ANGELES — Google Inc.’s latest technological marvels
point to a future where you’ll never need to visit
websites, write a term paper or stress over what to buy
for your mother’s birthday.
consumers seeking convenience and speed, it all sounds
great. But how will any of it make Google money?
Mountain View, Calif., company’s apparent transition
from go-to search engine to omnipresent virtual
assistant probably will require rethinking its
tracking Web browsing, emails, chats and more, Google
has become a dominant force in digital ads. It mines
that wealth of personal data to present ads to the
people most likely to care about them. Google’s parent
company, Alphabet Inc., relied on that ad machine for
about 88 percent of its $75 billion in revenue last
most of the ads Google technology places across the
Internet won’t make sense anymore if the types of
products and apps the company announced last week at its
annual I/O developer’s conference catch on. For
instance, the small Google Home drum listens to spoken
commands and responds with words of its own. Where does
an ad with a link, a picture and two lines of text fit
in? In general, Google wants to provide instant answers
rather than having people peruse traditional search
results, some of which are ads.
ad business isn’t going away any time soon, but they’re
looking at all these new areas and as those products
gain a larger user base, the question is how do you
monetize those?" said Martin Utreras, senior
forecasting analyst at ad industry research firm
declined to comment, but an individual familiar with the
company’s thinking said there are no immediate plans
for ads in the new products and apps.
issue for Google goes beyond its new vision for search.
People are spending increasing amounts of time using
apps such as Snapchat and Facebook, which have turned
that consumer attention into their own fast-growing
advertising businesses. Facebook formalized ad-selling
in 2006, about six years after Google, and now has about
one-fourth the ad revenue of Google.
apps represent a problem for Google because they’re,
in many cases, assembling data about users that
advertisers could find more interesting than what Google
collects. In addition, some apps are presenting ads in a
more creative fashion than what’s offered by Google.
The presentations get around ad-blocking software and
command high fees from advertisers.
analysts say it’s too early for them to raise concerns
about the rise of personal assistant gadgets and apps
and Google’s move away from old-school search. For
now, combined revenue from Google’s YouTube video app
and the Play app store is more than making up for
diminishing interest in traditional services. They also
have confidence in Google coming up with answers.
continue to believe Google is investing smartly for the
long-term and building competitive" barriers, RBC
Capital Markets’ Mark Mahaney said in a report last
last week’s unveiling of the forthcoming Home device
and the chat apps Allo and Duo show that Google
recognizes it can’t let the likes of Amazon.com,
Snapchat and Facebook go unchallenged.
offerings are attempts "to build up their own
services and attract as many, if not more, users than
their competitors," said Mark Hung, a vice
president at research firm Gartner.
are reasons to like them. Allo learns a user’s writing
style and automatically suggests replies to messages.
Home, whose price and release date weren’t disclosed,
includes Google’s new assistant tool that will combine
contextual clues like a user’s location and the time
with multiple databases to present actionable
information (such as a birthday reminder smart enough
not to suggest sending a bunch of booze emojis to your
amassing users is half the challenge. Shaping ads will
be the other.
someone asks Home to book a dinner table using OpenTable,
should Google’s virtual assistant first run a brief
audio ad for a different nearby fine-dining spot? If a
user turns to Allo to chat with a bot developed by
retailer Sephora to buy a new makeup set, can Google
interject with a video ad for a new hair curler?
does Google forgo ads on Home and Allo and simply charge
a fee to OpenTable or Sephora for bringing them
business. Transaction revenue could be "a lot more
lucrative" than standard ads, Hung noted. And where
do competitors such as Yelp and Macy’s fit into the
virtual assistants, we’re at where Web pages were in
1995," said Omar Siddiqui, chief executive of
chatbot development tool-maker Kiwi Inc. "Business
models have yet to emerge."
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possibility would have Google extend its app store to
third-party virtual assistant services. People browsing
the app store could see Sephora’s shopping bot on the
top of their smartphone screen because the company has
paid for promotion.
with Home, Google is "in the business of providing
fast, accurate answers, so they are unlikely to
interrupt the flow with an audio ad," said Jason
Hartley, vice president and search practice lead at ad
could come out ahead in the end because it gathers users’
personal preferences and desires as long as they are
using its products. Advertisers will fork over more
money when additional data lead to more efficient
spending, Hartley said. Assuming Google can continue to
place ads in other companies’ apps and draw people to
its standard mobile searching tools, maintaining a
steady business shouldn’t be a challenge.
provides revenue growth is less clear.