to PageRank (and indeed after), webmasters stuffed their Web pages and metadata with keywords that search engines would assume signaled a site had a very specific topic — say cereals. Put cereals in the URL and the metadata, mention it frequently in the content on a web page and you had a chance of being front page news in search.
Google’s innovation was, in a sense, to make this word-stuffing game harder but still achievable.
PageRank could still be manipulated by SEO experts who second-guessed how the algorithm worked, but it took considerable investment to build high-quality inbound links, initially the primary driver of Google’s rankings.
The search engine won favour with the search marketing community in part because there was now a systematic and low-spam way of serving their customers. Creating pages with inbound links from pages that also had inbound links was an easily understood mission, though a difficult one too.
The content issue
Content in ecosystems is incredibly important, vital in fact to success. And this too can be dated back to the early years of Google.
Through its emphasis on quality links as the way its search engine would judge Web pages, PageRank made the Web a perfect home for renowned content providers like the BBC and The Guardian. And those information rich producers soon came online and began to establish themselves as cornerstones of the new information economy.
Google also made the smart move of buying a blog platform, Blogger, and incorporating blog content into search returns, providing it with a large advocacy group in the blogger community. (As time passed, Google was forced to include more social media links in its returns, making it the perfect vehicle for millennial publications like Vice and BuzzFeed.).
With PageRank and various adaptations of its algorithm over time Google, made the SEO game became tougher, particularly as major publishers moved content online and automatically achieved strong search returns.
An additional boon for Google was that its advocates got behind an older idea — that information “wants” to be free — and reworked it for the Web, tempting large media properties like The Guardian and the BBC to give away more and more of their journalism. Companies of all sizes, but particularly the large multinationals, also gradually realized that search was an alternative to traditional broadcast media.
But to take advantage of it, they needed advice on how best to become visible in this highly competitive, content-crowded environment of the Web. Eventually they would turn to their advertising agencies but the agencies were getting left behind in search engine optimization. The corporate world turned to SEO companies, who would also make a judgment on when a client should seek out organic positions in Google or paid (buying a position in Google’s sidebar).
As an alternative to the earlier tactic of keyword stuffing, SEO companies created link-building programs for clients. With multiple inbound links from “quality” sites (i.e., highly linked sites), their clients would show up on the front page of Google. As SEO companies did this more and more, link spam began to build up.
Even as Google began pulling away from competitors, relevance was again in question. Nonetheless, the SEM and SEO communities grew. And alongside them, the online content creation industry grew too.
At this stage Google’s platform had created several pivotal elements that would define the future of marketing.
There was the search element, a platform where people could come online and immediately jump into relevant content; there was the paid element, where advertisers could pay for clicks through to their websites; there was the SEO community that would arrange “organic” search return performance, meaning companies would score highly on Google because they had the right content and the right links; and there were massive content providers who felt that Google was the channel for them to reach more readers. There were also small advertisers with micro-budgets advertising local goods and services and large advertisers who began to divert significant budgets to “digital.”
Platform and ecosystem innovation
The rise of the Google platform created many discreet and nuanced innovations.
Self-service: Most of this activity took place in a self-service environment. By and large, the whole Google system was designed for DIY. Companies had to organise their own purchase of Google services, design their own campaigns on Google’s platform, and track their own performance. Google provided the means (search and Adwords) and the transaction engine.
User experience: That meant a new emphasis on user experience because without good user experience, there would be no sales. This again was a vital innovation for the platform because it meant Google could scale without hiring vast teams to provide client support.
The microtransaction: The transaction engine too was unique serving not just the giant advertisers with their analytics platforms but also the little guy. The self-service design innovations meant anyone could use the system: you, me, and the local baker. That in turn meant more advocacy.
Unprecedented scale: It led to phenomenal scale and concentration. By 2012 the search engine had found “more than 30 trillion unique URLs on the Web, crawled 20 billion sites a day, and processed 100 billion searches every month.”
Data: Google provided the means for everyone to track the performance of their search campaigns.
The advocacy ecosystem: Today analysts are prone to attributing platform scale to the existence of two-sided markets or network effects. But in search there was no two-sided market. The information seeker had no corresponding information seller, and for a while had alternative search engines she could use.
The Google ecosystem
By this stage, Google had a very diverse ecosystem as its advocates. It had its search engine marketing (SEM), and search optimization (SEO) communities who were expanding their businesses on the back of link-building and content advice; it had its blogger communities; and it had established media players and corporate advertisers and their agencies, and even local businesses that could now advertise globally for a few dollars.
They all became part of the ecosystem and all of them advocated Google. Of course, the quality of Google search returns mattered, but none of this ecosystem activity led to any significant improvement in that area. Arguably the scale and activities of the SEO/SEM community continued to compromise quality. What the sum of the parts did do, though, was create a new kind of economic structure.
What’s important to realise however is that the novelty did not lie in the idea of a platform. Though we may have become obsessed with platforms, the real novelty lay in the ecosystem.
Here was a company making a fortune out of “organising” the activities of content creators, advertisers, marketers and eventually app developers. In itself it wasn’t actually making something — it had its transaction engine and its self-service consoles and these were continuously improved. But it wasn’t like Google had to create phones or laptops or autos.
Its money-making role lay solely in making people, and companies, visible to each other. Without that ecosystem of willing content creators, there would be a small Google. Without the advertisers there would be a poor Google. Without the search engine marketing community Google would have had to wait decades for scale. But with these groups all in its orbit there was unprecedented wealth.
What can we say about this ecosystem play? This was not the two-sided market experts claim it to be. A two-sided market would be an Uber, bringing people together travelers who need a ride. Or it would be a dating site bringing people into couples. But this search community was, and is, something else. It is a vast collection of different types of content creators, craving different kinds of audiences; it is those audiences too. It is the skilled search engine marketer selling visibility to clients. It is the vast literature on good online marketing practices; social media conferences, authors and their books, training courses, all ultimately telling you how to Google. It is the brand community who need exposure. It is people needing information and the apps that have grown over time to help them. It is the early advocates of Google.
There is nothing two-sided about it. There is no network effect virality about it. It is a unique moment in history seized on by Eric Schmidt, the CEO of Google in its early days. Played out with incredible engineering and Schmidt’s verbal panache.