Why Google Won't Become A Bank

Search Engine Watch published an article titled Why Would Google Become A Bank? and basically answered the question in the first paragraph by saying “Because that’s where the money is.” The article goes on to list a more specific set of reasons including:

  1. Increased value for AdWords ads.
  2. The power of the coupon just got better.
  3. Further diversification of revenue streams.
  4. Data.
  5. Android and Chrome usage increases.

My take: Don’t hold your breath waiting for Google to become (or launch) a bank. It isn’t going to happen. Here’s why:

1. It’s not where the money is. The prospects for mobile payments is certainly bright. But the question that remains to be answered is: Who’s going to make money from these payments? If you, your bank, or anyone else thinks that consumers will pay a fee or a premium for the “privilege” to make a mobile payment, you (and they) are sorely mistaken. Banks’ ability to make money from transactions — mobile or not — has seen its ups and down in the past few years (up on credit cards, then down on credit cards, up on debit cards, then down on debit cards). Retail banking is simply NOT “where the money is.”

2. Nobody in their right mind wants to be regulated to the extent that banks are. For the past few years, regulatory changes have hacked away at banks’ ability to make money. The Card Act, Regulation E, Durbin’s Folly, the list goes on. From a new entrant standpoint, it’s simply too risky and unpredictable to enter the industry. Firms like BankSimple and Movenbank are getting into the industry by either leveraging other firms’ bank charters or by avoiding the need for one altogether.

3. They don’t have the support infrastructure. Google isn’t a B2C company, it’s a B2B company. It has no competency — let alone capability — to provide transactional customer support. So I hear you say,”but they’ll outsource that.” No, they won’t. Outsourcing a critical business function doesn’t absolve you of the need to know how to manage and integrate that function into your business

4. It doesn’t fit with the firm’s business model. Even if you argue my three previous points away, the most important reason why Google won’t become a bank is that it just doesn’t fit with its strategy and business model. Google’s strategy and business model is unique and ambitious: It aims to be the center of the universe in INFLUENCE.

Why did Google acquired Zagat? To influence your choice of restaurants. Why did Google launched Google Advisor? To influence your choice of banks.

Google doesn’t want to process mobile transactions, open bank accounts, and deal with your stupid little banking questions.Google wants to influence who you do business with. And not just in banking and financial services, but everywhere.

When Google is influencing all of your day to day decisions, then every provider in the world will be kissing Google’s shiny black boots looking to participate. And THAT’S how Google will make money. Not by becoming a bank.

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Facebook Versus Google

No, this is not a review of Google+, and how it’s features are better or worse than Facebook’s. Nor is it a post on what Google+ means to marketers, etc.

Instead, it’s a rebuttal to a blog post published on the Customer Collective. According to the author of a blog post on that site, the author concludes that “This boxing match is over before it gets started: Facebook wins.” 

Here are reasons the Customer Collective (CC) gives for calling a TKO, with my take on the points.

———-

CC: Facebook is about staying connected with friends. Google is about making the world’s data searchable. Google is therefore not on solid ground.

My take: Facebook is about “staying connected with friends”? You must be joking. For thousands (if not millions) of companies, Facebook is about finding new customers, and connecting (or at least trying to connect) with existing customers. For Facebook, Facebook is about figuring how to monetize the vast traffic and engagement it has.

Google is about “making the world’s data searchable”? Ha. Google is about connecting advertisers to prospects. The common thread between FB and Google? Advertising. Both are on very solid ground when it comes to generating advertising revenue.

———-

CC: Google is already pervasive in our lives due to its dominance in search, email, collaboration, smartphone integration, and more. People are going to resent or ignore the company’s attempt to elbow out Facebook just like we resent it when one close friend tries to eliminate another one from our lives.

My take: A misinterpretation here. Facebook users’ connections are with other FB users — not with Facebook. Yes, Google is looking to elbow out Facebook. But the rest of the world doesn’t care about that.

———-

CC: Face it, Google: Social networking is not your thing.

My take: Oh, come on. PCs weren’t IBM’s thing, but (after some fumbling) it became very successful in the personal computing world. The web wasn’t Microsoft’s thing, but they adjusted. Writing off Google from social networking because of Wave and Buzz failures is a bit short-sighted.

———-

CC: Facebook stays focused on its core business for a reason – they really know what they’re doing.

My take: You’ve got to be kidding me. Facebook knows what it’s doing? It’s taken so many missteps (especially regarding data usage and privacy) that it’s to back up an argument that there’s a grand plan (other than “world dominance”) at Facebook. Forays into Facebook Credits (which is a damn good idea) is hardly about their “core” business of advertising, which accounts for, what, 95% of their revenue? And even if it were true that FB is “focused” on it core, and “knows what its’ doing” is hardly an argument for why the “boxing match is over before it begins.”

———-

CC: Last but not least, Google doesn’t seem to get that people actually care about privacy and worry about being tracked online, especially when it comes to their personal email.

My take: If the implication here is that Facebook does get that people care about privacy, then there is little that I’ve seen from Facebook that supports that contention.

———-

Bottom line: The boxing match is far from over. But it does seem that Google has a big task in front of it, if it wants to avoid getting Pownced.

I wonder if people even remember Pownce. Not long after I started using Twitter in 2007, Pownce was launched. It was a Twitter- like tool, with some additional features. While many of the people I followed (and who followed me back) registered with Pownce, it quickly became a game of Alphonse and Gaston: “Who’s ready to give up Twitter? You go first, Alphonse.  No, no, no — after you, Gaston. 

Nobody left, and and Pownce got bounced. 

The social media gurus have already jumped on Google + and conferred upon us their wisdom regarding the new networks’ features and implications for marketers and businesses. 

But the acid test is whether or not the masses change their behavior. And changing behavior is not easy, nor does it usually happen very fast. And it doesn’t matter if Google+ is better or not. We’re lazy. We don’t like to change. Unless we get paid to, or if the convenience we gain by changing is very noticeable.

A sample size of two isn’t very representative, I admit, but when I asked a 16 year-old and a 21-year old that I happen to know (for 16 years and 21 years, respectively) if they would switch to Google+, their response was identical: “Not unless all my friends do.”

The wildcard here is what businesses will do. If Google can entice businesses to launch brand pages, and if businesses can lure customers and prospects, then maybe the balance of power can be tipped. But it would seem to me that Google needs data to lure businesses, and without 100s of millions of users, won’t have the data. Chicken-and-egg problem. 

So, it’ll be a tough road for Google, but it’s way too early to call the winner.