Google's Business Model: YOU Are the Product

Datamation content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

Google does it again, with its new Google Latitude offering. Latitude lets you automatically share your location with friends, and let them share theirs with you. By using your phone or Web browser, you can simply look at a Latitude Google Maps mash-up, and see where everybody is.

Like many Google offerings, Latitude is cool, easy, functional, useful, appealing and free.

Why do they do it? Why does Google invest so heavily in great products, then just give them away?

There’s only one way to understand Google’s business model, which is to understand that Google’s services are not products. In fact, Google has only one product. And that product is you. Or, rather, us — all of us. That sounds like an extreme position, but I mean it literally.

Google makes billions of dollars in revenue each fiscal quarter. That money comes about by the same process that all companies use: They sell a product to their customers. Their customers pay money for that product.

Who’s Google’s customer? You? Really? When’s the last time you paid Google for anything?

Advertisers are Google’s customer. What do they sell to advertisers? They sell you. Or, at least, they rent you out, or provide access to you.

They improve their product by improving you. That’s where Google Latitude comes in. Latitude represents merely the latest in a long string of Google offerings designed to condition you for hard-core contextual advertising.

With each new privacy-invading service, Google customers feel mild shock, followed later by acceptance.

First was the realization that our personal information is always available to anyone via an ordinary Google search. Remember when you first looked at a satellite map of your house on Google Maps? You went through the same shock-then-acceptance process with Street View. The idea that Google computers were scanning all our e-mail in order to display advertising related to the conversations we’re having took some getting used to as well.

But we got used to it. We got used to all of it. And that’s the purpose of these free services. By making the violation of our privacy desirable — by mainstreaming the use of technologies that used to exist only in cautionary science fiction — Google is building a better product. They’re building a better target for advertising.

Google Latitude isn’t a product. It’s an automated product-development tool. Its purpose is to soften resistance to constant location tracking.

Once we’re all enjoying and depending upon Google Latitude for work, to keep in touch with our kids and to meet up with friends and family, Google will drop some advertising in there. And, oh, boy will it be contextual.

Google Latitude includes a chat feature. Mark my words: Google will one day throw a switch and start eavesdropping on these chat sessions the same way it does on Gmail. Google’s servers will combine what it knows you’re talking about — “hey, let’s grab a beer” — with what it knows about your location, and offer up paid advertising that puts it all together. “Click here to meet at Billy Bob’s Bar & Beanery.”

Over time, Google will likely combine all it knows about you from your Google searches, Google Calendar appointments, purchases via Google Product Search, interests on Google Reader, and conversations in Gmail and Talk — along with your location — and constantly offer you eCoupons, special deals and advice about nearby products and services. Your phone will become like a personal assistant, always ready to offer you what you want before you know you want it. But all those products and services offered will be Google advertisers.

Google will become what it has always wanted and intended to become, which is an advertising gatekeeper as indispensible as Microsoft is (or was) with Windows, Apple is with downloadable music or Amazon.com is with online book sales.

But in order to get there, Google needs you to change. They need you to drop your resistance to being listened to, tracked and monitored at all times. They want you to be the best product you can possibly be. Google’s customers will love you.