David Heinemeier Hansson

March 8, 2021

Google suffers from a digital petro curse

The profits that spew out of our ad-infested internet accrue to Google most of all. For the last couple of years, Google has seen an astounding $40 billion dollars per year flow into its coffers from US online advertising alone – a market in which it commands an astounding ~30% share. And then there's the international market on top of that.

No wonder it's hard for Google to stay interested in anything else for very long at the time. The company is notorious for its graveyard of services, which continuously kicks users out of their digital abodes or subjects them to yet another DOA rebrand.

Just earlier this month, Google rang the death notice on Stadia, after shutting down its internal game studies that it had barely just formed. Now it's Google Pay that's getting the treatment. It's exhausting merely to keep up with Google's dysfunctional management of its conglomerate empire. And I'm barely even involved as a user any more!

But why is it like this? Why can't Google seem to focus for more than 18 months at the time?

For an explaining parallel, we can look to the curse of the petro state. That curse essentially says that when a nation derives an overwhelming share of its national income from sovereign extraction of oil, it has a tendency to twist, distort, and corrupt the whole economy. Why bother investing in other industries when you can make so much money from shit that's literally spouting out the ground? You have to be extraordinarily disciplined and well-functioning prior to finding such riches, if you are to stand any chance. Google has never been either.

This explains why Google is structurally inclined to give up on almost everything it tries. It's almost impossible for anything else to get even close to matching the riches available from mining people's data, processing their eyeballs like pink slime, and selling it all as targeted advertisement. Why spend the executive energy really nurturing something new to life over multiple years when you can just turn the screws on your dominant internet advertisement winch a few more degrees to make the quarter?

But at the same time, the temptation to start yet another New Thing is irresistible. Because what self-respecting executive really wants to internalize that they're just the middle manager in a petro state, exploiting a search monopoly for outsize data rents? No, you want to dream! Dream that you're really changing the world, actually. Or organizing the world's information. Or whatever other fairytale you're selling yourself in the mirror that morning.

Yeah, I know it! The world really needs another messaging/gaming/pay service! That's it! That's what I'm going to spend the next 18 months of my life drumming into existence before I rotate into some other part of the business to work that data-extracting oil rig.

Paraphrasing what Steve Jobs ironically said about monopolies: When your company is no longer influenced much by the success of your new products, the people who end up running the show are the ads and data extraction people. If you are a product person at Google, and so you make a better messaging/gaming/pay service, so what? When you have a search monopoly and a dominant position in advertisement, the company is not any more successful.

Google won't get back to the mojo that gave us search, gmail, and maps before the petro curse is cured.

About David Heinemeier Hansson

Made Basecamp and HEY for the underdogs as co-owner and CTO of 37signals. Created Ruby on Rails. Wrote REWORK, It Doesn't Have to Be Crazy at Work, and REMOTE. Won at Le Mans as a racing driver. Fought the big tech monopolies as an antitrust advocate. Invested in Danish startups.