UPDATE, July, 2010
UPDATE, July, 2010
Google is no longer just a search company. It is now a rising presence in Web browsers, mobile phone software, email, online maps, blogging software, language translation services, productivity software, and online video--all technologies that touch and are being transformed by the Internet.
It is showing great promise in new products for searching and communicating in real time, free telephony service, and social networking (TechCrunch reports it is buying Facebook apps maker Slide.)
The Android is a hit. The figures may change when sales of the iPhone 4 come out, but research firm NPD reports that Android phones are now outselling both the iPhone and the Blackberry.
It is working on a desktop operating system, a tablet computer to compete with Apple’s iPad, a new social network called ‘Google Me’, the long-rumored GDrive that will automatically synchronize everything on your personal computer with a personal online storage system, and many other projects that have not yet come to light.
This is all part of Larry Page’s and Sergey Brin’s strategy to push the development of the Internet as quickly as possible and to become the leading software company of the Internet Age. It will, of course, also increase Google’s wealth as more people get online and expand its advertising revenues.
The advantage Google has in each of these areas is three-fold. The first is its powerful and dominant Internet advertising business, which enables the company to offer many free products, a capability that companies such as Microsoft and Apple will find difficult to match.
The second is its incredible wealth and willingness to invest heavily in these new areas with little concern for how it affects the company’s stock price. Its stock continues to swing widely, anathema to most public companies. Since going public at $85 per share in 2004, its stock peaked at over $700 per share in 1997, dropping to $262 a year later, and recovering to $620 a year after that. Between January and July of 2010, its stock again lost over a quarter of its value to bottom out at $436. Microsoft executives would be apoplectic over such gyrations.
Still, Larry and Sergey are willing to reach deep into their hoard of cash to buy other promising companies. As of mid-2010 Google has spent many billions to buy or invest in about 75 companies to boost its technology and offerings. It has its own venture capital fund, Google Ventures, seeded with $100 million, to invest in promising start-up companies. This makes it unlikely that some brilliant entrepreneurs will blindside Google with a powerful new technology, at least as long as the Internet continues to be the dominant platform in computing.
Microsoft will fade against the Google onslaught, just as IBM faded in the wake of Microsoft’s rise two decades ago. Interestingly, if Microsoft is the new IBM and Google is the new Microsoft, which company will be the new Apple? The answer is simple: Apple.
Right now, with the brilliant Steve Jobs back at the helm of Apple, it is continuing to innovate, in online music, mobile phones and portable computer platforms. But Apple is falling into the same position it had relative to Microsoft in the PC Age; high-end products that have a loyal following and high prices, but much lower market share. It is the Jaguar of the computer and Internet world, while Google is the Honda or Toyota. That’s because Steve Jobs is pursuing his old approach--creating integrated hardware and proprietary software that he stubbornly controls.
Microsoft dominated and set the standards for computing because it focused only on software, courting every PC maker in the world to use its products. Today, Jobs strictly controls the manufacturing, the components and the applications of products such as the iPod, the iPhone and the iPad. Larry Page and Sergey Brin, however, are seeking deals with all the major PC, mobile phone and other manufacturers and service providers whose business touches the Intnernet. That will, in the end, give Google the largest market share.
Why? Consider the Android smartphone OS. Google licenses it the way Microsoft licenses Windows. Android is available on more than 60 devices and several mobile networks, and the applications do not have to be cleared by the man at the top. Apple’s iOS is available only on the iPhone and AT&T’s network, although there are rumors that it will finally become available for the Verizon Wireless network soon. Market researcher Gartner predicts that Android will pass the iPhone in market share in 2012. The Blackberry is still the most popular “smart phone”, but it is losing momentum.
Even Apple’s customers are starting to rebel. A research firm called Vision Critical surveyed iPhone users to find out what they think their phones lack, and the list of features they came up with reads like a list of technology already available on the newest Android phones. The list includes the ability to run on a choice of wireless carriers, the ability to run on a 4G network, an 8 megapixel camera, a larger display, a removable battery and a physical keyboard. Apple may start adding such features, but Steve Jobs stubbornly believes that he knows what’s best for customers--and for Apple--and is known for ignoring such feedback. Android phone manufacturers can provide whatever features they wish.
Of course, becoming the new Microsoft also puts a lot of heavy baggage on Google’s flight. Government agencies around the world are scrutinizing its moves for antitrust violations. In early July, 2010, the European Union’s antitrust chief said he was looking “very carefully” at allegations that Google unfairly ranks competitors’ sites lower in search results. The irony here is that one of the main reasons Google became successful in the first place is that it alone among all the major search engines refused to bias its search results. There is no discernible evidence that Larry and Sergey have changed their strategy now. Type any company stock ticker name into Google, for example, and Yahoo Finance appears above Google Finance. Larry and Sergey have always been adamant that search results must always be unbiased. But competitors complain and regulators, wary of Google’s increasing power, will listen.
Controversies surrounding Google’s tactics continue unabated. News organizations such as Rupert Murdoch’s News Corp. are still threatening Google with lawsuits for stealing snippets of news from his publications. Viacom was dealt a setback in its suit against YouTube over copyright infringement when a U.S. court ruled against Viacom in June 2010, but Viacom says it will appeal.
More and more people are also becoming skeptical about Google’s “Don’t Be Evil” philosophy. That philosophy is being put to its biggest test now as it struggles with the Chinese government over censorship. When hackers broke into Google customers’ email accounts in China in early 2010, Sergey was irate. Saying that the hack targeted Chinese dissidents, he made it clear that he thought the attack had government backing. It pushed Sergey too far, and he announced that Google was no longer willing to censor itself in China. Google moved its operations to Hong Kong, where the laws are more liberal, and stopped censoring its search results. But it has to renew its license to continue doing business in China every year. Google recently renewed its license to do business in China, but it still struggles with the censorship issue, and China recently blocked.
Leaving China would be an enormous blow to Google’s future. Microsoft CEO Steve Ballmer has made it clear that he has no problem doing business in China and censoring his company’s search results, and the Chinese search engine Baidu continues to gain market share. If Google drops out of China completely, its will be giving up a huge and growing market. If it compromises, it reputation as a corporation fighting against evil will take a big hit. The battle of wills is going to be intense and important to Google’s future. For Larry and Sergey, it is a fight between revenues and principle.
Nevertheless, Google’s momentum will continue to grow, along with all the challenges it faces. Becoming the new Microsoft may not be the description Larry and Sergey would like to have, but it is inevitable. Years ago when Microsoft’s then-CEO Bill Gates was asked if new developments in technology could make his company obsolete, he scoffed, asserting (with an amazing lack of insight to the rising danger of the Internet) that as long as there are computers in the world, Microsoft’s opportunities are strong. Now Larry and Sergey could make a similar claim: As long as the Internet is a powerful force in computing, Google’s prospects--and the controversies it faces--are nearly limitless.