Google Spreadsheet and Google's Microsoft Obsession

Let me first eat some crow about arguing last year that Google and Microsoft were not going to go to war with each other because, except for the MSN crossover, they were in different businesses.  They are in different businesses, and I still think it would be a disaster for Google to compete directly with Microsoft Office by ginning up a Google version of OpenOffice.  But as the Writely word-processing acquisition and, now, Google Spreadsheet, make clear, Google wants the casual Microsoft Office user.

A few thoughts:

First, if Google's long-term ambition is to bring Microsoft down, this is, in fact, the way to do it.  Google Spreadsheet and Google Word, as described, resemble classic disruptive technologies: cheaper, more convenient, no-frills solutions aimed at products with fat product margins whose complexity and usefulness have overshot the mainstream.  History suggests that, if such products take hold, Microsoft will have an extremely difficult time competing.  The company will be driven to the high end of the market, and, ultimately, displaced----following in the footsteps of most of the doomed incumbents in The Innovator's Dilemma. Importantly, the problem will not be technology: Microsoft is obviously capable of releasing its own web-based spreadsheet.  Rather, the problem will be conflict with the existing business and profit model.  All this, however, depends on Google Spreadsheet, et al, capturing the low-end user and then gradually moving up the value curve.

Second, although it is easy to extrapolate from "Google Spreadsheet" to "Google Takes Over the World!", I do not think it is a given that the product will be a hit, especially initially.  Few professional Excel users are going to use a stripped-down, web-based alternative, so the core Office market is safe for now.  Furthermore, free or nearly free spreadsheets have been available for years, and they haven't made so much as a dent in Microsoft's monopoly.  So it would be easy to overestimate Google Spreadsheet's impact, especially initially.

Third, what is the business model?  To seriously compete with Excel, and to avoid the fate that has befallen many of its "WOW!" product introductions, Google will ultimately have to dedicate a big team to the spreadsheet and word-processing services.  At some point, that team will start costing real money, and no serious spreadsheet and word-processing user I know of is ever going to stop working on documents to click nearby ads (The "PPC ads in apps" concept is absurd).  If the goal is simply a portal strategy--soak up more of a user's computer time, and you'll capture a greater percentage of their searches--then, fine.  But the ROI on a free spreadsheet designed to capture more of a user's time is way lower than that of a successful tweak to a search algorithm.  Google's overall ROI, therefore, should continue to fall.

Bottom line, I am still not convinced that office-productivity tools a la Word and Spreadsheet are Google's best route to revenue diversification.  They offer usage diversification, certainly, but, so far, no revenue diversification.  I continue to worry that Google resembles Yahoo! in 1999--a mile wide and an inch deep--and until a few other products emerge as category killers, I will continue to worry about this.  To be fair to Google, of course, it bears noting that the company developed its search service for years with no revenue model, and that story certainly had a happy ending. 

 

Comments

[KING TROLL]

FIRST FUCKERS!!!!!

[Bud B]

"Low end execel user" doesn't exist. People who need it have it. and the general public will use online calculators for their needs, ie mortgage, home equity line, car etc. This product is worthless

[joe]

IMO, there will be a tiered system of "free" and "premium use".

i see where an small biz would want the cheaper alternative so long as the info can be absolutely secure. (or as secure as office on ur desktop is)

and if the functionality of a web-based system is greater than the desktop offering (and cheaper) the question becames, "why wouldn't a small biz do this?"

i envision many upon many college students and entrepreneurs using this offering (albeit a free version) especially if the offering is compatable with excel... as writely is compatible with Word.

Google is simply catering to the 'on-demand' world we are transitioning to. (i would of thought Microsoft would of done it first, but they have been the constant lagger in this new tech world.)

[KING TROLL]

I have that book Henry. Should I read it? Its been sitting for years. I am reading The Nordstrom Way and
Built for Growth: Expanding Your Business Around the Corner or Across the Globe right now.

Should I be reading The Innovator's Dilemma for my retail business first?

Let me know what you would do fucker.

[Margaret]

There are lots of low end excel users...but I would argue that what most of them are doing is studying spreadsheets created by a high end excel users.

