SO MUCH FANFARE, SO FEW HITS
Google No Comments »Rivals get the jitters when Google’s nonsearch products grab headlines. But a close look shows that so far, there’s not a market leader among them
It’s a role once filled by IBM and later by Microsoft Corp. Today, tech’s 800-pound gorilla is Google Inc. A mere mention by one of its executives of a potential new product is enough to send shivers through competitors and drive analysts and the press scurrying to sift through the ramifications. When Google launched an instant-messaging program late last year, tech watchers buzzed over the looming confrontation with America Online, Yahoo!, and Microsoft. Google’s launch of online spreadsheet software in June was deemed a shot across the bow of Microsoft Excel. And when Google prepped for its June 29 debut of Google Checkout, an online payment system that will compete with eBay Inc.’s PayPal, several headlines blared: “Google Readies PayPal-Killer.â€
But if you cut through the hype, Google’s intimidation factor quickly fizzles. An analysis of some two dozen new ventures launched over the past four years shows that Google has yet to establish a single market leader outside its core search business, where it continues to chew up Microsoft and Yahoo.
Consider just a few examples: Google Talk, an instant-messaging service launched last August, now ranks No. 10, garnering just 2% of the number of users for market leader MSN Messenger, according to comScore Media Metrix. Three-month-old Google Finance, heralded as a competitor to market leader Yahoo! Finance, has settled in as the 40th-most-visited finance site, according to data from Hitwise, a competitive intelligence firm. Gmail, the e-mail service that was lauded at its 2004 launch for offering 500 times as much storage space as some rivals (they quickly closed the gap), today is the system of choice for only about one-quarter the number of people who use MSN and Yahoo e-mail.
SHORT ATTENTION SPAN
It’s not surprising that as more services migrate to the Web — from locating a restaurant to pricing real estate to sharing snapshots — the Internet’s most dominant brand is the presumptive winner. But after sparking substantial buzz, most of Google’s nonsearch offerings quickly fade from view. “People give Google the victory in the beginning and don’t show up later to notice that things didn’t go anywhere,†says Paul S. Kedrosky, a venture investor at Ventures West Management Inc. “Google has product ADD. They don’t know why they’re getting into all of these products. They have fantastic cash flow but terrible discipline on products,†says Kedrosky. “It’s a dangerous combination.â€
Fortunately for Google, its $120 billion market valuation is based on its domination in search, a business that is expected to keep growing at 30% to 40% per year. Google has, hands-down, the best algorithms for determining what Web pages to offer up as well as the largest base of advertisers. But many analysts think Google’s stock is worth $550 or $600 a share, well above its current $400. That’s based on the expectation that more new offerings will take hold. Analysts assume that services such as Google Checkout will generate fees from online transactions. Others, like Google Finance, could bring in more users, offering Google more opportunities to serve up lucrative ads.
But the company’s struggles with expansion raise long-term questions about whether it can eventually diversify revenue away from the small text-based ads that now constitute 99% of sales. “This is still a company that derives almost all of its revenues from one business,†says Scott Kessler, an analyst at Standard & Poor’s.
The problem is that every time Google branches out, it struggles with the very thing that makes its search engine so successful: simplicity. The minimalist Google home page offers a stark contrast with the cluttered sites of key rivals Yahoo and MSN. People go to Google to find information fast. So Google can’t showcase its plethora of new products without jeopardizing this sleek interface and the popularity that generates a $6 billion geyser of cash from search ads. But the lack of exposure for its new products means only 10% of Google visitors use it for anything other than Web and image searches, says Hitwise.
It doesn’t help that Google, despite its track record for hiring the best and brightest programmers, has a spotty record for new-product quality. Google’s philosophy of launching “early and often†frequently leads to products that start out on a par, at best, with those of competitors, giving Internet users little reason to change their surfing habits.
Furthermore, product managers at Google tend to have less power than engineers, say several former staffers. This can contribute to slow product upgrades, since most engineers want to work on the next big launch. Take Orkut, Google’s two-year-old social-networking site. Since making an initial splash, Orkut has seen limited changes and has faded in popularity everywhere except Brazil. Today it draws less than 1% as much U.S. traffic as MySpace.
Company officials concede that some of the newer products haven’t caught on. But they say a high failure rate is baked into their strategy — as it is for an increasing number of innovative companies (page 42). Marissa Mayer, vice-president for search products and user experience, estimates that up to 60% to 80% of Google’s products may eventually crash and burn. But the idea, she says, is to encourage risk-taking and let surviving products truly thrive. “We anticipate that we’re going to throw out a lot of products,†says Mayer. “But [people] will remember the ones that really matter and the ones that have a lot of user potential.â€
Case in point: Google Maps, which trails only MapQuest in mapping-site traffic thanks to such innovations as aerial views and “click-and-drag†maps to make navigation easier. The product has become so popular that other outfits build new businesses or services around it, creating “mash-ups†that show things like real-estate listings or crime statistics on top of Google’s maps. And four-year-old Google News offers top stories in 40 different countries and languages. That has spurred a jump of over 600% in international usage in the past year, making it the second-most-trafficked news aggregation site.
Source: www.keepmedia.com 10-07-2006
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