Over the last three years, Google had astonishing and rapidly increasing revenue numbers, growing $110.55 and $160.74 billion per annum. In these three years, approximately 85% of their revenue resulted from advertisement platform services. These revenues result from users being shown ads for i.e., a new TV on Coolblue.com when they search for “best TV 2020” on google.com or a similar relevant video ad on YouTube.
Simultaneously, the worldwide smart speaker sales will surpass $30 billion by 2024, and Google is the fastest-growing smart speaker producer and already owns 31% of that market. However, since one of the key functionalities of smart speakers is voice search, one should assume that consumers will make increasingly more searches based on voice search. Expected is that in 2020, such searches will represent over 30% of all searches. While the revenue from smart speakers’ sales seems like a welcome addition to Google’s portfolio, it could also disrupt the PPC (paid search) industry. This disruption could eventually hurt Google’s main cash cow since there is no business model in place (yet) to monetize audio searches.
How should Google prepare their business model for the era where voice searches might be the dominant search method? Since already 42% of consumers using voice search state that they have shopped via smart speakers, there should be a value capturing opportunity for Google (and other PPC-based companies) here.
As you might know, you can ask your smart speaker for recommendations, i.e., to place a reservation at a restaurant. Google could make businesses pay for a higher spot on these rankings, similarly to how on-screen PPC works now. However, a key difference is that with voice search, fewer results will be shown to those who search, giving them fewer options and so less freedom of choice. However, this may also increase Google’s power, and thereby the prices they can force advertisers to pay for their services.
All in all, exciting discussion topics; what do you think the PPC industry’s future looks like with the increasing number of voice-powered searches?
Sources
https://www.statista.com/statistics/266206/googles-annual-global-revenue/
https://www.statista.com/statistics/1093781/distribution-of-googles-revenues-by-segment/
https://voicebot.ai/2020/04/28/amazon-smart-speaker-market-share-falls-to-53-in-2019-with-google-the-biggest-beneficiary-rising-to-31-sonos-also-moves-up/
https://www.digital-clarity.com/blog/voice-search-pay-per-click-advertising/
https://medium.com/voice-tech-podcast/monetization-of-voice-assistants-and-the-end-of-ppc-advertising-as-we-know-it-13c3ca317fbe
Hi there Redeëet,
When browsing through the posts, your title caught my eye. Google, one of the most powerful and impactful companies in the world, killing its own cash cow? I had to know more.
I am glad I did, because the points you touch upon in your article, combined with the easily understandable way in which you explain them, made for an very interesting read.
My initial reaction was indeed that Google is chosing a quick revenue stream to increase their current portfolio, risking to damage their main revenue stream coming from their search engine. Then I realised of all tech companies, especially Google knows the true power of innovation. So instead of waiting for a competitor to disrupt, they themselves try to disrupt their own market by developing an emerging technology. Capturing a large market share in the proces. In a way its a very effective defensive strategy of Google: dont let others disrupt you. Disrupt yourself! JP, the guest speaker from Amazon discussed this during his guest lecture as well.
I am curious to see where Google takes this and indeed if google will up prices for preference spots in voice search results. Google might be able to do so based what Francesco spoke on in the last lecture of IS: advertisement auctions. Have advertisers fight in an online open market auction (or via deal contracts) within the second that the voice command is used. Advertisers receive from Google information on the user to let them determine how much they are willing to pay to be the number 1 search result in that particular search.
Just an idea
Thank you Redeëet for this article. I find it an interesting topic as it shows how fast our world is changing and that what is now the present now can very easily be tomorrow. I personally never used voice search but I do believe that the number of people who do will grow increasingly in the coming years. As customer are becoming more picky and hard to please, they always look for the easiest alternative. This makes me think of a quote that we saw in class during our Amazon guess lecture, that went along the lines of “Disrupt yourself or someone else will”. I do believe that Google should be aware and act accordingly. The last point you mentioned is also quite interesting as it shows that these big established ecosystem will always find ways to dominate and control the data we receive.
Hi Redeëet,
I think the connection you made between the growth in voice searching and PPC industry is quite interesting. I agree with you that there is still a lot of potential for big companies such a Google to tap into the potential revenues associated with providing the user with recommendation when using voice search. I am not surprised to see that voice search is increase so much, and I believe this number will grow even faster as speech recognition gets even better.
On one hand, I see a clear opportunity to ask for higher prices when auctioning off a top spot in the limited results provided in voice search as opposed to a simple text search. This creates a sense of scarcity for the advertisers to bid higher for the limited spots. On the other hands, I believe that there is a larger tradeoff (in voice search as opposed to text search) between looking to maximize these profits and providing the person with search options that are better targeted to their needs. E.g. Voice search users of Siri aim for convenience, speed, and relevance. If the top result is an advertisement that is not entirely useful for them, it would cause annoyance/dissatisfaction and they would not click on it. Therefore, companies in the PPC industry will need to focus on further enhancing their algorithms to ensure that ads, which are offered through voice search are even more tailored and relevant to the audience than text search ads.
Overall, I would agree that Google can use its power to charge more for voice searches, but it should apply this very carefully and it should not be treated the same as the current pay-per-click models.