Understanding the limitations of data

Steven Levy’s profile of Val Harian in Wired sings paeans of how data is at the heart of everything that Google. Yet curiously at the heart of the article is this anecdote of how Google phased out it’s Premium based on the advice of two young business executives

It wasn’t long before the success of AdWords Select began to dwarf that of its sister system, the more traditional AdWords Premium. Inevitably, Veach and Kamangar argued that all the ad slots should be auctioned off. In search, Google had already used scale, power, and clever algorithms to change the way people accessed information. By turning over its sales process entirely to an auction-based system, the company could similarly upend the world of advertising, removing human guesswork from the equation.

The move was risky. Going ahead with the phaseout—nicknamed Premium Sunset—meant giving up campaigns that were selling for hundreds of thousands of dollars, for the unproven possibility that the auction process would generate even bigger sums. “We were going to erase a huge part of the company’s revenue,” says Tim Armstrong, then head of direct sales in the US. (This March, Armstrong left Google to become AOL’s new chair and CEO.) “Ninety-nine percent of companies would have said, ‘Hold on, don’t make that change.’ But we had Larry, Sergey, and Eric saying, ‘Let’s go for it.'”

So one of the biggest business decisions that Google made of simply doing away with a standardised media product which it’s sales force and customers understood on nothing more than a leap of faith. Their customers also made that leap of faith as another anecdote notes

Levick tells a story of visiting three big customers to inform them of the new system: “The guy in California almost threw us out of his office and told us to fuck ourselves. The guy in Chicago said, ‘This is going to be the worst business move you ever made.’ But the guy in Massachusetts said, ‘I trust you.'”

So next time someone tells you to crunch data to decide business strategy, think long and hard of what you are trying to achieve. If you are looking for simple incremental insights, data is your friend, but if you wish to change the world, create a new business, or change the rules of the game there just isn’t any data that will justify it.

So go ahead and make that leap of faith.


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