Google, Wal-Mart and the Commons

It's funny how sometimes it all just comes together.

A few days ago, I was quoting approvingly an analysis of how the prices of cheap food at places like Wal-Mart do not reflect the true costs - in terms of damage to the environment, local economies, small farmers etc. And now here is the deeply incomprehensible, but clearly perceptive Umair with some cognate thoughts about Google, its business model and PageRank (inspired by Scott Karp's interesting but depressing posting on linkfarms):

But, of course, there's a loser in this game - there must be, since no attention value is created, but attention is being exchanged. In the end, it's consumers, and, to a much smaller extent, advertisers. Consumers pay by spending attention to which returns are essentially zero, and advertisers pay with clicks whose propensity to consume isn't very high (but not many of them will be so interested in that for another couple of years).

Put another way, It is the expected value of attention of consumers which PageRank is supposed to, somewhat accurately, compute. But as long as there's no real competition in search (and let's be honest - there really isn't), Google can keep shifting the costs of this arbitrage on to consumers.

As Scott puts it, "the media business has been reduced to pure transaction". That's a brilliant statement - he's exactly right. In fact, his statement parallels Mark Pincus's very nice analogy from a few months back - Google as Wal-Mart. The dynamics are very much the same: scale economies are achieved by shifting costs elsewhere; at the expense of consumers, quality, etc.

This naturally led me to the original Google as Wal-Mart posting:

in fact, google feels a like walmart today. once the excitement over trying out their latest release wears off we are left with the realization that they are going to ultimately put the corner grocer (being craigslist) out of business, and suck value out of an economy not add back. and while it's a beautiful day here in san francisco, it's a sad one for me to see a company with so much promise to help the world, primarily focus on helping itself.

do we really want this form of capitalism? where companies like msft, walmart and now google pacman up industries, turning founders into billionaires who then hopefully make big philanthropic donations back to the community. is this sustainable capitalism? yes we live in a free market and yes we can choose how to come together as ants. united we stand, divided we work for google and walmart.

(Lack of capital letters not mine).

And of course, it all fits together, it all makes sense. Commons sense, of course.