Tech Bound #49: Google’s powerful Data Network Effects

6 min read

There’s so much for me to write about in this episode – I don’t even know where to start! So, let’s begin with some personal stuff.

I also want to bring a nice video I shot with Ross Hudgens from Siege Media to your attention. I had so much fun doing this because Ross and his crew were super professional.


And then there were like a thousand other things that happened:

  • Apple acquires Shazam, which was one of the first app on the App Store (Apple)
  • Kevin System and Mike Krieger leave Instagram/Facebook (NY Times)
  • Adobe buys Marketo (TechCrunch, Tom Tunguz)
  • UBER is apparently in talks of buying Deliveroo (andMiddle Eastern ride-sharing rival Careem) (Bloomberg)
  • Sirius XM buys Pandora for $3.5bn (The Verge, Fortune)

… aaaaand Google changes Search! I wrote a whole article about all the changes and how they change Google and SEO in the next couple of years: “A new Google – from discovery to answer machine“. So, instead of covering that again here, I want to narrow down on a CNBC article and how Google uses data network effects because Google is THE best practice for that.

Google everywhere, companies on a shopping spree, new iPhones, a new Fantastic Beasts 2 trailer, a new Yuval Noah Harari Book – summer break is officially over!

Google’s algorithm and data network effects

This week CNBC published an article that I think we should pay a lot of attention to. To be fair, it got a bit overshadowed by Google’s 20th anniversary announcements.

The article is about how CNBC journalists sat in on a meeting at Google in which a feature for organic search was tested.

One line stood out to me:

“Google in July made some significant changes to the guidelines that, among other things, required raters to consider the reputation of a page’s author. As a result, pages with no clear author may now be ranked as lower quality.

Say what?

That’s a strong hint at the recently rolled out “Medic Update”, which was assumed to be about E-A-T. You might remember episode #43: “How to improve E-A-T of a site“, in which I covered the update and gave some advice on what to do in case you got affected.

But the main topic of the article is Google’s use of experimentation and what it says about building out competitive advantages. Two episodes ago, we had lock-in effects and how Apple uses them to gain a competitive advantage.

Google uses data network effects to get ahead, a different kind of “moat”. The most common network effect is about users. Yelp, Airbnb, or Tripadvisor and many others use User Generated Content to provide more value for other users. Google gets so many users that it can experiment faster, hence learn quicker, implement those lessons and get more users. You get the idea.


Network effects allow a company to grow faster and defend its business better. That’s, for example, an advantage Netflix has over HBO. Even though the latter might have better original content, Netflix has a better digital approach. It uses machine learning at large scale to figure out what users like to create and suggest content. Google does the same, just to refine its search results.

In that context, the following quote from the CNBC article about keeping ranking factors completely secret is nonsense:

The company intentionally doesn’t reveal all the factors steering its ranking system, in part because it doesn’t want people to try to use that information to game the system — there’s a lot of traffic and money at stake in appearing at the top of search results. This secrecy also helps Google stay ahead of potential competitors.

Of course, I’m not saying that Google should publicize all its ranking factors but the no-talk policy Google has followed in the recent years probably does more harm than good. After all, Search is only one piece of the incredible eco-system Google created and with its size and power I’m not sure another search engine company could harm it. Microsoft’s Bing, the third largest search engine after Youtube – which also belongs to Google –  has only 9% market share world wide. DuckDuckGo recently secured another round of funding – a measly $10m. So, I don’t see any competition for Google right now. Yes, that’s also what Yahoo and others thought 20 years ago. There’s always a chance, but currently, I don’t see it.

Another paragraph of the article hits it on the head: 

In all, Google’s search results have come a long way from its original “10 blue links” to other websites. As voice search becomes increasingly important for Google and other big tech companies, it has relied more on its Knowledge Graph, a database of more than a billion entities with 70 billion connections between them, and on ‘featured snippets,’ which surface answers extracted from webpages at the top of search results.

Right, Google Search hasn’t been just 10 links anymore for quite some time now. Voice Search will capture a good chunk of searches and featured snippets are a precursor of that. Google can use featured snippets and refine them with testing and user feedback while mobile and desktop search is still prevalent, but in a couple of years, these featured snippets will be the answers that people hear out of their Google Home (or maybe Alexa… or ApplePod?).

Making the jump to the next wave of technology is crucial and Google might be able to use the data network effects it has now to be present in the voice-first future and IoT. Facebook is an example of a company that successfully made the shift to mobile and tremendously benefitted from it. Microsoft missed mobile and had to pay a big price.

The good news for Google is that user behavior and reactions can still be tested with voice search – no competitive advantage lost. But the competition (Amazon) is fierce and has a head start. It will be interesting to see how aggressive Google will get to leverage its position as “search engine” to make the jump to voice assistants.

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