Early this year, Google announce that they will replace Eric Schmidt with Larry Page as the next Chief Executive Officer. Ironically, the reverse situation happened in 2001 when Page was the CEO. This April, Larry Page officially returned to his former executive position. Shuffling the power balance among the triumvirate – Page, Brin, and Schmidt – will grant Page complete control on product development and technology strategy. Mashable claims boldly that it is now “Larry Page’s company.”
Google has become a household name. Instead of searching an encyclopedia or a dictionary for an answer, most people will tell you to “Google” it. It all began with two Stanford graduates, Sergey Brin and Larry Page, and a simple mission – to “organize the world’s information and make it universally accessible and useful.” In the last eleven years since inception, Google has made several significant mistakes that have raised many criticisms.
Because of Google has the monetary and human capital to enter new ventures, Google has partaken in social media (Google Buzz), online video hosting (Google Video and YouTube), mobile phone industry (Android OS), and computer clouding (Google Docs) industries. Yet, how many of these projects are profitable?
During Google’s recent attempt with social media, Google purchased a blogging website, tried to buyout Friendster, launched its own online community website Orkut, and implemented Google Buzz, a messaging and social networking tool that integrated into Gmail. This happened sporadically over the last seven years (2003-2010).
Unfortunately, Google cannot battle Facebook vis-a-vis. Not only has Google’s profit earning been a disappointment to investors, it is lagging behind the Standard & Poor’s 500-index index and being outpace by Facebook. Instead, Google needs to consider a strategic alliance with LinkedIn or any social media website to utilize their best attributes: Google’s search knowledge and a reputable site with a large database. If Google does not hurry, Facebook will certainly overtake Google’s territory one day. Rumor has it that Facebook has a plan to enter the Chinese market with a little help from Baidu, China’s #1 search engine and Google’s largest rival.
In a similar situation with online video hosting, Google acquired YouTube for the price tag of $1.65 billion after the failure of Google Video in 2006. The deal made YouTube co-founders Chad Hurley and Steve Chen happy men, but what about the rest of us? Sadly, Google is still waiting to make back its money as of today. The latest news I heard is that Google is on track to recover 50% of what they paid the YouTube guys by 2011. In the words of Google CFO Patrick Pichette, “YouTube will soon be very profitable.” Keyword – soon.
When Google noticed that they are terrible at investments, they moved their energy to create in-house products. Two popular Google products are Google Docs, a cloud computing form of Microsoft’s Office software program, and Android OS, an open source mobile platform that challenges Apple’s iPhone OS as the market leader. Both are still in its infancy stage and share a striking flaw – they are not making Google money.
A major downfall for engineering firms is the lack of focus on increasing values for stakeholders, a very important factor for a publicly traded company such as Google. Instead of just releasing “cool” products, Google needs to focus on worthwhile endeavors in protecting the interests of investors.
I salute Google for its valiant efforts to create unique products such as Android OS and Google Docs. However, from an investor’s point of view, it is a death warrant for Google to try to disrupt either market with its reverse positioning. Especially when veterans Microsoft and Apple control the dominant market shares in their respective industry.
It is inevitable that one day Google will struggle to sustain its high growth rate. Indeed, Google has even mastered the art of network effects. But at what cost?
Business Week covered an article in January regard the current condition of Google:
“The creative chaos inside Google's halls—a decentralized jungle of innovation, as one prominent venture capitalist puts it—once empowered employees to make bold moves… [with] a culture has recently produced a string of flops.”
Now the billion-dollar question remains – what should Google do next? How will Page enhance its value for the stakeholders?
Google is infamous for their disregards against the normal standard. The company has a 20% innovation time off to allow engineers to work on pet projects. By allowing Google engineers to take 1 day off a week to work on an independent project of their interest, this has resulted in the conception of half of Google’s new products.
Yet, these only serve as supplements to Google’s core competency: a superior search algorithm unmatched by any competitors. I have the perfect proposal for Google to take things to the next level: Go back to what works!
According to the Official Google Blog, Google’s bread and butter are its search engine and its cost-per-click ad service, which together generate 99% of annual revenue. Not only has Google maintained the leader position in the U.S. search engine market, but Google’s value to users and advertisers is worth $119 billion.
Yet, no one at Google is working on improvements. The SearchEngineWatch Blog’s latest post reveals that Microsoft’s Bing.com jumped 5% in searches while Google.com declined 2%. In Hitwise’s recent survey of “search success rates,” Bing scored higher (81%) than Google (66%). Jaynotes’s finding concurs, “Often, Google fails where contextual topic search is critical.”
With the arrival of Page, Google’s Mountain View headquarter need to shake things up! After Page’s first monolithic move of company restructuring, it is clear that Page is on the right track. Now, Page must ensure Google’s dominant presence in the search market by continuously fine-tuning its search algorithm.
Because consumers’ switching cost is very low, Google certainly needs to maintain its reputable claim as the ultimate search engine. It is dangerous for Google to lose users at its current rate as advertisers pay for the potential foot traffic that Google can provide. Especially in the fast-paced world of high tech where technology can become obsolete overnight, today’s Google may become tomorrow’s Netscape.
The word “google” is synonymous to “search.” That is exactly what Google should do – Keep on searching!
I really disagree with the concept that Google is bad at investments. Sure, they may not look great on paper, but at the same time, those "bad" investments are the reasons that EVERYTHING I now do on the computer is used and tracked through Google. This is important for several reasons: the value of my user metrics and perhaps more importantly, the fact that on Android and Google Products, Google Search is the default search engine.
ReplyDeleteSo while everything may not be profitable, Google is making it so that if someone wants to encroach on their search territory, they have to not only beat their search algorithm, but they also have to beat Google's ancillary products and the data they gather. Google may not make the best decisions, but there is method beyond the madness of their investment strategy.
This comment has been removed by the author.
ReplyDeleteI think it is great that Google allows its employees one day a week to work on their own "pet projects". Although Google is primarily known as a search engine--and this is what I use it for most--their product introductions over the past few years have been hugely successful. I, for one, got rid of my Apple email account that I had to pay an annual fee for, and switched over to Gmail. I also utilize Google docs quite a bit, and I believe that this service has been so successful because it allows both PC and Mac users to view documents and presentations with no technical glitches. I also am a fan of Google's Google Books, Maps, Scholar, News and their online voicemail system. Although Google has certainly had a lot of "flops", I think it is clear that their other main product lines are successful and have allowed the company to diversify beyond just the search engine feature.
ReplyDelete