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Tuesday, January 17, 2006

Leveraging Edge Competencies

It shouldn't come as a big shock that Google's moving into radio ads.

Now that Google's built an edge competence in making ads and content plastic and liquid - essentially, in harnessing the power of markets and networks that underlie them - it is going to leverage this competence across as many media markets as it can, as fast as it can.

You shouldn't see Goog as the world's information organizer. It's more accurate to say that it's the world's ad allocator.

And worrying about the numbers here is totally missing the point. Because Google has an edge competence - because it leverages the universe of value external to the firm - it can by definition make advertising hyperefficient across nearly all media markets.

For all those who keep wondering what the difference between attention allocation and information organization is - here it is. From an economic POV, they are in direct conflict with one another.

Finally, IMHO, you should note the power of an edge competence. Contrast Google with Yahoo. Yahoo doesn't have any edge (or core) competencies; so it can't leverage anything into new markets.

Despite it's huge, ongoing investment in the edge - Yahoo's picked up most of the major edge players - it still, amazingly, hasn't learned how to create value at the edge, and so all it's edge investments are trapped in silos, because Yahoo's afraid that touching them will devalue them. That's a vicious circle: it would indeed mess them up...but only because Y doesn't understand strategy at the edge.

This example should make that crystal clear.

-- umair // 9:43 PM //


the feeds i read in google feed reader dont cross over into my google web clips subscriptions and nor is my "attention" used to maximise search algorithm in google blog search. which is again separated from google classic web search. google's silos have been emulated and extended on microsoft. on the other hand there are google "cells" creating packs of software i dont need... "be careful what you wish for..."

this goog radio ad deal is classic clicks and bricks acquisition before stock price/growth rates go south.. where you take a pile of cash and high stock price and buy offline stuff that is semi digital and a semi fit and 'evangelise' some greater mystical unknown organisation of the world's information.

why not buy time warner and some ad agencies too... and as the line in the movie the player goes, "If we could just get rid of these actors and directors, maybe we've got something here."
// Blogger redbarren // 11:36 PM

Hey Redbarren,

1) Dude...It doesn't matter if *you* are siloed. The advertiers aren't. Think about it...

2) ...your deal analysis is way off. Google has been looking at traditional media for a very long time.
// Blogger umair // 12:03 AM

yes the advertisers can run untargeted ads everywhere. and hey *me* as a user. who cares ? i'll just click elsewhere. and anyway *dude* google has no success in running a *business* outside of keyword websearch/adwords, which they do better than anyone else ever has. as for radio bolted into adsense, go spend some time with advertisers and see what they think.
// Blogger redbarren // 12:24 AM

Killer post Umair, killer. Especially about Yahoo - they need to get themselves radically reconstructed by the folks they've been paying all that $$$ for.
// Anonymous paulpod // 12:32 AM

I think the key, Redbarren, is that there are possibly millions of advertisers who aren't using radio, but would, if Google made it easy for them.

Sure, coca-cola may have no need to go through google for radio ad buys. But there might be 1,000 advertisers 1/1000 of the size of Coca Cola who will.
// Anonymous Anonymous // 2:05 AM

Redbarren + Anon,

...I agree that Google has no success outside of adwords - in fact, I wrote a series of research notes about it.

But that has nothing to do with any of this - I think Anon nails it; it's about massive advantage within ads.


Thanks - I agree but lucky for us it ain't happening anytime soon ;)
// Blogger umair // 4:07 AM

If Yahoo! is unable to build edge capabilities through acquisition this raises the question of how firms can build these capabilities? What are the processes required and how best to develop them?
// Anonymous James Cooper // 9:44 AM

Umair, good post...on your observation:

>>For all those who keep wondering what the difference between attention allocation and information organization is - here it is. From an economic POV, they are in direct conflict with one another.<<

can you elaborate?

// Blogger Michael Parekh // 4:09 PM

"You shouldn't see Goog as the world's information organizer. It's more accurate to say that it's the world's ad allocator." That's cool with me...i'm hoping Clipmarks will prove to be the world's information organizer :)
// Anonymous eric goldstein // 5:38 PM

after reading that post i *think* the difference between information organization and attention allocation can be summarized by the following:

if google is an attention allocator, its primary goal is to own and sell the end user's attention.

if google were an information organizer, its primary goal would be to own all information and sell that.

in a world where attention is in shorter supply than information, it seems like attention allocation can be a more lucrative strategy.

that was my take, any thoughts?
// Anonymous kid mercury // 7:16 PM

sorry, regarding last post, i didnt mean own all information, i meant organize all information.
// Anonymous kid mercury // 7:18 PM


KM has summarized the difference between information organization and attention allocation pretty nicely.

Brokering information is in conflict with allocating attention - the more attention you can allocate, the less info you can broker. They "cannibalize" each other if ya like.

You can design clever business models which minimize this conflict, but the equation doesn't go away.


Acqs are not generally a great way to build learning. At minimum, you have to innovate...repeatedly, along one of the key economic dimensions of the firm. Think of P&G's branding competence. It's down to decades of reworking brand econ + strategy.
// Blogger umair // 3:51 AM

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