Fear & Irrational Exuberance: Alan Greenspan Explains Why Google is Worth Trillions of Dollars

Alan Greenspan was recently interviewed on the Daily Show.

Explaining his old job, he stated:

I have been dealing with these big mathematical models forecasting the economy, and I am looking at what is going on in the past few weeks and say, you know if I could figure out a way to determine weather or not people are more fearful, or changing to more euphoric, and I have a third way of figuring out which of the two things were working, I don't need any of this other stuff.

I could forecast the economy better than any way I know. The trouble is that we can't figure that out. Forecasting today is as good or bad as it was 50 years ago. The reason is human nature hasn't changed. We can't improve ourselves.

Economic Trends Are Caused by Emotions

The prices of commodities often change without any underlying change in value, just a change in perceived value. After all, what is money backed by and why did the dollar lose 25%+ of its value over the last few years? If it is supply and demand related, why did we need to sharply increase the supply of currency? Once a trends start heading in one direction, just the creation of the trend (or perception of the trend) causes a following.

Investments are based on risk to reward ratios, and if people are afraid they are less likely to take risks. People like what is familiar, but by the time something has no perceived risk there is little upside potential, and then eventually the bottom falls out of the market, like what happened with real estate recently.

Tracking Real Estate

Paul Kedrosky recently posted about real estate predicting broader market trends, the mortgage market meltdown destroying a town, and using Google trends to predict real estate markets.

Letting Google Share Other's Emotions With You

Google makes communication faster and cheaper, advertising more relevant and trackable, and audience aggregation more efficient. They also create a lot of cool tools that evolve the web which allow publishers to layer value over the top of them. Not only can you use Google to predict real estate trends, but you can use them to

Trends Are Increasingly Fast

There is already a college course on making Facebook applications. Facebook applications are less than a year old, and colleges are typically years behind the market.

With Google's mass storage of usage data, huge reach, analytics and conversion tracking code they can track the changes of sentiment and demand faster than anyone else can. They can buy out competitors before anyone else understands their full value.

Classifying Fear & Euphoria

Just like Google can classify queries as being informational or transactional in nature, how hard would it be for them to

  • track searches and classify them as pessimistic or optimistic?
  • track searches of people who visit Google Finance often (or any other finance site, given the Google Toolbar) and classify them as pessimistic or optimistic?
  • track changes in outlooks from people who are known thought leaders, have old trusted accounts, and/or have spent significantly through Google Checkout?
  • track search volume and link it to economic activity?
  • assign an economic value to each query based on ad value?

Right there Google is already a better economic predictor than anything the Fed could hope to be, but what happens if Google decides to also buy and sell securities?

How Google Can Influence Markets

Answers.com

A couple years ago Google switched their definitions link partnership from Dictionary.com to Answers.com. Earlier this year Answers.com announced they were buying the competing Dictionary.com, and a Google update caused Answers.com's traffic to plunge.


When Answers.com announced their Google traffic was cut their stock plunged, which indicates two things:

  • Answers.com has a weak business model
  • Google has leverage to make Answers.com do whatever Google wants

In spite of Answers traffic increasing and a recent stock market rally, their stock is still down quite a bit from its highs. Answers recently did gain a bit of value though, when they announced they renewed their Google ad syndication partnership.

Syndication = Spam?

In the same way that an algorithm adjustment can kill the profitability of a site, so can a new Google business partnership with a competitor, as newspapers are figuring out right now. If syndication is a large part of your business model look for that stream of revenue to dry up soon.

Flawed Self Analysis

We are bad at self analysis, but we tend to like / trust / believe what is familiar. If we let machines know us well enough they will find the holes in our personalities and egos that are easy to exploit for profit.

Personalized search helps highlight what is familiar, and makes us trust Google more by reinforcing our worldviews. Not only can Google bring back things you liked in the past, but they can recommend new stuff, guide your thoughts, and share ads as content.