That being said, it's annoying to pay big bucks to read a document. Where is the PDF of spreadsheets?

[Tom]

I don't really see the point in doing this, except to spite/distract Microsoft. Maybe there are too many former MS guys in the googleplex.

[Bud B]

What is the basic need here of a spreadsheet: It is to do math calculations/analysis and store numerical info. People do not want a spreadsheet per se. They want to do financial planning, taxes, investment strategy, eduction expense planning, household budget. and guess what? that stuff is already out there. i stand by statement this product will not take off. henry is right, if you want to compete with ms in software you will have to sell to businesses including fortune 500, and that means bulking up.

[Don Dodge]

I am Director of Business Development for Microsoft's Emerging Business Team. Google is directly competing with open source projects like OpenOffice and Sun's free StarOffice.

Google acquired Writely (word processing) and now has a spreadsheet. There was speculation last year that Google would partner with Sun to offer a version of StarOffice. Instead Google has decided to go its own way and compete with OpenOffice and StarOffice.

C/Net says "Google spreadsheets turns up heat on Excel" I don't think so. Microsoft Office is a powerful, industrial strength, client based, information worker productivity platform. Microsoft Office is moving beyond just being a collection of applications (Word, Excel, PowerPoint) to being a server based application platform for ISVs. Lots of companies run their business on Excel spreadsheets. Now creative start-ups are using Office as a front end User Interface to a whole variety of business applications.

I wrote a blog on this subject today
http://dondodge.typepad.com/the_next_big_thing/2006/06/google_competin.html

[pmod]

The way this is all going to matter is when Google announces that all of the Enterprise Search Appliances are also Enterprise Application Appliances - the thousands of pizza boxes that have been sold to corporate america & SMBs only do search today. Sometime soon, they'll also do hosted email, calendaring and application deployment. THAT is what can kill MS.

[billy]

yeah well when/if google crushes msft are they actually going to profit from it?

[savvysoft]

The technology will have a much better chance of taking off if they incorporate something like TurboExcel, so people can hide the parts of the shared spreadsheets they want to keep to themselves, and also offer a killer home to web services.

[Victor]

Henry, think of it as a chess game. Google is making feints on one side of the board while mountain their bigger more strategic attack on the other side. Clearly the cost of launching writely, and this spreadsheet is negligible to google, but can you imagine the frissons of fear running through Microsoft's management at the moment? And for exactly the reason you mention. Google is going after MS' fat margin business, and even if they make a fractional dent, that would be disasterous for MS. For Google it's but a small feint. For MS it's a question of rethinking their entire business model. Do we, or do we not embrace the web and make our products free on it? If they don't Google will begin chipping away at their core market. If they do, they're going to cannabalize their huge cash cow. It's scary times for MS.

[Still Inside]

Yes, scary times for MSFT indeed. This is the first time anybody has ever offered an office suite product cheaper than MS Office. I wonder why nobody thought of doing this a decade and a half ago.

They are going out of business for sure. Especially since MSFT has virtually no track record of successfully competing with anybody and winning. The scariest thing of all is that they probably never expected this move up there. They are so stupid.

SI

[Victor]

Nice sardonic post SI. I wonder if you have anything useful to contribute?

[Neal S. Lachman]

Haha SI, that was funny.

Henry says its Google's Microsoft Obsession. I think It is far worse than just an obsession. Google has developed a Obsessive Compulsive Disorder. G's OCD is going to be devastating.

What G doesn't understand that now they are public they have also mom and pop money in their pocket. They have responsibilities. Wasting money on non-core-business related developments without a viable business model is going to be to the detriment of G overall business and credibility.

For the rest, less said, the better.

[billy]

yeah schmidt did a great job leading Novells to victory over the Redmonds in the Battle of the 1980s 1990s.

[Peter Cranstone]

I think you nailed it with your "business model" comment. Pie is not free at the truck stop. To make a meaningful dent in Microsoft it must offer/solve a problem that the current application does not. That's going to take years and require a serious programming team, which in turn requires commitmant and $$$. They have the latter not the former. To me this is just another toy for the programmers to play with and to keep them busy.

