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The Google Strategy or is it The Google Error?

011310_2114_GoogleMayBo1.jpgTwenty five years ago the world had telephone companies, cable TV companies and no public internet companies. By the early to mid 90′s it was already understood that these 3 historically diverse services and architectures would eventually merge into one, the only real question was how and how fast. Fast was the optimum word though as this migration of services onto a common delivery platform was racing ahead at breakneck speed as companies strived to gain market advantage over their competitors. Over a decade ago now, the merge was completed and company after company was offering the magical marketing of “triple play” (TV, internet and telephone). It has been the competitive landscape now for quite a few years but something new is worrying the telco’s and ISP’s and that something is Google. 

 

Fifteen years ago Google technically did not even exist yet but today they are a $300 billion dollar corporate giant that can drastically affect lots of markets in the world.  In December of 1998 PC magazine is quoted as saying this new company called Google has a search engine that has an uncanny way of coming up with the most relevant search results. Over the next decade the company launches new services to strengthen their brand value and enhance their core business. Products such as; Gmail, Google chat, adwords, toolbar searches, Google Earth, Analytics and a myriad of other internet products.  And virtually every time a new product or service was launched the world applauded the developments, advancements and the services. But, now we have the world scratching their collective heads and trying to figure out “what is Google doing, what is their strategy?” This question springs forth after the announcements of late of; Google Glass, Google Fiber and Google Driverless car. The search engine and advertising leviathan is moving into businesses away from its’ core and strength. While that in itself might not be so troubling, the businesses they have selected are confusing and problematic in that none of them can be seen as adding anything to the bottom line for a long time and will eat up large amounts of capital.

 

The driverless car project while exciting it is also driving on a road filled with potholes and regulatory detours that dwarf any technology challenges. Even once the technology is proven to work the company will still need to work on a global basis with governments to gain their agreement to allow these types of vehicles on the road. They will need to convince insurance companies that they can be insured and do not pose any additional liability risk and ultimately they will need to sell the public on the concept of simply setting the destination and sitting back and trusting the robotic car will get them there safe and sound.  Google will be looking at decades of efforts and expense before they can get any return on this kind of investment.

 

Google glass is another amazing and exciting idea. It had been imagined before but with not much progress until Google got involved. It is basically; a camera, display, touchpad, battery and microphone built into really cool looking frames so that you can place a display right into your field of vision. You can; film, take pictures, search and translate all on the go. This product has real tech merit and can be a success but there is a huge challenge. Google will need to convince people to try and buy and then the user will need to learn how to adjust and accept this new visual experience. I can see this product having the “cool” factor for a while but it will be a huge undertaking to get the world to change its’ behavior patterns so that the product can succeed. Decades have been spent getting people out of eyeglasses either via contact lenses or laser surgery and now they will be expected to go back in the other direction. We shall see where this one goes.

 

Google Fiber may be the most mind boggling decision as far as the business community is concerned. Google has announced they are entering the ISP market is certain target cities and will be doing this via an over-build to the existing ISP players already there.  The cost of doing this is very large, even on Google standards, and thus why they have only announced the very restricted number of locations to get Google Fiber. The cost of doing this and getting significant market share is quite high, in the neighborhood of $3,000 to $6,000 per customer. And this is just to get the client, then you need to add in all of your monthly operating costs and programming and such. Even based on this limited model it could take well over a decade to get back the investment dollars and start adding to Google’s bottom line. Yet they further amaze and complicate the picture… if you take the entry level internet package the cost is a very reasonable….. $0.00. Attaching homes to your network and giving away internet is certainly going to test the business model assumptions we don’t see, such as advertising revenues and new services yet to come.

 

Time will tell if Google can succeed in these new areas or if they will someday take a deep breath and say “oh well, it was a nice idea” and walk away. Google has been the love child of the investment and tech community for quite some time, but even the faithful are pausing and scratching their heads and wondering.

 

 

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