Predicting the Future With 99%+ Accuracy

Not only can Google update algorithms or add features to stun competitors, but they also could easily see real trends first hand (like cuts in marketing budgets, search related product demand, or organic mentions) and trade securities or derivatives in near real time. They also have a pretty good idea of the types of sites their next filters are going to take out.

What more for predicting market trends if Google buys DoubleClick (a leading online ad server) and become a free international Internet service provider? Cory Doctorow recently covered how Google can go wrong, but until more people think along those lines Google is going to grow to be the single largest economic engine in the world, and the best predictor of micro and macro economic trends.

Google is Becoming Wikipedia Without the Talk Page

In a recent post about paid links, Danny Sullivan wrote about how Google's army of engineers are going to start hand editing PageRank scores if they think you are selling links, which is a move that wreaks of desperation.

Google is only decreasing the PageRank for a subset of the sites they actually know about. ...

Google stressed, by the way, that the current set of PageRank decreases is not assigned completely automatically; the majority of these decreases happened after a human review. That should help prevent false matches from happening so easily.

In contrast, if you're a smaller site not deemed as important to relevancy, a harsher punishment of a ranking penalty may be dealt out.

Introducing the New, Corporate Web

If they actually follow through with any of this then Google, which touts the value of PageRank, clearly no longer believes in its value. They already show stale data in their toolbar, and might as well scrap the whole thing and start fresh. Their mind control exercise is getting a bit obnoxious.

Now they are editing PageRank and relevancy scores. They don't edit based on quality of information but based on method of promotion. And if it is a corporation breaking Google's arbitrary shifting ruleset then Google simply decides not to edit, or only fakes that they care.

Google is Wikipedia, but Worse

With this news of more hand editing, Google also shows that they are biased against small webmasters are and actively trying to screw over small webmasters to increase their corporate profits.

Google is becoming much like the Wikipedia, where generalists wrongly assume topical knowledge greater than that of the real topical experts. In some cases Wikipedia is saved by talk pages and community participation that allow the experts to be heard. Google has no talk page though, which means that Google search results will become a dried out and dumbed down version of the web.

The Real Problem With Half Truths & Hand Editing

The response to every move is a counter move. So if they actually try to squash link buying then webmasters will look for indirect ways to purchase links. Google also offers tips on how to sculpt PageRank, but sculpt to much and suddenly the intent is changed, and you are banned.

Why leave such a thing up to a single Google engineer making a judgement call? If they want to increase the quality of the web they need to be more innovative in encouraging the creation of good content, not make people afraid to invest into creating content only to watch a Google engineer kill it.

Link bait is good when you are a large corporation or are syndicating Google spin, but if you are too successful at link bait they will ban your site for it. They did it to one of my sites and they even banned one of their own site.

If you are a small webmaster and get judged by Google don't expect compassion. They have no talk page, and they already paid an AdSense publisher to steal all your content. They don't need you.

How to Do Well in Google

If you are a webmaster assume that Google is lying to you and ignore them. If their view of the web and webmaster advice are reduced to half truths and lies then we can only hope something a bit more honest will come out of their downfall.

While I Was Getting Married....

These are some of the interesting things that happened while I was getting married.

Understanding the Psychology of the Google User (Through the Actions of an Engineer)

Frank Schilling and Shoemoney recently had two great posts about Google. When combined I think they paint a picture of Google that skips past the rhetoric and double talk. Frank said:

As a publisher, I've always viewed Google as a bit of a predator in this context.. taking publishers in, convincing them to serve Google ads, and then allowing those publishers to toil for Google, working sites into their algo to serve the beast, all for increasing revenues, finally to have Google's algorithm scrub you from the index if you become too successful at punching ad converting pages to the top.. Good publishers take on the role of sacrificial lamb to show the algo guys where the holes are and they get to ride the express elevator to the street as a reward.

Shoemoney's video about avoiding getting hit by Google stated that the key is just don't do things that make Google look stupid or undermine the perceived magic that occurs at Google.

My site that Matt Cutts hand removed from Google's search results got too much exposure and Matt killed it not because the site was spammy, but because it was mine and it was getting too much mainstream traction and exposure. My marketing was too appealing, aggressive, and effective. In another year that site would have been untouchable, and that thought made Matt Cutts feel uncomfortable.

