The Logic Behind the Demise of Google Tags

When a company like Google discontinues a product like Tags there is almost always more than one reason.

Google’s publicly stated reason that they need to focus their efforts on which technologies they expect will yield the most benefit to users and businesses is very plausible.

I think that the statement is accurate as far as it goes.

At best Tags offered little benefit to businesses that were using them. While it allowed for a listing to be visually highlighted and its difficult to value the benefit of that in terms of additional clicks or calls, the product itself generated a very low click volume. There was little accountability nor possibility for accountability of those actions either.

In accounts that I examined, Tags generated between 1.5% and 4% of the total actions reported in the dashboard compared to all of Google’s reported actions. Once Google stopped allowing a Tag to be directed to a website and those Tag actions were directed inward on Google towards a photo or the Place page, a Tag became even less valuable (and less trackable) for a merchant. The change to blended results further decreased the value of Tags in the Places world. At least the other, free actions like driving directions or clicks to your website in Places offer mostly direct and quantifiable value.

The logic of whether to keep a given product in the mix needs to address not only individual merchant needs but Google’s corporate needs as well. You also have to remember, Google is an large stock held company that trades on the public capital markets.

To keep capital flowing, companies like Google need to show regular and steady increases in their income. Google has generated average revenue gains of over $4.5 billion a year for the past 4 years. If you discount 2008 as a recession year then they increased revenues by an average of $5.3 billion a year.

Google needs that sort of growth and more every year to be a contender in the capital markets. Growth of their traditional ad products has slowed as a % of sales. Everyone, including Google, is looking to Local for the next ad growth market. Some companies, like LivingSocial seem to have found a way to access local ad revenue and are already on track to reach a $1 billion of revenue for 2011.

A fixed price product like Tags puts a very real cap on total potential revenue and growth that can ever approach those sorts of numbers.

There are 16 million or so businesses in the US. Even if everyone one of those ponied up for Tags it would generate only $5 billion or so a year. With a self serve product it is estimated that the maximum uptake is about 25% of the potential market. In Google’s case, because of the steep drop in benefit once a Tag no longer shows on the main SERPS, the actual market is likely to be significantly less than that. Thus, even over time, it is unlikely to be able to contribute significant annual growth to Google’s revenue stream. At least not at the level they need.

Income though is only part of the equation. Costs are the other side. And the Local market requires hand holding. Unlike the early adopters of Adwords that could survive with little human contact, the new markets Google is going after minimally need a voice on the other end of the phone. As Groupon, Yelp and LivingSocial have demonstrated, sales into local markets do best with a high touch. Google, at least initially, is going for a light touch with phone support. But even one call from a Tags account into the support line a month would likely eat up the total monthly income. Given the current number of problems with Places, Tags was destined to be a loser.

Google, while still struggling in the local space, has developed two products in Boost and Adwords with local extensions, that have higher upsides and because they function independently of Places fewer problems. Google is obviously searching for a growth market like daily deals but has yet to succeed. You noticed that in the current corporate realignment, they put someone at the head of Local, Jeff Huber, with lots of Adwords and commerce background not lots of local background.

Whether Google is done “clearing the decks” is not yet clear. What their next income move in local will be is unclear. In abandoing Tags,  Google is essentially abandoning the hundred million dollar a year market in search of the multi billion dollar a year market. When Jeff Huber says to provide him with “any suggestions you have on new or different (preferably innovative) things we should be doing” you can be sure that the subtext to that statement is income generating innovative things.

Please consider leaving a comment as your input will help me (& everyone else) better understand and learn about local.
The Logic Behind the Demise of Google Tags by

7 thoughts on “The Logic Behind the Demise of Google Tags”

  1. @Mike,

    I always thought of Tags as putting the cart before the horse. Until you fix the issues and get the masses of businesses to claim their listings it’s not going to work, even if it was free. Plus, I agree, high touch is essential to get most SMBs to engage in the process.

  2. Great post Mike – very well thought out and I agree. The one obvious opportunity is Coupons. If I could tell our clients that if they posted a coupon on their places listing – and it will drive more traffic or conversions – then it would gain considerable traction. How to do this? I’m not quite sure. There is some magic-un-thought-of ingredient somewhere.

    First Google has to decide if they will call these things “Coupons” or “Offers”. “Coupons” seems nice. It’s something simple that everyone already can wrap their brains around. I hope they don’t go “Branding” some “New Thing” like “Tags” which is yet another thing that SMBs can’t keep track of.

    How about these “Coupons” appearing in place of the top Adwords listing somehow. In some way the coupon relates to a Places listing that is visible on the page. In other words, if your business is not listed on the page then the coupon does not show. This would drive businesses to understand the value of a well ranked places listing.

    But any new initiative must have more thorough testing, focus groups, and feedback from the real world. And Mike, they should ask YOU for your stamp of approval too. Let’s all figure this thing out together and do it right!

  3. @John

    Yes, tying an ad product so directly to Places is a recipe for some unhappy customers… I have seen reported cases of suspended listings still being billed…not a lot of click thrus on that one.

    @Jeffrey
    Thanks for the vote of confidence! Although I am not a big fan of focus groups I am a big fan of solid working, intuitive software.

    Your point about joining rather than bucking the trend of language is interesting… why invent new concepts and names when old concepts would be more easily articulated… although it would still require a vision and decent marketing..

  4. Mike:

    All other things considered, Tags is a minor, minor, minor little source of potential business at $25/month. Google, after all, is now well on its way to over $30 billion in revenues for the year, having just made well over $8 billion in the first quarter 2011.

    They can put their time and resources into better opportunities. In the meantime they unveiled a direct marketing sales staff. Great big Google can make a lot more money than $25/month from small businesses.

    Meanwhile if their town to town campaigns in promoting claiming businesses so well is working….and that is a direct door to communicating with businesses why waste time on something that is tiny tiny tiny….and comes with the requisite amount of pain, mistakes, errors and f*ck-ups that most items tied to Google Local seem to have.
    :D

  5. Yes, focus groups are terrible. But then how will Google successfully release products/tools which the general public can actually grasp?

    Today I received this email from a relatively young & savvy business owner who has claimed her Places Listing:

    “I have a question that for you is probably a no brainer…..but I don’t know. When I look up my practice in google it shows the map & says I have 3 reviews but I don’t see a link so people can write new reviews. I want to build that up but what am I missing? Is there a setting or something?”

    My reply:
    “Google wants everyone to be confused! The place to “write a review” is where it says “Been here? Sign in to rate”. ”

    Does anyone else think this is absurd? Is “HotPot” the next “Brand” on the “Chopping Block”?

  6. @Jeffrey

    HotPot is gone… left last week… now unfortunately some of its bad integration is still left behind.

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