Google Be Gone
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News Analysis. My colleague Clint Boulton asks, "Is Google a one-trick pony?" My answer: Google is a magician out of tricks. The magic is gone. |
The trick Clint refers to is search advertising revenue. I don't believe it's sustainable, not without Google truly becoming the monopoly I predicted in January. Google is the search leader, as measured in usage share, and that's not likely to change anytime soon. Google has been gaining share since 2003, with no letup visible.
But search share doesn't necessarily equate to search ad revenue. People presume one leads to the other, but Microsoft and Yahoo failures clearly show how one doesn't guarantee the other. Google's platform depends on the business model's success—that search share guarantees search advertising revenue.
Clint points out—also referring to a Chris O`Brien MercuryNews story—that Google acquisitions such as YouTube aren't paying off. Google hasn't successfully expanded its search ad business into new ventures. D`oh, of course not. Google's contextual keyword success is mostly limited to commerce, about providing a means by which third parties make money off search queries.
It's Great to Be Google
Commerce and search are highly congruous, because people often look online for something they want to buy or to learn about or a place they want to go to. Local online advertising is increasingly important. According to TNS Media Intelligence, ad spending on local—or spot—TV declined 2.4 percent year over year in the first quarter, with even steeper declines for local newspapers (5 percent) and radio (7.2 percent). By contrast, Internet banner ad spending grew 8.5 percent; TNS doesn't measure search advertising. The offline declines come as more spending shifts online.
In June, the Search Engine Marketing Professional Organization, or SEMPO, publicly released details of its "The State of Search Engine Marketing 2007" report. Notable trends:
- North American Advertisers spent more than $12 billion in search engine marketing last year.
- SEMPO forecasts North American SEM spending of $15.7 billion this year and more than $25 billion in 2011.
- Google AdWords was the most popular paid placement search engine (97 percent of advertisers) and network (71 percent). Yahoo also highly rated. Microsoft ranked below Ask.com, with 22 percent of advertisers.
- Search engine marketing is all about commerce: selling stuff or services for 58 percent of advertisers and increasing product or brand awareness for 61 percent of them.
- Three areas of advertiser interest stand out from the other search categories: mobile, targeted and video.
At first glance, these numbers look mighty good for Google, which advertising revenue topped $16 billion in 2007 (The figure is more than SEMPO's $12.5 billion spending, because only North American advertisers were counted). Google's advertiser popularity far exceeds its search market share, which, according to ComScore, was 58.4 percent in December, at the end of SEMPO's report period.
It's Not So Great to Be Google
But all this success is tied to search and search advertising, and, as Clint rightly notes, Google is not successfully expanding to other areas. From my perspective, Google has got problems with:
- Non-search content
- Mobile search
- Platform expansion
Non-search content. If Google were a media company, acquisitions such as YouTube would likely be more successful selling search advertising, because there would be cross-marketing and cross-target tie-ins. Hypothetical: LonelyGirl8.534 is a popular video blogger with 13 to 25 year-old girls. But those clicks to her videos probably wouldn't generate much in the way of keyword business. But if Google provided a way by which she could profit from product placements, LonelyGirl8.534 could dress up her video blogs. Suddenly that hot dELiAs Tee she wears could rack up keyword clickthroughs for girls who want to dress just like LonelyGirl8.534.
That's a simple and reasonable example of how Google could do more cross media marketing tie-ins, if it were a media company. By the way, this is one of those areas where Clint and I have differing perspectives. He does see Google as being a media company.
Google isn't even a search company. Shall I repeat that? Search is a means to an end, and the end is information. Google monetizes information by wrapping around it search and contextual advertising.
For all Google's brand coolness, it's still a company run by a bunch of geeks. They're good at math, but haven't shown that they know Jack from a jackass when it comes to smart, media marketing. Some advice to Microsoft: Hold on to Avenue A | Razorfish. Yesterday I saw an Advertising Age report indicating Microsoft might sell off Avenue A | Razorfish. The ad group is valuable brain trust.
Mobile search. The big emerging search trend right now is mobile, but Google is more clueless than Cher Horowitz. Google's mobile search strategy is OK—best with Google Maps—but deficient for a medium that's going to be hot for local search. Microsoft is worse off, given the sorry state of Windows Mobile.
