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.
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.
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.
