Google: One Successful Failure?

(MoneyWatch)  No one can deny that Google is financial successful. The company makes huge amounts of money and their main line of business -- selling advertising -- is something that needs virtually no marketing to its customers. That is an impressive feat. But it is also one that masks deep confusions and lack of focus at the company.

Early on, the company's cofounders indicated that their strategy was to "lure loyal users and reap profits later." As Sergey Brin was quoted as saying back in 2000:

"If we wanted to sell ad banners, we could call DoubleClick and be profitable today," said Brin, referring to the dominant online advertising placement company. "But we can be more successful in the long run if we grow our user base. I've been happy with our progress."

But even with a company that has Google's revenue, to keep flinging stuff at the wall to see what sticks is a risky approach because it can turn into the corporate equivalent of ADHD: distracted attention, hyperactive behavior, but often little practical being accomplished.

The lack of focus is easy to show. All one has to do is remember that 97 percent of the company revenue comes from search ads and then look at the list of the company's undertakings:

• Google is planning to support two competing operating systems, Chrome OS and Android. You could argue that this is an intrinsic understanding of the split in the nature of how people use computers. But as both operating systems are ostensibly targeting the netbook market, which is supposed to be about web-centric use, you have to wonder how the "two different needs" argument could make sense. Is Google suggesting that there really are two different types of netbook users? More likely the company doesn't want to admit to making a colossal mistake in the original strategic aim, and possible in the design as well, of Android. My colleague Michael Hickins has rightly suggested that Microsoft is trying to rationalize four competing ERP/accounting products. Surely Google is doing the same on the operating system front -- not to defend a questionable acquisition strategy, but a planned extensive expense in developing yet another new OS.
• Google Apps is improving, but even so, the product line has managed to get a paying customer base of "hundreds of thousands" according to Matt Glotzbach, product management director for Google Enterprise. For many software products, that would be big success, but this is a company with Google's resources aiming at the enterprise market. It's not even a statistical blip in the office productivity market.
• So far, Google's attempts to venture into the advertising realm beyond search-based text ads has been an utter disaster. They dropped out of the ill-ventured print ad business earlier this year. It called it quits in radio advertising this year as well, after trying since 2006. It's still trying to make Google TV Ads work, but who knows how long that will go?
• Even in some areas of making information readily available, Google has largely flopped. Knol? Who even talks about it now? Google Patents? You can't reliably get the same results as you can with the US Patent and Trademark Office's search engine (and I know because I just tried).
• Google has entered or is trying to enter such areas as healthcare record storage, 3D drawing applications, website and wiki creation, and software for collaborative Q&A for group events.

Much of what Google does is interesting. Some of it elevates to the level of pretty cool. But Google is a publicly-held company, not a university. It's locked into a degree of dependence on one revenue source that would be obviously disturbing if it appeared in any other company. Google even makes Microsoft look highly diversified. And until it can establish itself with solid revenue in areas other than advertising, it will continue to be forced to always protect the money machine and eventually try to bend all its efforts to that. It can make you wonder why Google doesn't break out revenue and expenses on product lines. Could it be that it's the sort of equation that it wouldn't want investors seeing?

Having a unifying theme like wanting to manage the world's information is all well and good, but eventually that has to cleanly translate into business strategy and operations. And at Google, eventually management will need to reconcile such broad statements with effectively using its resources to expand what the company can do.

Image via stock.xchng user srbichara, site standard license.