Google: Googzilla or Senile Chameleon?
February 27, 2008
In both The Google Legacy and Google Version 2.0, I include a recital of the flaws that could cripple or kill Google. Most of these are now routine furniture in the warehouse of articles, books, and reports about the company.
In light of the data from comScore, summarized at MarketWatch Google’s magnetism for Wall Street accolades has been reduced? The larger question is, “Will Google rebound, or will it be forced to limp forward? Wall Street wants its champions to be like a youthful Alexander — a vanquisher, not just a winner.
I want to revisit the weaknesses I began cataloging in 2002 when I started paying attention to Google.
Technology. My position has been and remains that Google has engineered a technical competitive advantage. As the company becomes larger and places more demands on its plumbing, a risk exists and becomes greater moving forward. In some ways, Google is a more innovative technical platform than Microsoft or Yahoo. Amazon, which has been working overtime to out-Google Google in cloud-based services, watched as its S3, EC2, and SimpleDB platform choked, then survived on life support. Google has not faced this problem, but the company has as recently as February 26, 2007, experienced slow downs in Google image search, some glitches with Gmail, and similar hiccups.
Management. My view is that the troika of Eric Schmidt, Sergey Brin, and Larry Page has been one important ingredient in Google’s success. Now that some Googlers can cash in their Google options to become Xooglers (ex-Googlers), there may be some gaps for the company to fill. There’s a serious, global shortage of Google-grade mathematician – computer scientists who can manage. There’s also a shallower pool of 20-something whiz kids, but that’s a secondary issue. Management may well be the more critical challenge at Google. As recently as Monday, February 25, 2008, I heard from a person interacting with Google, “These guys don’t follow through.” Maybe this is one person’s opinion, but its a datum.
Competitors. Most organizations face competition. The Sears – KMart operation has to deal with Target. Google has no comparable direct nemesis. In fact, since the morphing of Backrub into Google in 1997, Google has had a free run. Competitors either fell short (Yahoo) or retired from the field of battle (Lycos). For the foreseeable future, Google is operating in an arena where the opponents are still in their locker rooms.
Lawyers. The legal process is always a great way to hobble an organization. Look at Microsoft’s squabbles with the European Union. Microsoft’s kinder, gentler ways have done little to get the EU’s regulators to look at European monopolies such as professional publishing, weapons, and pharmaceuticals. Google has parked most of its attorneys about a mile from the senior manager’s offices. Despite the reams of legal papers dropped on Google’s feet, the company has not been seriously encumbered. Regulators, as I have asserted in my talks and writings for various firms, don’t know what to make of Google. If you don’t understand a company’s business, it’s tough for a specific regulatory group to craft an action. Google is search and ads to most politicos.
Revenue. Google remains a one-trick pony when it comes to cash. Logically a report that suggests the Google’s core business is slowing becomes the indicator of the Google’s future. In the Google Legacy and Google Version 2.0, Google has been working hard to diversify its revenue. The problem the company faces is that new revenue streams are small when compared to revenue from online ads. The Google Enterprise unit is doing well, according to my sources. The Google Search Appliance, I have heard for those close to the company, has more than 8,,500 licensees. The Google geospatial products are hot, hot, hot, opening doors for the new Google Apps Software as a Service business. At the end of calendar 2007, the Enterprise unit was generating revenue in the $350 million range. In 36 months, the company is larger than other vendors in the behind-the-firewall search sector, but in comparison with ad revenue, Google’s 36-month-old enterprise unit is loose change.
The media reaction to Google’s sub-$500 share price, the downturn in Google growth, and the comScore report leaves me with the impression that the honey moon with Google is drawing to a close. For the first time since the company emerged from Stanford University, you can see the Wall Street leopards spots. Criticism of Google’s tag line “Do no evil” is ratcheting upwards. Privacy wonks are salivating over Google’s alleged warehouse of user data. For a positive view of Google — before the Google stock price rebounded — navigate to A VC: The Musings of a VC in New York. Is it the beginning of the end for Google? I don’t think so. Let me foreshadow my speech at AIIM in Boston, Massachusetts, next week:
- Google has an application platform. The company has not leveraged that platform as effectively or as rapidly as it could have. Going forward, I believe Google will become increasingly aggressive in multiple business sectors. Mobile is one sector, and Google has probes into health, publishing, back office services, and others.
- Google has been playing coy with integrators and resellers. Google won’t accept companies on sometimes fuzzy logic. Google’s impact in the large enterprise market can be increased with tweaking of its partner – reseller – integrator strategy.
- Enterprises have data management problems. Google is a reasonably competent data management company. With some rifle shot marketing, Google is in a position to approach certain large firms and land business because many organizations are unable to get their IBM DB2, Oracle, and SQLServer database systems to handle “big data”.
- Monetization options. Google’s patent applications reveal a wide range of monetization options. But I want to ask a question, “Would you pay to access the Google search system?” I would, and I would pay for premium access. Let my father who is in his mid-80s surf for weather in Brazil and news. I would pay for the types of Google features I find most useful; for example, personalization, redundant data storage, and Google Trends, to name three.
I am not ready to pooh – pooh the comScore numbers. I am not ready to ignore the substantial body of research I have amassed about Google’s technology. I think the Google has some staying power. It will take a lot more than some Web traffic and click analysis before I see Googzilla as a five – inch chameleon basking in the sun.
Stephen Arnold, February 27, 2008