As I've repeatedly expressed, mobile is the next major computing platform, and search and other Web services are the killer applications. What Google needs is a mobile platform. I suppose Android could be it, but let's be realistic. Google services exist in perpetual beta. Android will come to market, stumble to the ground and maybe come around again next year. By then Apple and Nokia mobile platforms will have stormed the smart phone OS market. Windows Mobile is their roadkill unless Microsoft gets its shit together.
Some advice to Microsoft: Forget search. You lost. Google won. There are plenty of other places to capture big advertising revenues. Start first with the next-generation platforms. Yeah, game consoles are good. But mobile phones are much better. You need a compelling platform, with great local search and lots of ways for advertisers to make money off services, software and digital content. The platform needs to be on the device and the Web. Let me repeat: Forget search. Give it up. Look to the next thing and get there before Google. Oh, yeah, Apple's iPhone is going to be bigtime in your way. But you knew that, right?
Platform expansion. Google and Microsoft are both platform companies. Microsoft's core platform is the operating system, and Google's platform is information. Where is Google's platform of the future? Google offers no vision of a new platform for the Web, and Android is looking too much like a mindless automaton than a mobile platform—at least one coming soon enough and to be good enough. Repeating myself, Google's core platform is information. But the company doesn't produce the information around which it performs search and search keyword magic.
Vista may be a mess and Microsoft's mobile strategy a forthcoming train wreck, but the company is building out data center infrastructure that will deliver content and services to just about anyone. I predict that Microsoft's platform expansion into hosted Web services will route Google. In May, I affirmed that the services platform would solve Microsoft's Google Problem.
It Would Be Better to Be Somebody Else
It probably seems looneybins to some readers for me to make such harsh prognostications about a company with $16.6 billion in revenue last year, $158 billion market capitalization and share price of $483.01 (at stock market close today). I get paid to make nuts-for-brains predictions, so I make them. When I predicted in summer 2003 that Windows Vista wouldn't ship until 2006, people snickered. But Microsoft shipped Vista even later. "Google be gone" is a Microsoft wish, no doubt. I'm not suggesting that Google is going away, just that on its present course there is little elsewhere to go.
Successful companies share in common one trait: They're very good about managing perceptions. Google has it easy by being a young company with high share price and huge market share in search and search advertising markets. But those perceptions are tilted. Looked at another way, Google has failed to maximize the value of nearly all its recent acquisitions. I used YouTube as example, but my colleague Clint identified others, such as GrandCentral, Jaiku, Postini and Zingku—and there is Android.
Other signs of trouble: "Google said in a filing to the SEC it believed its $1 billion investment in AOL was impaired, which is to say, the investment is looking like a washout," Clint writes. Search and search advertising are great, and they might be something more if Google were a media company. Google's core business isn't broad enough or of sufficient depth. By contrast, Microsoft and Yahoo have broad product and service portfolios. Where they aren't successful in search today they can be someplace better tomorrow. I'm convinced that barring some great change, Google has already reached its epiphany. If there are any more great ideas for making gobs of cash, Google hasn't brought them to market.
Problem: Many of Google's greatest assets are nebulous, because the company feeds off the good works of others. Google is like the middleman of the Web, the car salesman, the financial broker or—shall I say—parasite. Google's successful hawking other people's information is a limitation. Information seems endless, but not the stuff people really need or want. As Google's growth ceiling becomes more obvious, positive perceptions will be tougher for the company to manage. The day will come when adjusted perceptions will bring Google's share price closer to earth.
There is a disturbing irony about Google. For a company which business is all about finding information, Google is reluctant to disclose much of any. Google's innerworkings are notoriously guarded. In the Google sphere of influence, information generally flows one way. Perhaps that's not so strange, given Google's business model. The company knows all about taking the good works of others and profiting from them.
Mmmm, maybe the saying "it takes one to know one" applies to Google. The company discloses little to protect its information from prying eyes. Do the voyeurs on your block live in the house where the curtains are always closed?
[Please send your tips or rumors to watchtips at live.com].
