No matter how much Google has pushed into other areas, something like 97 percent of its revenue is still from search, text, and display ads. It's a great success, but limiting because of the way public companies must focus on growth to keep people interested in their stock, which, in turn, keeps the top executives wealthy. Google has an overwhelming market share, which is a competitive strength, but there are natural saturation points in markets. How much more can Google garner? Possibly more, but there's a limit. Given the way the company has developed, that translates into a limit on its growth and ultimate size. Investors just don't want to hear that. If the company wasn't nervous, why would CEO Eric Schmidt spend time bashing Microsoft's Bing? Because any potential threat to search is a threat to the company's revenue security. It is too dependent, managing in comparison to make even Microsoft look as though it had a highly diverse set of income sources.
Getting beyond the restrictions of its current business model is everything to management there. I've argued, and would continue to do so, that Android is nothing more than a way to secure some of the mobile ad market, which Schmidt sees as critical to the company's future. But as I pointed out yesterday, there is a lot of hype over how large mobile marketing will be.
Even if not at the saturation point yet, the company logically is approaching it, and mobile is uncertain. But Google's business model must have ads. What it then needs to grow are other ways to deliver advertising. Apps and services become a clear and obvious mechanism.
The connection between consumer and corporate has been obvious to those in the business for any length of time. People tend to keep what they're familiar with, and when you are given a certain set of applications in a corporation, those are the ones to which you tend to gravitate in your off hours. It's like a reverse of the brilliant job that Apple, Adobe, and others have done in the past with educational discounts and versions of products. Get people used to one thing, and chances are that's what they'll buy when they're out of school. In the case of a corporation, the audience is just as captured.
Google has been showing this desire for a foot in the corporation market for a while. Back in January, the company decided to use technology resellers to provide Google Apps to corporate customers. In its current pitch, Google puts things succinctly enough:
Now businesses can run Microsoft Outlook on Google Apps instead of Microsoft Exchange, so they can achieve the cost savings, security and reliability of Google Apps while employees use the interface they prefer for email, contacts and calendar.Strip away the marketing and positioning for a moment, and you see a picture of what is going on. Google has developed a reputation for services that are anything but trustworthy, at least the way IT departments measure such things. They want predictability. If something goes wrong, they want to fix it immediately or, if a service, want the vendor available to hop on command. But Google isn't set up to provide the level or type of service that corporations demand.
It also cannot get corporations to wholesale switch to new application interfaces because that requires training and change management, and there's nothing in it for the businesses or their IT departments or users. This latest effort is just another way to try and make nice with enterprise users, all in hopes of finding new routes for ads. But, as my colleague Michael Hickins pointed out, when it comes to replacing Office, Microsoft is a crafty and contentious power. Although Google may badly need the users, getting them is going to require much more than a new Outlook plug-in. The company is going to need a new outlook on corporate IT and how much it needs to invest in infrastructure and support to succeed in wooing this market.
Image via stock.xchng user woodsy, site standard license.