Home > economics, rant > You are not Google’s customer

You are not Google’s customer

June 24, 2014

I’m going to write one of those posts where many of you will already understand my point. In fact it might be old hat for a majority of my readers, yet it’s still important enough for me to mention just in case there are a few people out there who don’t know how the modern business model is set up.

Namely, like this. As a gmail and Google Search user, you are not a customer of Google. You are the product. The customers of Google are the ones who advertise to you. Your interaction with Google is, from the perspective of the business operation, that you give them information which they harvest so they can advertise to you in a more targeted way, thus increasing the likelihood of you clicking. The fact that you get a service from these interactions is great, because it means you’ll come back to give Google and its customers more information about you soon.

This misunderstanding, once you see it as such, can be clarifying. For example, when people talk about anti-trust and Google, they should talk about whether the customers of Google have any other serious choice. And since the customers of Google are advertisers, not gmailers or searchers, the alternatives aren’t hotmail or Bing. Rather they are other advertising outlets. And a very good case can be made that Google does violate anti-trust laws in that sense, just ask Nathan Newman.

It also explains why something like the recent European “right to be forgotten” law seems so strange and unreasonable to the powers that be at Google. It’d be like a meat farm where the cows go on strike and demand better food. Cows are the product, and they aren’t supposed to complain. They’re not even supposed to be heard. At worst we treat them better when our customers demand it, not when the cows do.

I was reminded about this ubiquitous business model yesterday, and newly enraged by its consequences, when reading this article entitled Held Captive by Flawed Credit Reports (hat tip Linda Brown) about the credit score agency Experian and how they utterly disregard the laws trying to protect consumers from mistakes in their credit reports. The problem here is that, to the giant company Experian, its customers are giant companies like Verizon which send credit score requests millions of times a day and pay for each score. Mere people, whose mortgage application is being denied because of mistakes, are the product, not the customer, and they are almost by definition unimportant.

And it seems that the law which is supposed to protect these people, namely the Fair Credit Reporting Act, first passed in 1970, doesn’t have enough teeth behind it to make the big credit scoring agencies sit up and pay attention. It’s all about the scale of the fines compare to the scale of the business. This is well explained in the article (emphasis mine):

Last year, the Federal Trade Commission found that 5 percent of consumers — or an estimated 10 million people — had an error on one of their credit reports that could have resulted in higher borrowing costs.

The F.T.C., which oversees the industry along with the Consumer Financial Protection Bureau, has been busy bringing cases in this arena. Since 2000, it has filed 18 enforcement actions against reporting bureaus; 13 were district court actions that generated $25.7 million in penalties.

Consumers have also won in the courts, on occasion. Last year, an Oregon consumer was awarded $18.4 million in punitive damages by a jury after she sued Equifax for inserting errors into her credit report. But the fines, settlements and judgments paid by the larger companies are not even close to a rounding error. Experian generated $4.8 billion in revenue for the year ended March 2014, and its after-tax profit of $747 million in the period was more than twice its 2013 figure.

Million versus billion. It seems like the cows don’t have much leverage.

Categories: economics, rant
  1. mb
    June 24, 2014 at 8:48 am

    I agree completely with this post, but I wonder would you extend the same logic when government pays for something – say medical insurance. Or when government gets data wrong – I have been trying to correct the way the city spells my name on my deed for 11 years now – it has been “corrected” three times now, a little closer each time, I figure it will be fixed by the time my will is executed. And forget about police when then make data mistakes. Also didn’t Countrywide Dodd Frank make credit reporting more important for obtaining credit? One thing I fear is when the government finally gets e-verify going, I would not want to be Jose Ramos and applying for a job – if Ted Kennedy can be put terrorist watch list, e-verify will be disaster. and speaking of terror databases…

  2. June 24, 2014 at 9:01 am

    Nothing new about Google in this respect. Commercial television has always sold audiences to advertisers rather than programmes to viewers. The answer? Internet users should use better search engines, and be prepared to pay for a better service. If not, they have only themselves to blame. There’s no such thing as a free lunch.

    • Dan K
      June 24, 2014 at 9:39 pm

      20 or more years ago, I sat in on an interview with the CEO of one of the smaller broadcast television networks. I was a naive young man – so I was blown away when he said something along the lines of “our business is not broadcasting television shows for entertainment – our business is selling commercial time. TV programs are just what we use to fill in the time between commercials.” Well, yes, once he put it that way, it’s obvious, but startling to me at the time!

