Saturday, September 13, 2008

Vendors Survival: Will Google Survive until 2018?


Google is celebrating this year its 10th anniversary. Google is the most typical Web 2.0 company (see my post Web 2.0 for Dummies part 4).
It is a very successful company, changing the IT industry as well as the Web culture.
Will Google celebrate it 20th anniversary in ten years or will Google vanish?

Most people's opinion is that Google will continue to dominate its traditional business areas and probably expand its business to new domains.
Recently I read the book The Google Story by David A. Vise and Mark Malseed.

It seems like this interesting book is biased. It is pro Google. However, the company earned my sympathy.
Two Stanford doctorate students (Larry Page & Sergey Brin) working hard trying to build the best search engine. Their motives are more scientific than becoming rich as soon as possible. They were paving a unique lane, different from most Dot Com companies, insisting on uncommon ideas (e.g. loading the Web content into their GooglePlex).


My sympathy (as well as other people's sympathy) is not a survival guarantee.
My opinion is that the probability that Google will survive is high but it is less than 1.0 (less than 100%). In order to assess its prospects to survive, I will deploy the same approach I used many years ago to asses Microsoft's survival until 2005.

The approach is based on the following assumptions:
1. There is a small probability higher than 0 that the company will not survive.
2. A crisis will happen (e.g. Business Model change).
3. The company's ability to adapt to the crisis will decide its fate: survival like IBM or HP in the nintees or end of life same as DEC.
Based on the assumptions, I will try to analyze Google and possible future threats.


Google in a nutshell

  • The leading Web Search Engine in the market deploying a unique algorithm for ranking search results (Page Rank)
  • A very popular brand name turned even into a slang word googling. Googling is searching for information in the Web.
  • The Web as a platform – no Google platform
  • Variety of Web based services
  • Web 2.0 model of participation and trust
  • No fees for using services
  • Unique leading advertising model: the Ads are not disruptive and look like an content extension, Ads are related to content, Payments based on clicks on Ads, Sharing revenues from Ads with partners placing Google Ads in their Web Pages.
  • Googleplex – a unique and powerful blend of hardware and software
  • Innovative & Quasi academic: 20% of employees' time devoted to research activities on any topic the employee chooses - The Company as multi startups.
  • Attracting the best computers engineers an programmers by intellectual challenges and friendly environment
  • Slogan: Don't be Evil


Bullets marked in blue describe attributes and attitudes which are reasons for my sympathy to Google.


Possible Threats
One obvious threat is a significantly better Search Engine developed by another company.
I do not think it is the major threat.
In that case, if Google could keep its Online Ads dominance it may survive.

Google can sign an agreement with the other company applying its Ads to the other search engine so both companies continue to grow.
Actually, Ask Jeeves claimed that its Teoma based search engine used a better search algorithm (more sophisticated ranking algorithm). Ask Jeevs is using Google Ads.
Do not assume that a significantly better Search Engine necessarily implies a bigger Search market segment. Many technologically superior software products failed to lead in terms of market share.


In my opinion the major threat is failure of the simple and effective Google Business model.
The model is based upon payment per click by advertisers and payment per click by Google to its affiliates. Ads are content related and therefore generating more business deals or business leads in comparison to Ads which are not content related.
Ads revenues are Google's main income source



The model may fail in the following scenarios (as well as other scenarios I am not thinking of):
1. Sophisticated Click Fraud
Click Fraud based on intentional click on Ads which does not generate business or business
potential.This intentional clicking could be programmatic with no simple clicking patterns.
Advertisers will have to pay more for more clicks without generating more business. Customers
would abandon Google Ads in that case.

2. More effective advertising model by another vendor attracting advertisers



Other significant threats could be:
Threat 1: Loosing its image as the best company to work for
The reasons could be internal (Policy changing) or external (emerging of a more attractive companies).

Threat 2: Loosing its innovative spirit
Organizational culture could be changed. More established companies are usually more conservative. Google could be transformed to more maintenance oriented company.

Threat 3: expanding its business domains wrongly
A company releasing new services and enhancing current services frequently could expand its services portfolio to wrong domains.
In these domains it may encounter strong and established competitors or fail to produce good enough products. Is Chrome an example of a wrong service of that kind?
Google flexibility may enable it to withdraw unsuccessful services before they will damage its image.

Threat 4: Legal issues
  • Copyrights violation issues
My postMy post Web 2.0 fragility: Viacom vs YouTube illustrates this issue by discussing a
lawsuit against a company acquired by Google. It is an issue in other Google projects such

as Google Book Search .

  • Privacy issues
Google keeps plenty of information including private information e.g information in Gmail
messages.


Threat 5: Web X.0 (X > 2)
When Web 2.0 emerged, some successful Web 1.0 companies were not able to adapt to the new Web. Will Google adapt to a more Semantic Web?
Probably yes, due to its flexibility and creativity. But nobody could be 100% sure it will.

Threat 6: The founders
The founder ability to insist on their unique approach was so far an asset. For example, it differentiated Google from the Dot Com mainstream approach caused other companies to disappear. What will happen if they will be wrong and insist upon their way?

Will Google survive in 2018?
Google's organizational culture of permanent research and change enables it to be an adaptive and Responsive organization (transforming an organization to an Adaptive and Responsive Organization is one of the most important SOA Value Propositions).
The ability to keep changing while keeping its core advantages could be the reason why Google probably will celebrate its 20th anniversary in 2018. However, the probability of its survival will be higher if it will handle properly a crisis.
Will it keep its 20% of employees time allocated to research during that crisis? Will it allow its engineers to choose freely the topics for that research during future crisis?
No one knows if it could and if it would.
Although there were some positive signs in past mini crisis (e.g. Microsoft's attempts to acquire Yahoo! and the privacy objections to Gmail service), the ultimate test is real crisis. I am pretty sure a crisis will occur.

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