Google and Peril: Social Blind Spot, Not a Scaling Problem
November 17, 2010
Information Arbitrage ran on November 14, 2010, the story “The Challenge of Being Google.” The description of Google’s number one problem makes sense. The author uses the buzzword “scale” to pivot Google from superstar to “just another big company.” The examples are ones that most MBAs will find spot on. Who can quibble with Xerox’s inability to do much with its myriad innovations. The business was—and still is—mostly about making copies of stuff. Microsoft is another touchstone. The company makes money, but it is not exciting. I don’t have a Windows phone, nor do I use to many of Microsoft’s products but millions do. Microsoft is a company that will provide case studies for future generations of executives-to-be at Wharton, Harvard, and the University of Chicago.
The problem Google faces is easy to pinpoint. My research suggests that Google ran into trouble with what I put under the admittedly fuzzy umbrella term “social.” The company was on an absolute technical and revenue tear from 2002 until 2006. Sometime between 2006 and 2007, I noted three significant changes. In my opinion, each of these illuminates a different connotation of my “social” terminology.
Google Books has this scanned. Would it be useful in a social context? Probably not. Dale wasn’t particularly good at the math for dynamical systems and differential equations. He was a salesperson. Social too.
First, Google was not able to do much with Orkut. I heard many reasons. These ranged from the legal with inquiries from various parties about the service itself to the type of information that was flowing among the users, particularly users in Brazil. Whether the legal rumors or the significance of social software as a successor to the brute force use of the Internet is irrelevant. By 2007, Google was not able to respond to the Orkut opportunity and was essentially indifferent or unaware of the Facebook threat. In 2008, Google was talking about social centric innovations, particularly in technical presentations and patent applications, but nothing seemed to grab the market. When Buzz rolled out, Google did not handle the launch well. The company triggered howls from its customers/users and had to back up. A legal dust up followed and Google had to write a check to make the buzz die down. To recap, Google knew social was hot but was not able to manage the development of the technology or the servicer itself. Now, Facebook is worth more than eBay and a real problem for Google. The first sense of “social” is that the company could not pull off what Facebook has and is doing.
Second, in the period between 2003 in the run up to the IPO and 2007, Google allowed its “controlled chaos” approach to management annoy many different constituencies. The behavior created a sense that Google was “just right.” Google professionals would tell people what to do. Whether it was the famous T shirt and sneaker visit to the House and Senate or the approach to scanning books, Google just did what it wanted to do. As a result, the company developed a reputation as being chock full of smart people who were, in the words of one of my mentors, “bright but uninformed.” To recap, Google’s approach to anyone not an employee or consultant to Google put teeth on edge. A little vinegar enhances, a stream of vinegar is less desirable. The second sense of “social” is fitting into the way various institutional processes work. Even today, Google wants procurements to work its way. To make the point, Google is suing the Department of the Interior. Enough said about Google’s legal activities.
Third, the core of Google is based on brute force solutions to engineering problems that broke the financial backs of other competitors. When Google absorbed the learnings of the GoTo.com/Overture/Yahoo approach to online advertising, the company produced a stream of money that put a turbocharged on Google engineering. With lots of money, the brute force needed to solve the problems of old-style brute force content processing problems were solvable. Google built an infrastructure stuffed with technology that could index content, match ads, track and analyze user behavior, and rework data to create new information. The information perpetual motion machine was almost in reach. The problem, however, was that by 2007, the notion of using curators to provide clues to importance was becoming better understood. To recap, Google built a huge operation to handle brute force problems but new competitors found ways to offer alternatives at lower cost using such methods and user curated content and user cues. Google does this, of course, but not as well as Facebook, to cite one example. The third sense of “social”, then, is that Google has not been able to use the social inputs as effectively as other firms.
I know that by focusing on “social” I am simplifying, just as the author of “The Challenge of Being Google” has streamlined his argument. I think there is value in identifying one factor and looking at Google through that filter. My present view is that Google has a social problem, and I don’t see a quick, easy, or sure-fire way to address this issue.
Stephen E Arnold, November 17, 2010
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