  3. mathematrucker
    June 24, 2014 at 9:42 am

    My initiation into conscious bovinehood occurred 20 years ago when I moved into a new apartment in Tucson AZ and the local phone monopoly demanded that I pay them a $250 deposit for phone service. I’d never had to pay any such deposit before so I adamantly refused. After having my sanity tested by a protracted series of hellish phone conversations with maximally unhelpful CSR’s at both US West and Equifax regarding a mistake in my credit report, Equifax finally corrected the mistake and I didn’t have to pay any deposit.

  4. June 24, 2014 at 9:54 am

    There may be nothing new about selling people into bondage, but it’s trending toward a universal business model these days. Case in point, the ↑-&-coming school charterbagger industry, a futures market that sells children’s futures to the conniest con artists on the block.

  5. June 24, 2014 at 11:58 am

    This is a catchy meme, but I don’t see how it applies to Google (or Facebook or Twitter) any more than it does to CBS or the New York Times or Slate. In every case, the company’s goal is to give you what you want, so that you continue to patronize it, and the main source of income is something based on having a lot of patrons.

    I also think you are completely wrong about the “Right to Be Forgotten” question. The court found that a newspaper’s web site could keep showing an article about Mario Costeja González’s 1998 home repossession, but that Google could not link to that story when you searched for his name. In your analogy, the “cows” here are the people who search for González, and they are not the ones complaining.

    Yes yes, I know I work for Google, so you can assume I have some bias. But this is about sloppy thinking, not who signs my paycheck.

    • June 24, 2014 at 2:54 pm

      I agree, it’s a general business model, not just for Google. I said that. Also don’t think we are contradicting each other about the Right To Be Forgotten question.

    • Auros
      June 27, 2014 at 2:32 am

      Yeah, I’m with Michael Kelb on the point about the “right to be forgotten”. (And I *don’t* work for Google.) The newspaper published something unflattering about González — they announced the auction of his property to settle debts. He’s unhappy that this is still searchable years later. The correct response to this would be to *take down the notice*. The notice has served its public purpose, and has no value now — the auction is long since over. But as long as the article is up, and was not posted in error, and is hosted by a reliable source, it’s entirely reasonable for Google to be indexing it. Take down the page, and it will drop out of searches right quick. The court’s ruling in the case got this *precisely backwards*.

      What’s particularly galling about it is that the only consistent logic I can think of for their ruling is the arrogation of more powers to the courts — the paper had to publish the article in the first place to serve the court system (bankruptcy courts, in particular), and now that they want to let it be forgotten, rather than saying, “Yeah, OK, forget that earlier order,” they want to order around some completely unrelated third party who is merely accurately reporting on what’s available on the web.

      • June 27, 2014 at 7:05 am

        I am also not a huge fan of the ruling, because it doesn’t go far enough. I think we should all be forgotten eventually, not just the squeaky wheels.

        On Fri, Jun 27, 2014 at 2:32 AM, mathbabe wrote:

        >

        • Auros
          June 27, 2014 at 12:24 pm

          Hmm. I’m more with Dan Savage on this kind of thing. I think that both what the best outcome — and what’s actually desirable — is that, as a society, we learn to contextualize “unflattering” stuff online. Like, in 20-30 years, most candidates for office are going to be people who have some sexy and/or tipsy photos floating around somewhere. I’ll be more suspicious of the person whose record is unblemished — if you care SO MUCH about preserving your public image that you avoid ever doing anything fun or risky, because you’re planning your ascent to power at 18, I’m not sure I trust you with power.

          And, to compare more directly to González, we’re already living in a world where, due to the financial crisis, a ton of perfectly reasonable, responsible young people have gone through bankruptcy. I’d rather have us learn to examine those people’s records fairly, and not instantly disqualify them based on something like that, than try to force the internet to “forget” that it happened.

          Sure, there are some things that have low social value, where knocking them offline might make sense. (González’s case is actually a good example.) But the larger lesson ought to be that people shouldn’t discriminate against the guy for having hit a rough patch 15+ years ago. And the more of us are sporting “visible scars” from our adventures and mishaps, the faster people will learn that lesson. Kind of the same process as the erosion of anti-gay discrimination — once people have somebody in their personal orbit who’s affected, they’re far less likely to mistreat anyone else with similar issues.

        • June 27, 2014 at 12:34 pm

          Good in principle but unreasonable prejudices can last a long time and can create their own kinds of feedback loops that make following them “justified” in terms of money. Just look at redlining in real estate.

