They’re Not Exactly Tech Companies

Why do we call businesses like Google, Facebook and Twitter “tech” companies when most of what they do — and the source of most of their revenue — is advertising, sociologist Darwin Bondgraham asks in The Washington Spectator.

“With Google, and many other firms among the new breed of ‘tech’ companies, the computer has become more than a mere brochure,” writes Bondgraham. “The computer is an incredibly sophisticated and persuasive salesman. Brochures are inert documents a shopper flips through. The computer as salesman is an agent, watching us closely, collecting data about our wants, and subtly implanting desires in our consumer minds.”

“Google is the best case in point,” the sociologist continues. “Google has never been a ‘tech’ company, whatever tech is supposed to mean anyway. Google is an advertising company, and it makes most of its revenues from selling advertisements. Many of the fastest growing so-called tech companies are just like Google. The core of what they do, and how they make money, isn’t about the math and science of building things. Rather, these tech companies acquire, process, and sell information for the singular purpose of steering potential consumers toward a purchase.”

Google’s financial filings make this clear. As the company’s executives state in Part 1, Item 1 of their latest annual report to shareholders: “We generate revenue primarily by delivering relevant, cost-effective online advertising.”

So just how big a part do ads play in Google’s overall business?

— Posted by Alexander Reed Kelly.

The Washington Spectator:

Ninety-five percent of the company’s revenues were thanks to advertising in 2012. In 2010 and 2011, it was 100 percent. Only with the purchase of Motorola Mobile last year did Google’s revenues shift ever so slightly from advertising to some hardware sales. Last year Google raked in $31 billion in earnings by selling ads. Compare that to the revenues of two of the largest traditional ad companies that just merged, Omnicom, which took in $14 billion last year, and Publicis which claimed $8.8 billion.

So why do we call Google a technology company if it’s main business is really selling ads?

It has everything to do with how Google steers customers toward purchases. The story of Google’s founding is well known by now. Two Stanford grad students were playfully seeking a better way to search the internet. In a fit of genius (and with generous federal research funding and the support of colleagues) they wrote an algorithm that made ranking web sites easy and useful. “Don’t be evil,” they said.

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