Related Posts:
- Windows Live Search Can Be Cuil, Too, Microsoft Watch, July 28, 2008
- Google-Yahoo Smacks Microsoft, Microsoft Watch, June 12, 2008
- Microsoft Solves the Google Problem, Microsoft Watch, May 20, 2008
- Microsoft Gets Hosted, Microsoft Watch, March 3, 2008
- The Google Monopoly Begins, Microsoft Watch, Dec. 20, 2007
- Google is All About Information, Microsoft Watch, July 17, 2007
- Which Comes First, Software or Services, Microsoft Watch, July 10, 2007
- Why Google Succeeds, Part 2, Microsoft Watch, June 15, 2007
- Why Google Succeeds, Part 1, Microsoft Watch, June 15, 2007
- The Google Problem, Microsoft Watch, May 31, 2007
- Why Google Matters to Microsoft, Microsoft Watch, Feb. 22, 2007
Comments (24)
1. Doesn't the blog entry belong on Google Watch and not on Microsoft Watch? Not to be picky or anything; I actually like your writing so even if it's in the wrong place it's still in the right place. ;-)
2. Google Maps on a Blackberry Curve is fairly decent--and pretty much as good as it gets for as little outlay as possible (the AT&T unlimited data plan price notwithstanding). I'm not about to spend the extra on the recommended TeleAtlas GPS application, and Garmin on the Blackberry is about as expensive in the long run. And neither is 1/100th as good as the Garmin software on the Garmin Nuvi 760 series.
With Google Maps on the Blackberry, and a Garmin Nuvi 760, you are navigating LA like a native even if you just landed at LAX an hour ago and are in LA for the first time in your life. (The market isn't ALL desktops and smart phones!!!)
3. You're probably right about ad revenue. I've often wondered... and marveled, at how Google the company can become worth so much when countless other ad-based companies come and go like puffs of smoke. Based on your blog entry, Joe, I would say that Google's market cap is tenuous and that there is a fine line between wealthy monopoly and a puff of pretty smoke. And, like early Microsoft, when you are walking such a fine line with such an intangible product, the sheer will to succeed will cause your company to end up either gasping for breath (or dead), or else obscenely rich. There is no middle ground, apparently.
Posted by Philosopher | August 25, 2008 10:15 PM
"Problem: Many of Google's greatest assets are nebulous, because the company feeds off the good works of others. Google is like the middleman of the Web, the car salesman, the financial broker or—shall I say—parasite."
Joe, as far as making money goes, what are your greatest assets? Are they nebulous? I would suggest that your contacts, industry knowledge and writing skills are very hard to quantify.
As far as being a middleman, so are you. You make money from the hard work of others. I do not think I have ever seen you report something you did, it is always the work of others.
By the same token I predict the downfall of Joe Wilcox! The day will come when people discover they can go straight to the source of the press release and make up their own mind! His nebulous assets will not be worth the paper they are not written on.
You need to diversify into other money making ventures ASAP. Maybe child care part-time? I feel that soon someone will make a better Microsoft journalist, then you need to make sure you have a plan B. Forget being the best journalist, the most successful people are Jacks of all trades!
Posted by billybob | August 26, 2008 10:38 AM
I'm not entirely sure how Google makes all the revenue it does or why its stock has the valuation it does. But as a software developer, I really appreciate Google. We use the Google Web Toolkit along with a number of other open source Google technologies. These really provide the only viable alternative to Microsoft these days. We can develop applications that use no MS technology and are functionaly and technologically superior to the competing MS products. Since MS moved into business software competing with MS using the MS technology stack has been difficult. But once free of the MS technology stack then competing is easy. It used to be that our customer had to spend say $20,000 for our application and $80,000 for the MS technolgy stack. When MS came along they would charge $80,000 for the stack and give away the application for free. Now we charge $20,000 for our application and give away the technology stack for free. Huge saving for customers and boost to our business. Of course this also relies heavily on Linux, Apache, Tomcat and Java; but it was the Google technology that allowed us to really expoit these and tie it all together.
Posted by smist08 | August 26, 2008 11:09 AM
@billybob:
Bingo! I had the same thought pattern myself, but you've said it much more clearly and directly!
I would only offer a correction to your last sentence: The most successful people are the middlemen. One example among zillions: The people who make money on clothing are not the designers, workers, or factory owners who create the clothes, nor the sales people who sell the clothes, but the owners of WalMart--the middlemen who distribute the clothes.
Posted by Philosopher | August 26, 2008 11:10 AM
And Microsoft isn't a "one trick pony"? Besides the legacy OS licensing and sales of Office, were else does MSFT turn a dime for shareholders? Mr. Ballmer has presided over multiple strategic failures since he took over as CEO, while Google slowly and methodically extends its tentacles throughout the web.
Posted by John G | August 26, 2008 11:41 AM
It's kind of funny that you talk about Google being out of tricks and yet the e-mail address for this column is @gmail.com. They must be doing something right.
Posted by Just Visiting | August 26, 2008 11:56 AM
Billylbob, Joe adds value to the information by finding it, analyzing, condensing, interpreting, etc. What he's doing is far from just selling someone else's work, as Google does. Joe takes what would otherwise be simple news items, and adds his own slant, based on years of experience, connections, and a wide, deep understanding of the technology industry. And I say that from the perspective of someone who often disagrees with his view, but who values it enough to keep on reading.
If you have not tried Live Search in a while, I suggest giving it a go. For non-commercial searches such as seeking the answer to a tech problem, the results are much more on point, leading to solutions rather than to commercial products.
Posted by DaveN | August 26, 2008 11:59 AM
I suppose you missed the obvious parallel that Google finds (crawls), analyzes (super secret algo), condenses (page snippets) and interprets (translation) all of the web. All of this costs millions and is very hard (thats why nobody else has done it yet).
They take a disperse range of web pages which would otherwise be hard to find (and/or expensive to market for the owners) and drives traffic to them. I am a website owner who is apparently having my content sold without my permission. Google has driven more than 50% of my sales so I am more than happy. I am not sure what they sold, but the last stock check was OK.
I try Live search all the time (whenever they release a new super version) and it is really not as good as Google, the results are often filled with spam and low grade sites. See for example a search for "a better browser than ie".
Live returns Firefox in 6th place (with the wrong URL), with lots of spam and low quality sites above.
Google returns Firefox in position 4 and 5 with the correct url and quality sites above.
Search Live for "firefox" and the correct result is not even in the top 10. It is filled with opportunists and spam. I know I could search firefox and not worry about hitting 'Im feeling lucky'
Posted by billybob | August 26, 2008 12:21 PM
Sorry guys, first post was heavily laden with sarcasm. Please turn up the sarcasm detector, or get one installed.
I think the point is that even if you are a middleman, you have to add value or people will just go to the source, that is as true for Joe as it is for Google (as for any middleman - even a car salesman cleans the cars and offers warranty etc). Google adds value, until they stop doing that I am sure they will be fine.
Personally I think its all about the quest to organise the worlds information, not only about making money. Theres more than money in this world. All the money in the world cannot buy Bill Gates his dream of making speech computing a reality, nor did it help WinFS or whatever it was called.
Posted by billybob | August 26, 2008 12:31 PM
@billybob:
You're right, of course. It's all about adding value. Google adds tremendous value, or else they wouldn't be a top destination for people needing information. Journalists add value by finding the news, collecting it in one place, and even by adding their own thoughts so that we don't have to think as hard ;-)
The idea that Google is a parasite is flat-out wrong. It's just that a successful middleman is viewed as a parasite by those who are jealous of that middleman reaping a greater profit on the value he adds than the profit reaped by others in the supply chain.
And journalism is no different. It may not be immensely profitable to be a writer or blogger, but one has to admit that William Randolf Hearst did rather spectacularly well by reporting events that he didn't make happen and selling ads for products that he didn't make. But he certainly added value.
Posted by Philosopher | August 26, 2008 12:57 PM
To that said I just can add this Quote:
'The reports of my death have been greatly exaggerated'. (Mark Twain)
Posted by Marco | August 26, 2008 1:21 PM
Just one more thing Joe, I found your prediction and I think this is what you basically said.
Office 2007 by late 2005 (MUST be before Vista)
Vista by early 2006
Server 2008 before or with Vista
AFAIK Office came out with Vista in late 06/early 07 and Server 2008 was not released until early 2008. You also said it would have the new file system (part of the reason for its delay), it didn't. Part of you reasoning was that 'Microsoft promised it'.
For the most part you were wrong, but for some reason you only remember the 2006 figure (which they barely got). You were almost a year wrong on your "October 2005 or February 2006" prediction.
http://www.internetnews.com/bus-news/article.php/3066221
Just saying....
Posted by billybob | August 26, 2008 1:43 PM
Well Joe we all understand that you inform us and additionally you have to create controversy so as to the people in this forum post their thoughts. But you will have to be more accurate in your analysis because people are demanding that.
billybob: exact and precise (bullseye)
Posted by Marco | August 26, 2008 4:44 PM
No no no more talk about Google on this site Joe! it is just plain wrong. This is Microsoft Watch so please stick with stories about how VCSY PWNS Microsoft, so I can watch my stock rise on my lousy piece of crap VCSY penny stock.
Posted by I-Man | August 26, 2008 5:41 PM
hey fake I-Man, how many other companies do you know of that have forced Microsoft to settle in just 15 months of the lawsuit being announced?
Did you say "piece of crap penny stock?" ROTFLMAO!
http://biz.yahoo.com/e/080801/vcsy.ob8-k.html
Pursuant to the "CONFIDENTIAL" settlement agreement, the Company has granted to Microsoft a non-exclusive, "FULLY PAID-UP" license under the patent which was the subject of the legal proceeding.
--------------------------------------------
so I guess you can bash VCSY to try and cover your shorts but you can't stop the revenue from the "FULLY PAID-UP" license from showing up in the 3rd Quarter 10K. tic, tic, tic...
Posted by I-Man | August 26, 2008 6:00 PM
tic, tic, tic... since the 3rd quarter ends September 30th, wouldn't any BIG$$ licensing agreements before then be considered a material event and require an 8-K or a press release at the time of the event? That's why I believe that we'll hear of a couple of things before September 30th, VCSY needs to cover up the Microsoft revenue from the "FULLY-PAID-UP" license if they want it kept CONFIDENTIAL!!!.
Either way i'm looking forward to buying more shares at these bargain prices.
How stupid do the Bashers think the readers are to try and convince them that Microsoft only settled with VCSY to get rid of a nuisance?
Microsoft did NOT want to go before the judge at the Markman Hearing because they were risking getting slapped with injunctions on all of their .Net FrameWork products and Sharepoint and possibly guilty of inducing infringement on their 6000 partners. imo
Posted by I-Man | August 26, 2008 6:11 PM
No no no everybody! Don`t listen to the fake fraud I-Man above. My sole purpose here, and in life in general, is to extol the virtues of VCSY, in my penny stock pump-and-dump scam. I have been doing it for months here on Joe's website unabated. Joe is such a willing cohort in my plans. I have to thank him. Thanks Joe! Thanks for letting me continually have unfettered access to spreading spam. And for allowing it on your seemingly legitimate site. You are such a good friend to me, the I-Man, Joe. HEY EVERYBODY! READY FOR SOME MORE BLATHER AND DRIVEL going on and on about how VCSY defeated the mighty Microsoft? Because I promise you this: the I-Man will not rest, rest-assured. I will continue to clog up this site with my crap! More long posts! More exceedingly long copy-and-pastes! Especially from the spam-reknowned King Portonumbnuts. SPAM ON!
Posted by I-Man | August 26, 2008 7:10 PM
I am Marco...
Posted by sam | August 26, 2008 11:23 PM
Wow! VCSY stock price is at a whopping 5 cents per share. EVERYBODY LISTEN UP! Buy this stock before VCSY hires people who actually know how to run a company and deliver value to customers and the stock price climbs! BUY NOW while the current company knows diddly squat about how to run a real company that delivers real products!
NOW IS YOUR CHANCE! Did you miss out taking the last ride on the Titantic? Don't fear! You have one more chance to put your future hopes and dreams on a sinking ship!
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Vertical Computer Systems Inc. announced delayed 10-Q filing on 08/14/2008
On 08/14/2008, Vertical Computer Systems Inc. announced that they will be unable to file their next 10-Q by the deadline required by the SEC.
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Vertical Computer Systems Inc. announced delayed 10-Q filing on 05/15/2008
On 05/15/2008, Vertical Computer Systems Inc. announced that they will be unable to file their next 10-Q by the deadline required by the SEC.
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Vertical Computer Systems Inc. Auditor Raises 'Going Concern' Doubt on 04/22/2008
Vertical Computer Systems Inc. filed its 10KSB on April 22, 2008 for the period ending December 31, 2007. In this report its auditor, Malone & Bailey, PLLC, gave an unqualified opinion expressing doubt that the company can continue as a going concern.
Posted by I-Moo | August 27, 2008 10:53 AM
Listen, listen, listen EVERYBODY! I am I-Man. The original, the one and only. I am BFF with the world reknownde Nigerian scameister portonumbnuts. Together we work toward our mutual goal of attempting to artificially inflate the penny stock price of our poop-stock VCSY. Now is your chance to get in on the bottom floor with VCSY. BUY NOW! Maybe you have received one of my spam emails. I send out over a billion a day. Unfortunately many email filters are being BAD and marking MY spam as spam! Can you believe that sh**? ARE YOU READY PEOPLE? ARE YOU READY FOR MORE? MORE EXCRUCIATINGLY LENGTHY COPY-AND-PASTES? I love doing that. Doesn't it come across so legitimately. I am sure SOME of you believe the garbage I spew is worthwhile. Right? WANT MORE OF MY LENGTHY OFF TOPIC POSTS? Of course you do. The people have spoken.
Posted by I-Man | August 27, 2008 8:41 PM
Looks like you could be on to something Joe.
Posted by Partners in Grime | August 28, 2008 9:39 PM
So Google's WebOS will ensure Google's place on the web is more than "one trick".
http://blogoscoped.com/google-chrome/3
Funny a comic book should be used to introduce their new web application platform. Looks like there may be a good reason for using a comic book.
HEY MICROSOFT! You had better dispense with the horseplay and ass-grabbing and get to work or you'll be stepped on by the rest of the herd.
Posted by portuno | September 1, 2008 8:12 PM
This is a notice to all commenters:
This afternoon I deleted some comments about VCSY, and I unpublished 22 comments believed to be from the Fake I-Man (based on the IP address). I have not removed comments from portuno as some commenters requested. I did remove links in some portuno comments pointing to blogs he wrote about VCSY.
There is no censorship at Microsoft Watch, but spam is deleted. The posts on VCSY are endless, and they should have stopped when the settlement was reached. Any future VCSY comments will be treated as spam and deleted. If they persist, the poster will be banned.
Douglas Taylor and Tom Berber asked for some respite from portuno. Again, I don't censor comments. If it were my choice--and it's not--there would be no anonymous commenting at Microsoft Watch. Douglas and Tom both identify themselves through links. Portuno does not. The weak often hide and from their secrecy attack those in the open.
Portuno is right when he says that I have his e-mail address. But that doesn't really identify who he is, although the information wasn't that hard for me to get. I strongly suggest that portuno clearly identify himself and his associations if he wants to attack the integrity of others.
As for the others, like Douglas and Tom, don't let portuno's insinuations and accusations bother you. He's looking for reaction, methinks. Why feed his need to bleed you?
I found the VCSY posts to be mildly assuming and somewhat annoying. I watched the banter with other commenters and portuno, who clearly sought reaction. Neither he nor either of the I-Mans is getting a reaction from me. I've stepped in because plenty enough time has passed since the VCSY settlement and enough regular commenters have requested action for me to do something. So I'm taking action and will step in again and again until all this nonsense stops.
I am posting this comment on the 10 most recent Microsoft Watch blog posts.
My thanks to all the regular commenters,
Joe
Posted by Joe | September 4, 2008 4:25 PM
billybob wrote:
"Office 2007 by late 2005 (MUST be before Vista)
Vista by early 2006
Server 2008 before or with Vista...
For the most part you were wrong, but for some reason you only remember the 2006 figure."
Hi, billybob,
How carefully did you read that news story? I was quoted: "The earliest Microsoft wants to release the Longhorn version of Office is the end of 2005...you figure that Microsoft doesn't want to release anything earlier than 2006."
The report that I wrote clearly stated 2006. Among the reasons: Microsoft had shipped new versions of Ofice and Windows Server in 2003. I didn't expect upgrades for either product for three years.
I don't recall what the reporter asked or what other statements might have been left out. But the report is clear on timing. Also, the quote I gave deliberately uses "earliest," because I expected all products to ship around the same time.
I was wrong, however, but not in the way you suggest. Windows Vista shipped even later than I predicted. Nobody thought January 2007 back in August 2003.
Joe
Posted by Joe | September 4, 2008 5:05 PM