Google: So Much Fanfare, So Few Hits
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."
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 (instant-messaging service) launched last August, now ranks No. 10, garnering just 2% of the number of users for market leader MSN Messenger.
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 (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.
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. 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.
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 (a competitive intelligence firm).
Orkut, Google's two-year-old social-networking site 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. 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.
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.
As the list of Google products swells, five tabs don't do the trick. And for most users, it's out of tab, out of mind. One way around the tab problem is to push more users to create personalized home pages around Google's search engine, an option the company has offered for the past year. A custom-built Google home page can be surrounded by information from Google News headlines, stock quotes, and a list of e-mails from a Gmail account. True, this pushes people toward a busier home page. But at least they can set their own threshold, including only as many add-ons as they wish. Google claims that "tens of millions" of visitors have set up customized home pages, though it's not clear how many are actively in use.
But even if Google leads users to its new products, it needs to add pizzazz and improve functionality. Most areas it is targeting have entrenched rivals: For surfers perusing stock quotes, there's Yahoo! Finance. For chat addicts, there's AOL Instant Messenger. Those services have that elusive "stickiness" that makes users likely to return - for instance, often checked stock quotes already queued up in a finance site - which boosts ad values.
With its huge market cap and lead in search, Google has time to work out the kinks and a culture committed to learning from mistakes. And it is collecting a wealth of data about what surfers want. Still, the message coming back so far is that if Google wants to live up to its reputation as the beast of Silicon Valley, it needs to search harder for products people want to use.
From BusinessWeek, July 10, 2006
posted by Arun Nair at
10:24 AM
3 Comments:
You can't just get everyone to switch to your service overnight.
But they have definitely raised the bar in every market they've entered, which is good for us end-users whether we use google or not.
The best thing about google is that they let you do things the way you want to. I've not been to the google main page in ages.(The only time I go there is to look at the event logos)
And unlike what the author thinks Google Talk is not about becoming #1, it's about opening the IM market and interoperability. There was a time AOL/Compuserve/Prodigy users couldn't send emails to each other. That was pretty much the state of IM too until recently. And with Google Talk they have pretty much set the ball rolling towards interoperability.
Google and AOL started it with their agreement.
Yahoo! and MSN Live! will be interoperable. (This has been available for a while to paying customers but now it's being thrown open)
I can run my own Jabber server talk to other google talk users as kingsly@mydomain.com!(And soon even receive VoIP calls to kingsly@mydomain.com!)
I'm very much happy with Google being a close #2 or #1 by a narrow margin.
The world doesn't need another Microsoft .. err.. Monopoly. :-)
Google has 2 huge advantages:
- low product development costs
- high visibility
Many of the engineers have in fact brought pet ideas from their college days and developed them further under the aegis of Google.
Its all too obvious that they manage to generate enormous buzz around every new launch. There is a swarm of early adoptors across the globe, who are all to eager to chip in with comments and ideas.
All these lead to us to believe that in fact Google has extremely low costs, both for development as well as for publicity and launch.
The other aspect which is far more interesting is what Google can do by putting the pieces together..
Many of the projects that seem to have no connection at the outset, seem to meld together magically down the road. A case in point is Gmail and Google Chat.
Its clear that the Payment mechanism is the crucial component before they can fully indulge in e-commerce. Once they have that piece think of the possibilities with mashups between Google Maps, Froogle, Google Talk etc..
Of course, they are entirely relying on revenue from advertisements. There is currently no business model with any of their other services (search, chat, talk, froogle, maps, library, groups etc.). The question is whether they want to create new offerings to diversify their source of income or whether they want they want to further expand their ad related revenues.
Thanks for your comment Kingsly. Google has long been cloaking its ambitions beneath its desire to benefit the 'end-user' and inter-operability. Google has launched these products to acheive exactly what google-ites hate about Microsoft - monopoly. Since I am asscoiated with media, I'll choose that as a case in point: Google tested the waters last year to sell Old Media ads. How does this work? Google purchases space at a substantial discount from newspapers & magazines and then resells that (entirely or in portions) to the advertisers who buy online ads and search tools. After initial disappointment, Google is attempting another shot at this - with more publications in tow. (They also have a radio ad-buying unit that has been beefed up - its called dMarc). Print, as a business is facing a stagnant growth. For them, the short term gains in selling out space to Google is welcome. But they have no allusions about Google's ultimate intent - which is take over the the old media business. (How does this work? Google undercuts the magazine/ paper's relationship with the advertsiser/ agency by offering cut-rate deals). The only benefit here is that Google is sitting on vast amounts of data that advertisers could use to understand their target audience and monitor campaigns effictively.
Outside of search, their success rate is more or less pathetic. Surely you don't believe that they venture into all the mentioned verticals for the fun of it - so end-users are benefited? If so, why are they planning to scrap most of it by the year end?
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