The Google Backlash Begins

July 22nd, 2007

GoogleAccording to Business 2.0 the “Google backlash has begun.” This souring stems from the recent earnings “miss.”

I think the article is overly negative. Google missed earnings expectations ever so slightly, while they still made a big profit. But this is Wall Street where expectations are everything.

I do give the article this, though:

None of the other items on co-founder Larry Page’s famous list of Google’s top 100 projects are generating any significant revenue yet.

Truth be told, as far as I’m concerned, Google’s two successful ideas have been innovating in search when other companies thought it had been wrapped up, and monetizing through AdSense.

Other than that, all the cool Google web applications and myriad of increasingly expensive acquisitions still have yet to pay off. Obviously, Google is still looking for another big revenue stream to provide additional income to justify the size of the company and build to the future. It could be online computing, Google broadband, or a Google phone. But in terms of introducing new hit products and follow through, it’s clear Google is no Apple.

Next Dave Winer observes that Google’s purchase of Feedburner should have all bloggers thinking about the accessibility of our feeds. His point is that Google could easily decide to change the format FeedBurner from something open like RSS to something that works better with Google Reader.

I’m not exactly ready to hit the “panic” button just yet as I’m pretty entrenched in Google-ness - GMail, Reader, Docs, Analytics, etc. and I really don’t see any better options.

And to be honest, seeing the swift Wall Street and blogosphere reaction to Google’s slight disappointment, it’s another piece of evidence that things move so quickly in technology that this year’s leader could easily be next year’s joke. When I started blogging a little over a year ago, everyone was in love with MySpace and Digg. Now it’s Facebook, Twitter, and widgets. It may take years for Google to falter but it’s possible as bureaucracy begins to take root.

But the company recently a move to suggest “open-ness” for the broadcast spectrum that will soon be freed up once old-style analog television ceases broadcasting in 2009. This spectrum could be valuable for say, wireless broadband access for all. Google along with several other of the big telecommunications companies want in.

Here’s Google’s take from Fractals of Change:

Schmidt says Google will bid “at least” the $4.6 billion that the FCC proposes setting as a minimum or reserve for this part of the auction IF the FCC requires that whomever wins this chunk of spectrum is required to operate it according to four principles of openness:

  • Open applications: Consumers should be able to download and utilize any software applications, content, or services they desire;
  • Open devices: Consumers should be able to utilize a handheld communications device with whatever wireless network they prefer;
  • Open services: Third parties (resellers) should be able to acquire wireless services from a 700 MHz licensee on a wholesale basis, based on reasonably nondiscriminatory commercial terms; and
  • Open networks: Third parties (like internet service providers) should be able to interconnect at any technically feasible point in a 700 MHz licensee’s wireless network.

Needless to say, the telecommunication companies think this sucks. But I ask, who would you sooner throw your hat in with, AT&T, Verizon, or Google?

Anyhow, I’m still more inclined to side with this Google-is-still-better-than-the-others article as on Blackfriars’ Marketing. Lesser of several evils perhaps, but I’d go with the Google in a heartbeat. The other choices out there scare me even more.

Additional Reading: Insider Chatter, Fractals of Change, WinExtra

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  • Google FTW! Yes, as much as I and everyone else bash(es) Google - we still all use it, and it's better than a lot of the alternatives. I agree that many of Google's ventures have yet to truly take off in the way that search and AdSense have, but the same could be said for offshoots of Yahoo! and others too. We'll see.
  • I agree - Google may have its faults, but its still better then most every other option out there in almost everything they do. This 'backlash' will last until they beat earnings against next quarter and the stock zooms towards $600.

    Some companies warrant backlash - like say, Mircosoft for things like saying they would consider suing individual Linux users for royalties, or Sony for giving us a PS3 price cut, only to reveal a few days later that it's really just a clearance sale - Google, the way I see it, manages to keep the sketchiness to a minimum for such a big company.
  • DaveD
    And yet - what exactly does Google do?

    Do they innately do anything except search? Not if you care to disclude "beta" and buyouts.

    Do they atually guide Wall Street for future profits? Nope.

    Surely they work that "analog television" or "phone" thingee. Oh yeah - they don't. Um. Alright... that online ad revenue means they should command $600 a share. For sure. After all, that revenue certainly adds up to... well, exactly WHAT does that add up to?
  • DavidD - What the online ad revenue adds up to is pretty clear. Just read the earnings report (925 million net income on 3.8 billion in quarterly revenues) -- certainly nothing to sniff at.