          But I am with you about politicians! My preferred political slogan: Where’s YOUR dick pic?

  6. June 24, 2014 at 12:03 pm

    This “you aren’t the customer, you are the product” model is overly cynical.

    For example, what would your model say about Google’s resource allocation toward web search? What will it predict about how much Google cares about the user experience?

    • June 24, 2014 at 2:54 pm

      How much does Google care about the user experience?

      • June 24, 2014 at 10:44 pm

        In a word, I’d say immensely. I am certainly biased, but maybe Rachel Schutt would be a good person to ask.

    • June 25, 2014 at 3:26 am

      How would the answers to these questions change anything about the business model? If there’s a good business reason to feed the cows well, and give them a good pre-decapitation experience, slaughterhouses will also do that. Google is a commercial enterprise that harvests searchers for sale to advertisers. If you think the model itself is “cynical,” you may be right, but describing things accurately is never cynical.

  7. noneya
    June 24, 2014 at 12:16 pm

    I’m freely and (so far at least) happily giving up my data to Google for its services and love the competition it creates in various markets. Even if the “real” purpose of them entering that market is to get more users – who cares? They’ve created amazing competition in e-mail, video, mobile os, etc markets that has benefited me immensely.

    And if (when?) they start making me unhappy with how they use my data, according to that article, as well as my experience, I can switch to competing “free” services and get roughly the same results (they wouldn’t of course be where they are now, if it wasn’t for competition from Google, but at this very moment, that’s where they are).

    So that’s me. Now what about those poor advertisers? I can’t say I particularly care that their cost of advertising is higher in exchange for me getting more competition and better products in a lot of different markets (somewhat ironically including advertising). Can you make me care?

    • June 24, 2014 at 2:56 pm

      That’s you, and you don’t speak for everyone. I’m totally with you, by the way, and I use Google’s services all day every day, but I’m keenly aware that I’m very unimportant to them. Nobody answers the phone when I call Google.

      • noneya
        June 24, 2014 at 3:15 pm

        I don’t get it – the article’s claim (which I completely agree with) is that user’s data is extremely important to Google but now you’re saying they don’t care about you? If they didn’t you’d take your data somewhere else.

        I’ve never considered *calling* Google (so have no idea if such an option exists or not), but I’ve had issues resolved over email.

        • June 25, 2014 at 7:44 am

          They care about people’s information in general, not mine specifically. Like farmers care about cows in general but not a specific cow. I think the analogy holds pretty nicely.

        • noneya
          June 25, 2014 at 12:32 pm

          I honestly don’t know what you mean and why farmers wouldn’t care about specific cows. I’m not a farmer, and don’t have farmer friends to ask them if they care about specific cows, but my naive expectation is that if I was say a dairy farmer and one of my cows stopped producing milk – I’d try to fix that.

        • June 25, 2014 at 12:36 pm

          OK you’re right, I’m not explaining myself all that well. Let me try again.

          If you’re a subsistence farmer in India, and you only have 2 cows, then yes you care very much about each cow. If on the other hand you’re a huge cow farmer in California with thousands of cows, then you think about things like the percentage of cows that die under certain conditions, and you use models to optimize your yields. You actually don’t care about individual cows, just aggregate statistics.

          Does that make more sense? I should have said I’m talking about a huge farm.

          On Wed, Jun 25, 2014 at 12:32 PM, mathbabe wrote:

          >

        • noneya
          June 25, 2014 at 5:02 pm

          Ok, sure, that makes sense. So if something happens that’s very specific to you only and doesn’t affect the larger population – your concern is that Google won’t care.

          That’s a fair concern. In my personal experience, they’ve seemed to care, but maybe yours is different.

          How is this any different though from an exchange of money for their services instead of data? They’d similarly care less about 1 individual user than about large groups.

    • rtg
      June 24, 2014 at 7:55 pm

      But isn’t the issue that as Google continues to collect more and more data, they get a monopoly on having data to use for products such as ad placement? So the reason Google, or anyone, can develop and provide free services like email and search is that those platforms enable their data collection which allows them to better target ads. So customers buy Google’s ad services more often than anyone else’s, because they reach more consumers. And Google can use that money to improve gmail to make it more attractive to new users or to make it less likely that existing users will leave. And sooner or later Google will have such an advantage in terms of collected data that no one else who wants to offer free email in order to get your click data and around which to build services will be able to compete with Google. So no one else will have money to develop your free email.

