A while back I wrote (and I know I don’t update frequently enough for some of you but I have a life so live with it) about Google and what I fear is their inevitable downfall. Some have commented and wondered what I meant and I thought it might be appropriate for me to expand on this a bit. There will be the usual digressing of course but hopefully you will understand what I am trying to put into words here.
Google is a company that is built around a very simple idea. This is brilliant, most great companies are in fact built around very simple ideas. In fact if someone can’t explain the raison d’etre behind their company in less than 30 seconds, they’re probably not worth talking to. Then it’s just “a better coffee maker”. Which is fine, I am not saying that the world doesn’t need better coffee makers, God knows there is some awful ones out there, it’s just that nobody, at least to my knowledge, built a huge international business from a slightly better coffee maker. I am probably wrong, but as usual I don’t care. And neither do you because this is a simple idea and simple ideas are easy to remember. Complexity is for people who have thick glasses and think that technical analysis is the way to succeed in the stock market. (digress 1, niklas 0)
Google is also a company with a fairly strong corporate culture. I can’t really say much about it, just that to an outsider it seems like the classic case of startup sectarianism. Which, again, is great. You need to have a strong vision internally to have cohesion during your growth phases. And as we all know, Google have grown a lot. And even if they are growing from the bottom up and making money hand over fist they are still, it seems, reaching a stage were the vision isn’t strong enough to keep the company together. “Don’t be evil”. Right. But when you get to a certain size and you are publicly traded. And you’re faced with the potential of law suits from your shareholders. Suddenly “Don’t be evil” can easily turn into “Don’t be evil. Unless.”. Which is very, very different. And once that happens (and I have a strong feeling that it already has, but that is just me being pessimistic as per usual), the cohesion brought by the simple idea and the strong vision will start to crumble. Are we seeing early googlers leaving the company? Yes. Starting new startups? Yes. Leaving because they are dissatisfied? Yes. Because the company has changed? Yes. Ok.
I think it’s fairly simple. Google became very large very fast, they have huge fixed costs and even though everyone is arguing that the value of the internet ad market is going to grow a lot in the coming years they have also started to get some very stiff competition, money can no longer be made as quickly and as easily. But the fixed costs remain. Me, and many others, have a strong feeling that we are on the verge of a global economical downturn. That will certainly affect Google, and a lot more than they hope. And given that their ambitions are now so widespread (bidding for the 700 MHz frequency in the US, Android and many other initiatives are taking up both time and resources) it’s hard to see how they will be able to keep it together in the next 24 months.
And what happens when Google shows a loss, or even a less than expected increase in revenues? Like it or not, we are in bubble country again. It’s not as bad as it was in 2000, but it’s pretty damn far from good.
Now, I still think Google will survive and thrive in some role but I think their dominant position will be severely undermined in the next five years. Their revenue streams are already under attack and as more and more players muscle in on that market there will be even harder pressure. But the hardest blows will come from something which I see as not very far off – the vertical search engines. Even if Google are fantastic generalists, they are quite some way from becoming what is actually necessary for most of us, an integrated helping hand so to speak. Searches lack context, it can become frustratingly hard to find what you are looking for fairly quickly and very often we are actually searching outside of our main context. This Is Wrong (TM). One can also, easily, argue that humans are still far better than computers at managing and classifying information and that the best way of finding appropriate data is by using a networked, agent-based search that is far more P2P-oriented than the Google model. But this is perhaps a subject for a later entry (around 2010 or so if my current update frequency is anything to go by).
That will have to be it for now.