    I find it amusing that the problem Wall Street has with Google, in effect, is that it's only growing super fast and and not super duper fast. What their year over year earnings growth was only 28% not 35%? Oh the horror! Most company's would kill for those rates. It's the curse of the overachiever constantly having to outdo their last feat.

    Search + Adwords/Adsense is plenty to build off of. And if they can complete the Doubleclick transaction, they will have a truly awesome platform to capture even more of the online ad revenue. In the meantime, the other product experiments will hopefully yield something big or complementary to their bread and butter. But there is no shame in focusing on search and advertising. Especially with their dominating marketshare (I don't believe Comscore's numbers for a second -- the divide chasm between Google and MSN Search and Yahoo is much wider from what I've seen on my websites and what I've heard from other web companies).

    As for the Apple comment. It's worth noting that Apple spent 20+ years of its existence as a computer hardware/software outfit before what I'd consider it's next big hit, the iPod. The iPhone's success, while likely, is still up in the air. So I'd give Google the benefit of a few more years before knocking them as a one-trick-pony.
  • What Google has done is create a "frictionless" money making machine with search and advertising. They don't have any inventory or physical products to deal with so the sky's the limit. I also give them credit for innovating in search and ads when other companies that could have done the same (Microsoft and Yahoo!) thought they had search wrapped up. They have a lot of impressive stuff in the pipe - really looking forward to a web based Google Office suite so I can get off of Microsoft.

    Now about Apple / Google - I still think Apple has one up on the Goog, if only because it's a much older company. Apple outlasted many other technology companies. They were given up for dead in the mid nineties. The whole Steve Jobs returning to the company and its revival is one for the history books - practically like a whole new company.

    I'd list their "hits" as the original Apple, the Macintosh (revolutionizing the GUI), the iMac (resurrecting the company), the purchase of NeXT to become OSX, the iPod and iTunes, and the Apple Stores. The way they managed the OSX transition - both from OS 9 to OS X and the secret Intel version allowing them to move from Motorola to Intel was freaking brilliant.

    Then you add on Steve Jobs' ability to sell pretty much anything Apple to a captive audience. He could release the iStick and get press. Google doesn't have anything, marketing wise, to compare with the Jobs reality distortion field. I don't see late night talk show hosts cracking jokes about iGoogle.

    Comparing a thirty year old tech company and a web company less than a decade old is a bit unfair, but that was my whole point with the comparison. Google is an incredible company but hasn't really been tested by time. They haven't had to deal with abject failure, only success.

    Still, both Google and Apple are the two tech companies that I really believe in and use their products constantly. But to show where my loyalties ultimately lie, if Google ever tries to buy Apple, I'll be seriously pissed.

    Thanks for your comments folks, you keep me on the straight and narrow...
  • My only point on the Apple thing is that while you can go granular on individual Apple products, most mainstream folks would think (for the historical company) "Apple = Mac + Ease of Use". Hence, despite iterations on this product line (iMacs, processor transitions, Operating system transitions, etc. -- it's all really the same thing from a very high level view. Yes that's simplifying things quite a bit). In the end, the iMacs didn't result in a new business for Apple. It was just the natural evolution of an existing business line (and I assume from the above, what Google is getting panned for is not building new profitable lines of business).

    One could say the same for a Google. Search has seen a lot of iterations already. Image search. Video search. Changes to the pagerank formula. Same thing with adsense. Doubleclick integration might be analogous to the NeXT ingtegration with OSX. It's evolutionary to the inside observer and largely iterative. But to the mainstream bystander it's still all just "Search & Advertising".

    The music thing, I think, is a big deal b/c it finally opens up a whole new line of business for Apple that is massive and distinct from the mainline computer hardware/software line. I'm constantly amazed by the effect/success of this when I go into an Apple Store these days. The tenor of the company is completely changed by the new customers Apple has drawn (a good thing) and by the change in focus (makes me worry sometimes that Apple might be taking its eye off the Mac side of the biz too much).

    Anyway, I think we agree here, we're just operating at different levels of granularity on the Apple/Google comparison.

    I agree that they haven't had the big downturn that is critical to really testing the mettle and determination of a company. And in this area, Apple has many, many others beat having been kicked and left for dead so many times by the press and wallstreet (and Michael Dell) in the past. I hope both are successful, though I find my loyalties are also more closely tied to Apple (I a bit more mistrustful of Google, though I admire them nevertheless).
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