Google-Has it hit the growth ceiling?
My first tryst with internet was at almost the same time as the launch of search engine by Google. I used to work with PricewaterhouseCoopers (PwC) as a management consultant and at one of my client’s place, I first heard about the exciting new search engine “Google” and how good it was over the existing search engines. Larry Page & Sergey Brin were PhD students at Stanford University working on their thesis on the topic of the internet search. Their passion was in their research project for search and later they commercialized their successful project. Google changed the way we searched for information or even the way we used internet. Unlike its competitors, Google was a pure search engine and not a portal. It was the passion of Larry & Sergey that made them successful in their venture against established companies like Microsoft, Yahoo, etc. For me Google has been part of my virtual identity since I started flirting with internet. However, now when I look around and see the growth of completely unknown companies in this space, I feel that Google may not be able to keep pace with them on passion, nimbleness and more importantly consumer understanding.
Facebook is the new phenomena and is currently focused only on social networking. Facebook’s roots are very much similar to that of Google. Mark Zuckerberg founded Facebook while he was at Harvard University. He had a passion for translating physical relationships into virtual relationships. Today, Facebook has over 175 million registered users and adding over 5 million new users every week. As per the Fortune Magazine, Facebook reached the 150 million user mark faster than any other service including mobiles. On an average a facebook user spends over 180 minutes per week with over one visit every alternate day. No site of Google can match Facebook on the time spent by an average user per month. Microsoft valued Facebook at $15 Billion which is a lot of money for a single service company with revenues of less than $250 million and yet to break-even.
Similarly, Youtube was started by three employees of Paypal. According to a story, Chad Hurley and Steve Chen developed the idea for YouTube during the early months of 2005, after they had experienced difficulty sharing videos that had been shot at a dinner party at Chen’s apartment in San Francisco. Jawed Karim did not attend the party and denied that it had occurred and then the idea of YouTube got incubated. Again passion and consumer insight gave birth to a new service. Google later bought Youtube.
Apart from the single minded passion of the founder, the success of any venture is dependant on the consumer insight. Many more ventures fail than the successful ones. The founder of a failed venture may be equally passionate as the successful ones but what differentiates a successful venture from the failed venture is the consumer insight. After search, Google has not had even a single big success that is based on consumer insight.
Search is still at the center stage of whatever Google does. However, Google has now extended its offering to email, maps, blogging, advertisements, social networking and mobile OS platform (Android). Is it equally successful in all its offerings? Is it likely to be the leader in all its offerings? The answer to these questions is NO. Out of 1 billion online users every month, Google search is used by 673 million people giving it a reach of 67%. However, no other offering from Google matches the popularity of search. Its mail service has a reach of 12% and lags behind Hotmail and Yahoomail that have a reach of 28% each. Orkut has a reach of 5% vs. 22% reach of Facebook and if India and Brazil were to log off from Orkut, there would be hardly any users left with it. In the messaging space, Google Talk has a reach which is not even 1% compared to 28% of MSN. Social networking, entertainment, travel and messaging are the fastest growing categories on the internet and Google’s presence is miniscule in these areas barring Youtube which is a popular video entertainment site (with components of social networking). Youtube was acquired by Google and was not an in-house development. The point I am making is that Google has not able to cut much ice and is facing pressures from either incumbents or new age entrepreneurs.
Google is company that is great at developing platforms. It has developed platforms like Adsense, Blogger, search, etc. and should focus on developing platforms that the other entrepreneurs can use to further their initiatives. It would destroy the value of the company if it tries to acquire consumer driven companies. The passion cannot be the same when you are pursuing one opportunity or when you are pursuing multiple opportunities. If Google continues on its acquisition spree, it would spread itself thinly across many services and would neither have the resources or the vigor to follow on each opportunity.
Internet space is highly personal and differentiated. There cannot be one global strategy that would work. Though a public space, the virtual space is a mirror of an individual. Everybody is seeking to develop their own clone in the virtual world. People are replicating their relationships on internet they way they would like to have in the physical world through social networking media. In fact the Facebooks of the world are blurring the relationship management in the physical and virtual world. I discover a long lost friend on one of the Social Networking sites and then want to meet him in person. I want to communicate with my friends in my language and would like to see familiar things on a website. I would also want the services that could be more specific to my surroundings. It is for this reason that services like Baidu and QQ are so popular. Google would do well to develop the platforms that could help the entrepreneurs monetize their services in different parts of the world. It cannot expect to develop consumer understanding in each and every country. The basic platforms would remain the same but the consumer offering would differ and Google would benefit by focusing on the platforms that can be standardized across the globe.
As far as Google is concerned, its high growth past may not get emulated in future and if it continues to add the list of services, its growth prospects may get severely challenged.