Innovation resistance at Metro, part 2: The Google bugaboo

Yesterday, I discussed the way the burdens from a “top-down” approach hinders innovation far more than any potential benefits to Metro.

That addresses the first of the two major issues, releasing data to developers. Metro did release its schedule data, but under a restrictive license, and when asked about doing the same for bus position data, Board member Gordon Linton expressed skepticism, largely out of fears that people are out there “lining their pockets.” He, and Metro staff, often seem to be thinking about Google when they say this.

After all, Google has a lot of money, right? If Metro’s going to do something, shouldn’t they get a piece of that?

It’d be great for Metro to get some money if they could. I fully support Metro getting as much revenue as it can, from Google or any other company. (See the disclaimer about my previous relationship with Google at the bottom of this post.)

However, the important question is not how rich the company is that Metro is dealing with, but what the actual market value is of the resource being negotiated. Alstom, which manufactured the most recent railcars, is an enormous company as well. When they manufacture cars, they make a lot of profit. Is that unfair? Maybe they should be paying Metro for the right to make some cars, instead of the other way around?

Metro pays Alstom because railcars have a value determined by the market. There’s also a market price for transit data: zero. As Michael has pointed out in the past, every other major U.S. transit agency, and numerous others around the country and the world, have all given the data away for free. They believed that free was a reasonable price.

Gordon Linton noted in his rebuttal to my testimony that these others haven’t asked for revenue. That may be true, and IP considerations aside, it’s okay for Metro to ask. They could also ask Alstom to give them rail cars for free. But in both cases, that’s not going to happen. So far, there’s been no deal after years of delay. Whatever Metro is asking for, they apparently aren’t going to get it. And if Google paid Metro, then everyone else would start asking for money, too. Quite simply, it’s clearly better for Google not to work with WMATA than to change the existing, settled market price for transit data.

It’s also important to keep in mind that Google is probably not making any money off this service. Linton, Metro staff, and others seem to assume that this must have a value because a big, rich company is asking for it. That fundamentally misunderstands the way Google is structured.

Google acts much more like a startup than a big company in many ways. The typical company will only release a product if it’s worth a considerable amount of money. After all, any product requires development resources, marketing time, and more. There’s a roadmap, and everyone works on the top priorities on that roadmap. If you launch a product, you better be willing to invest millions to market it to make it successful, otherwise it’s not worth it. Google, however, tries very hard to maintain a startup culture where people can just whip out projects because they feel like it.

In an industry like shampoo, where there are manufacturing costs and huge marketing costs, that’s how businesses work. In technology, it doesn’t need to be that way because it’s pretty easy to make a halfway decent Web site. And Google has worked hard to maintain some of that nimbleness. If an engineer, or a group of engineers, wants to build something, like adding transit directions to Google Maps, they can go ahead and do it.

There’s still a coordination cost, as a product manager has to get executive buy-in, the user interface has to be immaculate, and lawyers have to sign off if copyright could be even remotely involved, but you can launch a side product at Google with only about 10 people involved. This is why Google often gets mocked for having so many “beta” products, many of which don’t go much of anywhere.

It’s easier to think of Google as one extremely profitable business plus a very large number of very small, completely unprofitable technology startups that are all funded by one VC firm or philanthropic foundation. The profitable business is search and content advertising. Google makes just about all its money from the ads on search and the content ads on millions of other Web pages. Then it’s got a lot of other stuff, most of which just loses money. At least when I was there, Gmail, for example, cost way more in capital costs (all the computers that store all of your email) than it made in ad revenue. It’s valuable strategically, but a big money-loser. The same applied to Maps. YouTube was a ginormous money sink. And so on.

I don’t know if Google is making any money off ads on Google Transit, but either way it’s a rounding error. Maybe the ads make enough to cover the engineering and legal time, plus the computing resources. Probably not. They can’t be making much. This product started because some engineers were disappointed that Google Maps let you find out how to drive and not how to take the train. The company is supporting this product because people like it inside and outside the company, not because it is a major strategic focus or even a minor one.

It is, however, valuable to riders. Even if the trip planner were perfect, which it’s not, many people are already looking up businesses on Google Maps and would find it much easier to get directions with one click. Many people are using iPhones or Android phones and want transit directions on their existing map application. Others don’t know about the Metro trip planner.

Metro staff, and Linton, are so obsessed with the imagined revenue that they won’t get. Meanwhile, they’re missing the bigger issues that affect riders. Next, we’ll put this whole issue in perspective.

Disclosure statement: I worked for Google from 2001 to 2007. I did not work on Google Maps or Transit. I am not coordinating with them on this series. I do still own some Google stock, but am selling it in fixed increments each month without regard to its performance. I don’t believe that Google Transit influences the price of the stock by even a penny.