The Changing Desires of the Magical Fictitious Average User

How Relevancy is Defined

With Google, the whole concept of relevancy is a shifting mind control game. As long as you do not get the wrong types of exposure you can make a lot of money without them doing anything about it. Go too mainstream with something a little sketchy or something with the scent of smart SEO to it and they will try to kill you out of resentment, jealousy, and to try to protect the lies that their business model are based on.

Major Relevancy Changes at MSN, Yahoo, & Possibly Google

MSN Search Update

MSN announced they are upgrading relevancy and coverage. The increased coverage likely means that more inbound link sources are getting indexed. From looking at rankings of a few of my sites it looks like:

  • anchor text got A LOT more weighting
  • many lower authority links that were not passing weight (due to not being in their index) are passing weight. For some competitive core industry related phrases (not SEO, another industry) I see a site that went from #150 to top 5 based on the anchor text of lots of low authority links.
  • fresh links are still heavily trusted, but sites with older links but few fresh links now rank a bit better than they used to in the older MSN, likely due to the more comprehensive index coverage. for as much as Google has beat down some directory links, MSN just gave them a lot of love.
  • MSN is still screwing up some navigational queries. For example, my homepage does not rank for seobook. Though I have already seen them fix some of these issues.
  • Internal anchor text still counts, but it might seem slightly demoted, as a side effect of more competing pages and more links getting indexed.
  • MSN mentioned that they were also looking to get more into universal search.

Yahoo! Search Update

Yahoo! recently updated their infrastructure, then rolled out universal search and are getting more aggressive with search suggestions. You can see they are serious about universal search because they are not only promoting their internal content, but they are also promoting YouTube videos. I believe this also indicates that YouTube will remain the #1 video destination in years to come.

Rand also noticed that Yahoo! is using their homepage to drive search queries for recent news. As Yahoo integrates their own content in their SERPs even more aggressively look for them to get more aggressive on this front to help further their search brand.

Google Tests

You can read about the Google test on WMW, which is seen on some Google IP addresses, but has yet to spread to Google.com.

The Key to Ranking for Generic Viagra

As noticed by Dave, some of the Google search suggestions are leading to thin affiliate sites. See generic viagra or generic valium for example.

As shortcusts and search suggestions get more advanced and more common they are going to be cheap traffic sources for those who understand the engines well enough to benefit from them. As search engines roll out these features you can always keep searching and keep testing until you figure out what causes them to select certain pages.

Radiohead Joins Google in Destroying Traditional Publishing & Media Companies

Radiohead announced that you can pay whatever you like for In Rainbows, the latest album from the best band in the world. A TIME article states:

Thom Yorke told TIME, "I like the people at our record company, but the time is at hand when you have to ask why anyone needs one. And, yes, it probably would give us some perverse pleasure to say 'F___ you' to this decaying business model."

And the record executives realize what is going on

"This feels like yet another death knell," emailed an A&R executive at a major European label. "If the best band in the world doesn't want a part of us, I'm not sure what's left for this business."

Artists will have to become publishers, and publishers will have to become artists. You don't need to sign a contract or jump on a plane to find customers. Anyone who has a blog with a following has no need for a publisher, outside of vanity.

Exploiting Passion for Profit

Buying Attention & Building Trust

With content that you freely distribute you are primarily trying to build relationships with people who don't know you and have never bought from you. Since attention is limited you have to make your content accessible to gain market attention.

Highbrow = Low Readership

Most potential buyers can not distinguish between great information and average information, but most people...

  • can distinguish between well formatted information that is easy to read and information that appears too complexFormatting plays a big roll in selling content.
  • follow the crowd and look for signs of trust from others (recommendations, on site comments, etc.)
  • care about enthusiasm and topic selection (why read a site that is not unique and/or too negative?)