Google really is a mile wide and an inch deep. They are first and foremost a search engine. 99% of their revenues come from that. We can take them more seriously when a new revenue number shows up on the balance sheet - until then, it's very much a case of "so what".

Peter

[MattyDread]

I've heard the "Office is dead" refrain so many times now I have to laugh at this one. Remember three years ago USA Today did a huge feature on SimDesk, the hosted business apps suite that the city of Houston adopted, kicking Office out. And where are they today? Pretty scant news in the last year:
http://www.simdesk.com/page/About_News.jsp

Meanwhile, Office revenues continue to grow--slowly, but from a $10B+ base. And MS has steadily segmented up and downmarket--the $99 "Student and Teacher" edition (which will be renamed Basic and will be for consumers in 2007).

This is nothing more than part of Google's continuing effort to dupe the press and Wall Street into upholding their absurd valuation. They launch a bunch of acquirees (Writely) and poor betas (Talk, Video) while insiders unload as much stock as they possibly can. Said it before, I'll say it again, this will come crashing down in 2007--declining keyword prices, click fraud, advertiser dissatisfaction, MS's "integrate MSN into everything" strategy. Look for much lower growth, plummeting stock price, and a whining complaint to the DoJ or EU about Microsoft's tactics...after it's already too late.

[Dimitar Vesselinov]

Ballmer at the Churchill Club--the podcast
http://blogs.zdnet.com/BTL/index.php?p=3031

[Victor]

MattyDread, talk is cheap. If you really think Google is set for a big plunge in 2007, then get on the short bandwagon! Or buy an assload of long-dated puts. More likely you'll end up with all the other people who thought it was a good idea to short this growth stock. I.e., you'll be left with naught but the shirt on your back

[Neal S. Lachman]

victor,

MattyDread has a very simple but realistic analysis of Google.

You think Google is a growth stock? It is a yo-yo stock, and it will remain so for a lil while before it will plummeth to oblivion.

[Steve D]

I think Google does not have a plan. They invest in many different ventures, but they are just one product company. They got successful in search, but in nothing else. Look at the breakdown of their traffic:
http://weblogs.hitwise.com/bill-tancer/2006/05/google_properties_understandin.html

Moreover, I am very skeptical of Google's future. Switching costs for users to start using another search engine is zero - many in fact use multiple search engines. There is no community behind (try replace eBay with yahoo auctions) and there is no difficulty factor (try to replace your old email address with a new one). As soon as someone puts something better than Google has, users can switch literally overnight. What kind of competitive position is that? Their only defense is laser focus, but investing in stuff like this spreadshit is going to dilute it. Google may be making tons of money on their flagship stuff, but so many people get either hyped or panicked at every trivial announcement they make and they forget that Google has never succeeded in anything they are doing beside search.

[doubtful, too]

I agree that Google has been way off track with its other projects. Regarding the spreadsheet app., I can't think of any group that would download it. People who can't afford microsoft software are usually not PC literate enough to understand what google app's are. I don't think college students will want it. They can buy office at student prices (cheap). Those who are too lazy to will just pirate it. I would use this spreadsheet app. if it were tied into Google Maps to visually display data, but that would be too useful of a tool for Google to make.

[SomeDumbGuy]

So...

Consider this my bit-wise-breathern...

What did the stable of product launches look like inside of CMGI in the 1999-2000 era?

Similiar to the stable of product offerings from Google, nes pas?

So - Google's funding their internal incubator activities with their big-daddy VC wallet [search paid ads] - and hoping to "get lucky" at the wheel in Vegas again...

But hold-on there cowboy...

Shouldn't all of these products have their own P&L statements...and be managed as cost centers?

Now that would be truly interesting...if investors could at least see those types of line-item details...

Might make the comparison with CMGI a bit clearer for some of the people who have fuzzy vision right about now...

[Victor]

Neal, stop posting. I think it's already been widely acknowledged that you're a crank. When i said "growth stock" i was referring to a classification that's derived from P/E. Value stocks have low P/Es.
And if you believe that google will plummet to oblivion, why not make some money out of it? My money is certainly where my mouth is. As I've previously acknowledged on Henry's blog, i'm net long GOOG.