Punching Google in the Snoot

August 25, 2008

The San Jose Mercury News, Google’s home town newspaper, points out lousy decisions at the Mountain View firm. Chris O’Brien wrote “Google’s Ventures Outside Search Fail to Pay Dividends”. The sub title is even more direct, “Google to face first real test of its leadership as ventures outside search fail to show dividends.” You must read Mr. O’Brien’s story here.

For me, the most interesting point in the write up was this statement:

all those high-profile ventures the company has launched, and the acquisitions it’s made, have yet to contribute much to the bottom line. In a filing with the Securities and Exchange Commission, the company noted that revenue from services such as YouTube, Google Checkout and a host of others ‘were not material.’

Material is a code word for worthless. Even more galling is that this story puts some wood behind a remark I recall hearing about Google from a Microsoft professional: “Google’s a one trick pony.”

That trick continues to spin money, but Google is now officially fallible, a charge that must be galling to the Googlers.

My research suggests that Google’s short term flops cannot be interpreted as the longer term trajectory of the company. Here are three points from my 2007 Google Version 2.0 study for Infonortics, an outfit located near Oxford, England:

  1. Google focused on search, built a good system by leveraging indifference from competitors and the good fortune of having AltaVista.com engineers available due to Hewlett Packard’s cluelessness about online
  2. Google discovered that by solving some problems in search, the resulting infrastructure could do other functions quite well. The first big other function was a running a rework of the GoTo.com/Overture.com ad engine
  3. Google’s infrastructure is an application platform which can be repurposed without too much effort if you are a Google class brain.

The net net is that Google only has to get traction in one or two tangential business sectors to generate new revenue. My research indicates that a “blast off” will generate a fraction of the core business revenue, but if the area is mobile services or enterprise applications, these markets are sufficiently big to make the revenue contribution sufficient for Wall Street’s greed appetite.

I agree with Mr. O’Brien’s analysis in general. But I’m not sure I want to count Google out just yet. Google is one tiny step from becoming a commercial publisher and a video production company. The company has mow through other business sectors quickly and only put effort into those where money begins to flow. That’s what makes Google a threat in the short term and for the longer term as well.

Stephen Arnold, August 25, 2008


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