Searching for Google’s future (Part 1) - Taking the tablets

4/3/2012 5:38:31 PM
Searching for Google’s future (Part 1)

DNA analysis, driverless cars and weather insurance - Gary Marshall investigates Google’s ongoing search for new opportunities

Were Google a horse, it would he well on its way to the glue factory by now. Android revenues are still tiny, the company’s social experiments haven’t stuck and it has a long track record of buying companies and then realising it doesn’t know what to do with them. Even its core business, search, doesn’t look too great - it’s becoming stuffed with spam as many of us migrate to social networks, and Facebook attempts to annex the entire internet.

Description: Searching for Google

That’s the received wisdom anyway, hut predictions of Google’s demise may prove to be premature. The company is facing challenges, certainly but Google remains one of the world’s biggest, richest, smartest and most innovative companies, and it’s placing big bets to ensure it’s as relevant in 2020 as it is today. The key to Google’s strategy is that it doesn’t really have a formal strategy. As technology analysis firm Gartner (www.gartner.com) explains, Google encourages innovation through emergence. It doesn’t have a strategic masterplan with investors or clients, which for some is a source of confusion or frustration. Applications, services and products that succeed - whether in revenue generation or serving as irritants and disrupters to its rivals - receive more resources. The resulting mesh of products is exceptionally strong in some places, hut loose and ragged in others. Google’s strategy favours rapid iteration, experimentation and fluidity over dogged pursuit of a specific set of long-term objectives.”

Right here, right now

That doesn’t mean Google doesn’t think long term though. Take Android, for example. Its mission is to replace every single feature phone with a smartphone, and that strategy appears to be working across the mobile market, with Android devices managing the difficult trick of competing at both the value and premium ends of the market. As Daniel Ashdown, Research Analyst with Juniper Research (www.juniperresearch.com) explains: “Android is currently Apple’s main rival in the mobile operating system space. The open source nature of Android makes it ideal for vendors wanting to get their smartphone to market at a low cost, hut [it] has the features needed for premium smartphones as well.”

Per-revenue income from Android devices is tiny now, but when we’re all running srnartphones, those devices will he running Google search, displaying Google ads and generating Google income. Juniper Research’s Principal Analyst Dr Windsor Holden says, “Our latest forecasts suggest that the mobile advertising market worldwide will be worth $11.5billion per annum by 2015.”

According to Google’s own figures, 96 per cent of its revenues currently come from the combination of display advertising and search ads, so it’s no wonder that the firm continues to invest in these two key products. Tools like Display Ad Builder make it easier for firms to move from search to display advertising, while the acquisition of AdMob in 2009 happened just in time for the smartphone-fuel led explosion in mobile advertising. As Gartner puts it, “While Google’s success faces [threats], the attention it maintains on its core advertising continues to deliver the benefit of growth and sustainable advantage from which Google has the opportunity to expand.”

Bad Guys

The company Google bought- and broke

Many of Google’s successes come from companies it’s acquired. The AdMob network generates Impressive mobile advertising revenues, while the 2005 acquisition of a mobile startup called Android and the following year’s purchase of video sharing site YouTube haven’t worked out too badly. Not all of Google’s purchases turn out to be good buys though.

The list of failed Google investments isn’t as long as Yahoo’s, but It’s still a tale of missed opportunities. Q&A firm Aardvark, which it purchased in 2010, was closed in the great Google Labs shutdown of 2011. Social gaming firm Slide got the bullet at the same time, less than a year after less than a year under Google’s umbrella. Other firms lasted slightly longer: Foursquare predecessor Dodgeball, purchased in 2005, lasted until 2009, when it was dumped in favour of Google Latitude. Twitter rival Jaiku, acquired In 2007, was shut down at the same time.

Google’s willingness to take risks - and to shut down sites and services if they’re not working as well as it would like — is part of Its flexibility, but it also means that being acquired by the search giant isn’t necessarily a shortcut to fame and fortune. Perhaps that’s why, when Google came a-wooing, firms induding Friendster, FlipBoard, Yelp, Twitter, Skype, Groupon and even Facebook have all told the company that they’d rather just be friends.

Description: Google Plus

Taking the tablets

Despite its success on phones, Android isn’t doing so well in tablets, where even the most generous estimates admit that Apple is giving everyone else a kicking — and in 2012, Windows 8 will bring Microsoft’s considerable muscle to the market. If Google can’t compete now, what chance does it have in a Windows 8 world?

Daniel Ashdown remains optimistic. The potential size of the market for smartphones and tablets means that there is a lot of space for a number of vendors to succeed,” he told PC Plus. “While Apple is dominant currently and its sales will continue to grow, it’s inevitably going to lose market share due to a broadening - in terms of price point, which suits Android - of these markets.” In other words, the more devices Android runs on, the more of the growing tablet market it will get.

Ashdown believes that Microsoft is only a very distant danger. Nokia’s move to Windows Phone 7 isn’t a massive threat to Android because it is one vendor, and many other vendors arc spreading devices across Microsoft’s and Google’s OSes — with a weighting towards Android. With regards to Windows 8, at the moment the tablet is seen as a mobile device, not a PC, and the mobile vendors are dominating that market at the moment.

Microsoft will make a big impact, but we think Android will become the leading player in the tablet OS and smartphone OS market b’ 2015,” he adds.

In July, Nielsen research found that some 40 per cent of mobile phone users own smartphones, and smartphones now dominate sales of new handsets too: 55 per cent of people who bought a handset in March, April or May bought a smartphone rather than a basic feature phone, and analysis firm iSuppli predicts that in the US, smartphones will outnumber feature phones by 2015. Google is currently activating half a million Android devices every day, which sounds impressive until you discover that there are 5.3 billion mobile phones worldwide. The potential for growth - and for Google - is enormous.

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