Some of My Errors

One of my biggest problems from a conversion standpoint is that I often write copy that does not sell...content that speaks well to some, but not to the buying market. Many posts exhibit the following traits:

People want to feel the comfort and accessibility of reading a for dummies guide one page at a time while being told they are becoming gurus / experts in the process. Which creates an interesting problem for anyone trying to sell how to information. Do you aim to make it as accessible as possible? Or do you aim further along the learning cycle and write at a higher level?

Where to Aim if You Are Looking for Profit

There are more people at the bottom of the pyramid, and if you capture their attention that will likely make you considered an expert to most outsiders looking to your field. As the online experience improves hobbiests use the web much more frequently. Yahoo! and MediaVest have done research about hobbyists, calling them Passionistas:

Passionistas heavily engage with communities of like-minded consumers who use email, text messaging, and instant messaging significantly more than typical users, and are more likely to create and share user-generated content online such as photos, blog posts or videos about their passions.

Because of their intense engagement around sharing information, Passionistas are 52% more likely than typical users to recommend or influence others about brands aligning with them.

In the SEO market (and probably most business related markets) it seems passionate hobbyists new to a field are much more likely to exuberantly promote brands than those who have been in the field for a great deal of time. I am not sure how well that translates to other fields though.

How Can I Use This Post to Help Market My Site?

Become a Platform for Passion

If top rated competing sites lack passion you can own your market in well under a year. If they are passionate then to stay competitive you have to raise your game and become a platform for passion.

Microsoft recently held a search event for SEOs to show they are serious about search. Google gives passionate charities free services to promote YouTube and Google Checkout. Cater to the passionate and create purpose driven media - use the same marketing techniques that Microsoft and Google use.

Make Your Site Look Alive

You can always add interactive features to build community interest. When you do so people are more likely to participate (fueling more people to participate) and they are more likely to market your site because they feel a sense of ownership.

My designer place the recent comments and this week top 5 sections on this site before I ever saw it. And I love it because it gives the sense that the site is dynamic, alive, and active. If you receive awards or have many feed subscribers publishing those signs of validation help improve your credibility and bring in new visitors.

Virtual Demand is Becoming Real Demand

Amazon tapped some of their top reviewers to review transcripts for a book publishing contest. How long until publishers are no longer required? You can look at the success of shows like American Idol to see how much people want to be engaged with what they consume. Also look to the stats about how often passionate hobbyists turn to the web to fulfill their wants. Deep profit margins exist in deep pools of passion.

Eventually consumers will go from hell to create the markets THEY want. The businesses with passionate communities will grow while the remaining businesses go to hell. Look for new ways to track demand and get feedback to create what people want. You don't even need a product off the start...just an audience willing to give you honest feedback.

What if Web Advertising Was Banned?

Ad Age's A Sign of Things to Come? mentioned that the city of São Paulo banned outdoor advertising, and the movement is picking up steam elsewhere.

São Paulo made history by banning ads on billboards, neon signs and electronic panels, and now Rio de Janeiro is considering a similar measure.

Advertising on the web is not yet heavily regulated, but what happens to the value of domain names or other web assets if certain forms of internet advertising become illegal? I would expect it would increase the value of names, clean traffic streams, and things that operate similarly to public relations while squeezing the margins on less organic forms of marketing and advertising.

The Next Break in the Web

Webmasters currently face link rot as a major website maintenance problem. As we rely more on Google and other third parties for features such as hosting, ads, and content syndication what happens when some of the business relationships that are opening up content fall away or search engines reorganize and rebrand their offerings?

A few weeks back I made a post about the book being a dying format, and in that post I have a Google book snippet. Within a week that snippet was broken. I had a Google CPA ad integrated into one of my major websites and the ad went away, breaking 10% of a large site and making it look like spam.

Even some of the services that are not broke will likely be drastically different in a few years. Google maps is really open because they need marketshare, but after they become the clear market leader will they stay fairly open? How long until we have ads in everything?

A good webmaster service that would be exceptionally useful is something that scours websites and looks for broken stuff. Think a Xenu Link Sleuth for multimedia. Another would be how to guides on how we can enable interactivity without becoming too reliant on any third parties that break our sites.

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