Whats Next for Google

The typical American business executive likes incremental changes, like, perhaps, an 18 percent speed increase. Or maybe a little bit more efficiency over here, and some additional functionality over there.

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PowerPoint slides to the contrary, a paradigm shift is the last one thing most executives honestly want because, to the typical executive with a large company, any monumental shift raises the frightening possibility that the company will end up a lot smaller than it is today.

Thats why its typically the startups and the small niche players that embrace big-picture change, if only to get someone to listen to them.

But what if one of those small companies that embraced big change—say, the Internet and its subsidiary, the World Wide Web—got big?

Thats the question—and the challenge—facing $11 billion search giant Google. At a recent media day at Googles New York offices, Google executives and managers discussed the enormity of the current e-commerce conundrum, and how the company is struggling to find the best way to deal with it.

Read more here about why providers are ogling Googles wireless possibilities.

Consider this: In the early days of e-commerce, a typical retailer and manufacturer might have been marketing between eight and 12 products, especially with search-engine links. Today, that same company would typically be doing the same kind of Web marketing with some 12,000 products, said Tim Armstrong, who serves Google as its president of advertising and commerce for North America.

This new environment, Armstrong and other Google people said, requires a very different approach. Googles answer is something called an Asset Map, a way to visually lay out every single one of a retailers assets, including all of its products and services. This, theoretically, allows a company to see not only which of their products are not covered, but to try and project some kind of return-on-investment analysis.

Armstrong argues that this is morphing ad budgets into operational budgets. Is a Google ad akin to a traditional piece of advertising—something that an ad budget should fund—or is it closer to the cost of a car dealer building a new showroom and dealership?

Google is making the argument that their auction-driven pricing model is more than a marketing cost. Google execs argue that its actually a tool to help match inventory and purchase patterns with inventory. Thats because, they argue, the variable pricing allows budgets to fluctuate with consumer interest.

In theory, that should allow better real-time information about demand, in a much more predictive way than simply examining purchases. In other words, if the number of times consumers look at ads for SUVs fluctuates in the same way during different months (or during different weather patterns), that can help influence core business purchasing decisions.

Another core change for e-commerce is the explosion of social networking and video sites—primarily launched for a younger audience—including Facebook, MySpace and YouTube (now owned by Google). These sites create the potential for customized, focused campaigns in a way that simply didnt exist a decade ago.

Armstrong said the social networking sites caught him off-guard—"the traffic is really incredible," he said—because he didnt initially expect search to be a factor. He saw videos as something people would merely browse. The high demand for video searches was "a very nice surprise."

Then theres the mobile movement, which places limits on ads (minimal screen size, less RAM and much slower bandwidth) but also opens up possibilities by being with a consumer at all times, and including very precise location information.

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