There was a time when Google had no profits. It was madly searching for sources of revenues. Then in 2003 they hit upon the AdWords gold mine and as of Dec 2011, Total Ad revenue stood at $ 36.5 Billion (Google’s total revenue was $ 37.9 Billion).
As per Google’s 2011 SEC Filing, “The goal of AdWords, our primary auction-based advertising program, is to deliver ads that are so useful and relevant to search queries or web content that they are a form of information in their own right. Most of our AdWords customers pay us on a cost-per-click basis, which means that an advertiser pays us only when a user clicks on one of its ads. We also offer AdWords on a cost-per-impression basis that enables advertisers to pay us based on the number of times their ads appear on our websites and our Google Network Members’ websites as specified by the advertiser.”
So should we say Google is an IT company or a Media company? Although core competency remains ‘Search’ but it has become an enabler for AdWords and AdSense programs rather than a key revenue generator. Boys are Men now; It’s been 8 years since Google went Public and it looks like Google is losing testosterone. I believe it’s time for them to transform their Business Model. Switching costs of consumers in Internet industry is 0. In addition, the switching time is in minutes, if not seconds. In such a scenario, as a CEO you would like to save the hard work you have put so far.
As more and more powerful gadgets are falling into people’s hand, the hunger for content is increasing. And so will increase the demand for ‘Intelligent Information’. And this explosion of ‘Intelligent Information’ will pace up every cycle – product, information, financial or even Bubbles. So closely placed network effects will be the new normal. In such hyper world, Google needs to do much more than search and Ads to keep itself fresh for people who have very-very small attention spans. In this regards, Apple should be the role-model for Google – The first transformation was around 1998 with iMac (PC was the core business), then moved to media (iPod) and then came the iPhone. And the latest foray is in tablets which are not at all performing badly. Google has been trying out several of these options but only to catch up.
So what are the options with Google?
- Forget about Social exploration – Leave Social part to Facebook; With Zuckerberg and Sandberg, they’re doing pretty good.
- Focus on core strengths – Rather than pursuing too many options, focus on what they are good at. Innovate Search. Strengthen the mobile value chain; Leverage Motorola and Android (Why keep Chrome?). Expand Google Wallet.
- Cloud – I will also be interested in Google collaborating with Apple to focus on Mobile Apps over Cloud 🙂
- Device a concrete plan for ‘Smart Mobility’. Google has already been awarded patent for technology for self-driving cars. Cities and transport on clouds!
- Buy Twitter before it’s too late!
Technology sector is one of the very few which appreciate talent without huge capital investments upfront. I hope Google Guys have that in mind to keep them on their feet.
PS: “ If you do something and it turns out pretty good, then you should go do something else wonderful…”