Last Updated Aug 8, 2008 12:30 PM EDT
For a number of years, the topic of everyone cowering in the shadow of Google seems to has been popular. Wired warned against the Google threat in 2005. BusinessWeek took it up last year. Big media is scared and, if you believe this report, consolidating at least in part as a reaction. Microsoft is scared if you watch the company's actions, although Steve Ballmer has felt the need to explicitly say that it isn't. Uh-huh. Heck, even Wal-Mart has said it views Google as a potential threat. I know some degree of paranoia is considered healthy in business, but would everyone please get a grip?
To be certain, the company has captured huge mindshare in search and is remarkably good at advertising against it. Back in February I spoke with Jeffrey Rayport, a partner at advisory and consulting firm Monitor Group, who noted that Google was making twice as much money in search advertising as Microsoft and Yahoo combined, yet with only half the number of unique users, and that was before finalizing the DoubleClick acquisition. No doubt it is really good at this.
But even here you have to avoid undue mystification. A company that provides its customers with access to content and pays for the operation by enabling advertising is a publisher. The web form may be different from the past, and the technology may be impressive, but this isn't a revolutionary new business. All forms of online advertising taken together account for less than ten percent of all advertising, and the specific number can vary from about 5-8 percent, depending on whom you believe. Yes, Google is important in its niche, and, yes, the size of the niche is growing. But it's still small compared to the overall media and advertising industries. This is not a company that owns all channels between corporations and their customers.
Once you move out of that niche, its power drops off dramatically. Google Apps? Maybe they were supposed to be Office killers, but notice how Microsoft recently had its highest annual revenue ever? No matter how much some people talk up the danger Google represents, the people who count -- paying customers -- side with Microsoft. Of course, to be competitive, you need something that works reliably, which isn't always the case with Google Apps.
A technical problem hit an undetermined number of Gmail users, including paying subscribers to the Google Apps hosted software suite, locking them out of their accounts for about 15 hours on Wednesday and early Thursday.If you want to replace a competitor in someone's toolkit, a 15 hour outage for anything short of natural disaster is pathetic, particularly when you don't keep people apprised of the status of repair efforts. And that's to say nothing of shutting down user accounts without warning. It tends to make people nervous and turns cloud computing into smog.
Next up: Handsets. Google wants to have its handset operating system, Android, anywhere and everywhere. In reality, it's hard to find people developing applications for Android, and lack of third-party support is the kiss of death for platforms. But that's fine, because Android phones are again delayed and we won't notice until the first ones come out in 2009.
The word from Half Moon Bay is that Google's "GPhone" cell-phones, being built by various handset makers, could be delayed from an end-of-year introduction to sometime later in the first quarter of next year, according to Trip Chowdhry of Global Equities Research. Among the issues causing the apparent delay are the following: Handset maker High Tech Computer is "having structural problems to incorporate Google's demanded feature set"; HTC is "demanding a guaranteed minimum revenue surety from Google", from which Chowdhry concludes that "Probably HTC does not think there will be enough demand for GPhone."Picking other winners isn't necessarily a strong point, either. Google just officially admitted that its billion dollar investment in AOL "may be impaired." That's trying to avoid saying that when it thought AOL was worth $20 billion, it was wrong, wrong, wrong. And Google is also claiming that the impairment is only temporary. Yes, like the life of the solar system is finite. Just really long.
Chowdhry adds that "contacts" tell him Google's operating system software for the phone, Android, "is not able to attract enough developers because toolkits offered by Microsoft, Apple, Research in Motion, and Nokia's Symbian software group, have sucked up software developers' attention. He also opines that the "uneventful ending of the 700 megahertz auction [for wireless spectrum in the U.S.] has left Android in limbo."
More generally, people I know who have tried working with Google describe the decision and execution processes as more tortoise than hare, involving convoluted management structures -- not surprising given how quickly the company is adding employees. That sort of binging can bring on a severe case of organizational indigestion and make it very tough for a company to adequately respond to competitive pressures.
The point is not to bash Google but hopefully to remove a bit of mystique. Lord knows, the company is doing some impressive things, and respecting its capabilities is smart. But executives who get overly worked up over it are like people who fixate on an unpleasant experience rather than deal with it, get over it, and move on to something productive. Maybe it becomes an easy excuse to not take an action and possibly make a mistake or fail. Or maybe this has become one of those things that executives feel they have to do to avoid a label of being foolhardy.
I can't help remembering when Microsoft first came out with its personal finance software. Many people predicted the imminent demise of Intuit. Instead, the latter clobbered the former. Success takes more than a big name and huge resources, and backing off out of knee-jerk fear alone is foolish.
Google office shot courtesy of Google.