Facebook is not a content company, he said, just as a telephone company is not. In fact, in some ways Facebook is like a telephone conversation, with all your friends on the same call. But on this call, your friends can share photographs, text, political summons to action, video, and music, or can click to make purchases. “There is a big misconception around what social networks are,” Zuckerberg said. “People think there are communities, or media sites, where people are going to meet new people or make new connections or consume a lot of media. But what they really are is a completely different paradigm for people sharing information. The traditional media models are all centralized. What we’re enabling here is decentralized individual communication. When that happens with a certain level of efficiency, it starts to become easier for people to communicate and get a lot more of their information through this network than through a lot of the centralized approaches they used before.”
This is precisely why Google, starting in 2007, began to worry about Facebook. If Facebook’s community of users got more of their information through this network, their Internet search engine and navigator might become Facebook, not Google. As media companies agonized that Google and YouTube were capturing more eyeball time, Google began to have the same concerns about Facebook. What if Facebook became the equivalent of AOL’s former walled garden, the home page, the place its users went not to roam but to comfortably nest? Google depends on more and more people surfing the Web. Relations were further strained when Microsoft outbid Google in October of 2007, laying claim to 1.6 percent ownership of Facebook and establishing Microsoft as Facebook’s advertising sales agent.
There was another reason Google fretted about Facebook. The social networking site operated on a different business model than Google’s. Like Flickr (Yahoo’s photo-sharing site), Twitter, or Linux, they are part of what Lawrence Lessig, in his book Remix: Making Art and Commerce Thrive in the Hybrid Economy, refers to as hybrids-companies that take the shared efforts of many and build communities that help create commercial value. They are not strictly part of a “commercial economy,” as Google, Amazon, and Netflix are, according to Lessig, nor are they strictly part of the not-for-profit “sharing economy,” as Wikipedia and the open-source Linux operating system are. The hybrids, wrote Lessig, are those that combine making money with sharing-as Red Hat did by offering Linux for free but selling consultant services to corporations; as Craigslist does by offering 99 percent of its listings for free; as YouTube does by allowing users to freely share videos; and as community-building sites like Facebook do. Google was free, but it was not building a community.
While Google warily watched Facebook, a real skirmish broke out between Google and the bear that is the advertising industry. Ad executives had been uneasy for some time that Google would displace media-buying agencies. But there were additional concerns. How many more ad dollars would Google siphon from traditional media companies? Would Google disintermediate the sales forces of these companies? Might Google bypass advertising agencies and develop a direct relationship with advertisers? If Google’s automated auction system brought the cost efficiencies Larry Page touted, would it not inevitably lower old media’s advertising rates as well as the fees ad agencies charged clients? Perhaps the overriding concern was the one identified by Herbert Allen III, who said of Google: “They want to be the digital advertising network for all forms of advertising. They want to be the advertising operating system, sitting in the middle of all advertising.” Google was indeed “fucking with the magic.”
Concern turned to fright in April 2007 when Google paid $3.1 billion to purchase DoubleClick, outbidding Microsoft and Yahoo. “There’s no way Google would have acquired DoubleClick if not for their fear of Microsoft,” said a DoubleClick executive close to the negotiations. The executive said that because Microsoft and Google were bidding against each other, DoubleClick was able to inflate its sales price by about $1 billion.
In the world of online advertising and marketing, DoubleClick was as dominant in its arena-placing display advertising-as Google was in placing text ads. DoubleClick provides the digital platform that allows sites like MySpace to sell online ads and advertisers and ad agencies to buy them, with DoubleClick culling from its database the information that targets the ads. The acquisition gave Google “an opportunity to be the infrastructure backbone for all ad-serving on the Internet,” said a worried Wenda Harris Millard, then Yahoo’s chief sales officer. In addition to potentially controlling the plumbing, DoubleClick offered rich new data-mining possibilities. By combining DoubleClick’s data with its own, Google would house an unrivaled trove of data. As Randall Rothenberg, the CEO of the Interactive Advertising Bureau, said the day the deal was announced, “You can dive deep into that data and say, who were those people, where do they live, what were they doing when they looked at those ads?”
DoubleClick’s promotional materials boast that they “track more than 100 metrics,” including which ads users download, how long they view them, where they scroll, what links they click on, if they view an ad and later visit the site, what products interest them, what ads “resonate the most,” what they buy and choose not to buy, and how much they spend. According to then CEO David Rosenblatt, the company delivered as many as twenty billion online ads each day. For the “sell side” (the content providers, who in the online world are called publishers), DoubleClick provides tools that help them evaluate the inventory they have to sell and where to target it, delivers the ads, and reports the results. For “the buy side” (advertisers), it provides the same service.
Google’s purchase of DoubleClick triggered a flurry of digital advertising acquisitions. Within months, Yahoo, AOL, Microsoft, and the WPP advertising/marketing colossus each swallowed online marketing agencies that compete with DoubleClick, with Microsoft spending six billion dollars, twice what Google had paid, to buy aQuantive. Why the rush to acquire digital ad agencies? And why was DoubleClick sold?
Since DoubleClick and Google share the same one-square-block building on West Fifteenth Street in Manhattan, CEO Rosenblatt joked that the free food was an enticement. But the main reason was that he saw the sell side changing. DoubleClick had promised to transform the business of selling remnant ads, the roughly 30 percent of an ad seller’s inventory that is hardest to selclass="underline" the least read part of the magazine, the least watched TV shows, the least listened to radio programs. Selling these remnant ads was becoming more expensive for DoubleClick, and Rosenblatt feared that a Google or a Yahoo would come along and offer to sell these for free in exchange for an opportunity to sell more of a client’s premium advertising, luring away his customers. DoubleClick needed to widen its scope. “We were selling transmissions. We were not in a position to sell cars,” he said. In Google, Rosenblatt saw not just “the single best monetization engine on the Web,” and a company with a base of over one million advertisers, but more vitally, a fellow and necessary “middleman” who did not compete with clients by entering the content business.