      Truth be told, I’m not sure how you get around this since I don’t see where Google unfairly tried to gain advantage except maybe in a few high profile acquisitions like YouTube (and no one argued at the time that it was, since video analytics were pretty nascent). But to my mind it’s a problem with no obvious solution.

  8. June 25, 2014 at 12:40 am

    The idea that any pusher of products and services in the modern mold strives to give people what they really want is too naive to be taken seriously. I could leave it to the reader’s worldly experience and capacity for critical thinking to spy the fly in that bit of unctuousness but anyone who needs help seeing it has ample literature going back to the 1950s at least to help them see it.

  9. lace
    June 25, 2014 at 11:38 am

    Excellent!

  10. June 25, 2014 at 6:15 pm

    wow! comparing harvesting meat to harvesting data! wild stuff! take it that you are a vegetarian? or maybe even vegan? so you seem to have invented the ideology of cyber-vegan also?
    surely you realize this perspective becomes a bit cartoonish…. o_O
    am musing about how many years ago, even before hotmail, web-based email was not even an application, and considered a highly useful killer app of the internet. also web-based microsoft outlook was very long in coming, it appeared only in the 2000s long after hotmail, yahoomail, gmail. it would be interesting to read a history on the subject.

  11. Savanarola
    June 25, 2014 at 8:39 pm

    A couple of points: the credit reporting agencies discharge their only obligations under the FCRA when they tell the supplier of the information that you dispute it. They can screw up so badly that they can be sued under the Act – but it’s incredibly hard to prove. I’ve seen only a couple, and I had to cover activity under this law for a couple of years. You have to prove a lot, and the only real penalty is counsel fees (which pretty much always dwarf the fines, which are in the $500 to $1000 range). Only the FTC really has the power to go after the credit agency itself. Yes, the credit reporting agencies are a definite problem. But so much more problematic are the other bottom feeders selling you – like the ones who do “background checks” for employment. Try getting one of them to quit mixing your file with that of a felon with a similar name.
    Google tends to lead to confusion about issues of privacy with issues of market dominance. The EU is fairly on top of this, however. There can be a market for something, strictly speaking, without one party paying in money for it – remember that an exchange of anything valuable is a transaction. So when I use gmail, I pay in information. I can use other options that won’t “cost” as much in information — I lose something in convenience when I do that. Don’t forget to think of bartering markets as markets. The problem in antitrust law then becomes to prove and quantify your damages. . .also remember that the Supreme Court has been radically restricting the right/power of small victims to band together as a class. Which will make abuses in the small-dollar range extremely attractive for more and more corporations. . .count on it. Some of the most restrictive opinions in the past couple of terms of the Supreme Court came in antitrust cases. I commend to you, e.g., “Italian Colors.”

  12. June 26, 2014 at 3:40 am

    Actually, there is more to google’s (or any other adword service) business model. Consider a city, say Nagpur, where the number of shops were fixed and the licenses to these shops auctioned by the city. clearly, things would be more expensive in such a city (unless the number of shops were more than where supply met demand) and the city would make a handsome profit.

    google search is like that since the first-page has only 4-5 places to shop from. its us cows who are lazy and believe google’s “quality” and liimt ourselves to their first page instead of looking through other pages. thus we make google-land into a Nagpur. and this is a vicious cycle of “belief in quality” rather than quality itself.

    also, i am not sure if smaller establishments with local content (e.g. food) and operating on smaller margins, can make it through google auctions. so ulimately, we get less choice and not “what we want’.

    for us cows: i don think there are short-cuts. there is a world outside google-world and outside the internet. we stand to lose if we dont sample it once in a while.

  13. Matthew Dorey
    June 27, 2014 at 4:45 pm

    What’s annoying is that even if you decide to step away from being Google’s product, you’ll find that most of your email goes through google anyway because everyone else has a gmail account, all the websites you visit use google analytics, all the posts you write on wordpress get scraped by Google’s crawlers, and so on.

    Facebook and Twitter are similarly creepy, but dang it, I can’t seem to quit any of them!

  14. afeher
    June 30, 2014 at 3:56 pm

    Google’s services, search, gmail etc, are products. When we use them we are Google’s customers and we pay with our data. Whether the price we pay, or the way Google makes us pay, is fair or not is a different question.

    The “right to be forgotten” law just gives Google customers an option to have some control over how much they are willing to pay for Google’s services.

  1. June 25, 2014 at 6:53 am
  2. June 25, 2014 at 4:45 pm
Comments are closed.
Follow

Get every new post delivered to your Inbox.

Join 1,817 other followers

%d bloggers like this: