What Google's Thinking?

As several readers have suggested, I suppose another possible rationale for Writely, Gmail, and the dozens of other revenue-less, storage-gulping products Google is developing is simply a portal strategy: Get people to spend most of their time on Google properties, and they'll be more likely to use the omnipresent Google search window when they get around to searching for something.

This strategy is different than assuming that you will one day figure out a way to insert advertising into word-processing documents (or in the word-processor itself).  It also happens to be Yahoo!'s biggest competitive weapon in search: Based on some of the studies I've seen, the main reason Yahoo! search users search on Yahoo! is that they are already on Yahoo! anyway.

So maybe the point here isn't to "kill Microsoft" or "diversify revenue," but simply to protect and grow the main revenue stream.  This would reduce any impact on Microsoft to the status of (gleefully induced) collateral damage.

If this is the strategy, it still suggests gradual margin compression over time: Writely has only a handful of employees now, but if it were ever adopted at scale, it's hard to believe it would generate enough incremental searching to offset its costs, especially when Google already has 50%-plus search market share.  Too much of this, moreover, and Google would run the risk of reducing the Google=Search brand association, the same way Yahoo! did when it decided to be all things to all people (and, thus, opened the door for a dorm-room start-up called Google). This said, Google's most valuable product by far is its own search window (7X more valuable than Google-powered partner search).  Anything that induces web users to use this search window as opposed to another, therefore (even a Google partner's), is a smart long-term strategic move.

Comments

[SJGMoney]

"Did Google not loose a gazzillion off its Market Cap because it has lost focus?"

Or did they actually gain 10% in market cap in the last 6 months?

Or did they actully gain 100% in market cap in last year?

The company has been making moves all along; like Supersonic I fear we are looking too hard to find the grand scheme here. Sometimes a duck is simply a duck.

[Neal Lachman]

SJGMoney,

Ever heard of the stupid saying... "It is easier to go to the top, it's almost impossible to stay there."

That said, I hope that Google will remain a great stock, and that it will be hugely successful in its core-business. If they wander, they will be inviting trouble.

[Neal Lachman]

Now, even I find this is exaggerated: "Google's fate hangs on search ruling"

http://money.cnn.com/2006/03/15/magazines/business2/google/index.htm

[Anon]

Check out the below article on clickfraud... if some of these numbers are true, your hypothesis could work

http://www.washingtonpost.com/wp-dyn/content/article/2006/03/15/AR2006031502339_pf.html

[Roman]

Yes, I think you may be very close to the truth. Still don't forget that despite initial intentions of Writely purchase strategy could be reconsidered some day...

[Dimitar Vesselinov]

Larry Page is a big fan of Nikola Tesla, right? Tesla was a genius, but he did a lot of mistakes:

“Tesla made a series of startling gaffes. From ill-conceived contracts with Westinghouse (leaving him with no ongoing revenue from his discovery of the AC polyphase system) to poor management of critical projects backed by J.P. Morgan, Tesla disappointed his financiers time and time again. Lack of prioritization, spinning off in too many directions simultaneously, poor project management…”

http://tinyurl.com/lkxno

[Dimitar Vesselinov]

What's wrong with AdSense, and Google?
http://www.neomarketing.tv/archives/whats_wrong_with_adsense_and_google.php

[Web2earn]

Google is huge, but I don't forsee a fate similar to that of the Roman Empire.... the only way for google is slightly upwards, at least for now.

[ugurss]

thanks admin good post
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