It seems a little sensationalist to question the livelihood of a company valued at almost $200bn and one that holds around 80% market share of worldwide search. Many SEO companies do not even factor in the rankings of other search engines. Rather they focus their efforts solely on search engine optimisation for Google. Now, any firm that claims they are the Best SEO company will consider the other engines when needed, but in Australia even the top SEO agencies generally do not need to focus on any search engine except Google due to its enormous market share. Just over ten short years ago, prior to the Google revolution and the dot-com bubble of 2000, AltaVista like Google today, was the dominant player in search. It took less than three years for them to go from market leader valued at $2.3bn, to crumble and be sold for a knockdown price of $140m in 2003.
I thought it would be interesting to assess the big threats that Google will face over the next 15 years and question whether one, or a combination of these, could result in a cataclysmic downfall similar to the one that destroyed AltaVista.
Top 5 Threats Facing Google
Reliance on Search – Investors have always been critical of Google’s almost 100% revenue reliance on search related advertising. The Economist noted this in a recent article and went on to point out that Google’s patterns of acquisitions, such as YouTube, have deepened rather than reduced Google’s reliance on search advertising. Without more diverse revenue streams Google faces a much larger strategic threat if their market share of search is hit.
Legal Threats – Like most dominant companies, Google’s size is an increasing liability in keeping a low profile. With various antitrust suits in the USA, and similar issues in Europe, Google can no longer act as start-up underdog, but is being treated more like tech monopolist. European Union claims that Google manipulates search results for its own good, stoushes with the Chinese Government, and law suits in the USA citing anti-competitive behaviour, show that Google is more keenly watched than ever before. Snapping up exciting new innovations or crushing competition through buy-outs will not be as easy as it once was.
People – Much of Google’s success has been due to its ability to hire, and retain, some of the world’s most talented people. From nimble start-up, to sexy dot com darling, Google has been able to attract high quality staff with a quirky working environment and a genuinely exciting outlook. But like most successful companies Google’s growth has led to complaints of bureaucracy, red-tape and less innovation. This has seen top talent leave Google and move elsewhere. As of earlier this year, over 15% of Facebook employees were ex-Googlers. This included prominent defections such as Google Maps creator Lars Rasmussen and former Google Vice President of Global Online Sales Sheryl Sandberg. The loss of top talent, or the inability to recruit such talent in the first place, could impact on Google’s ability to innovate and dominate.
Competition – The barriers to exit are low for search engine users. A preferred search engine today can be replaced tomorrow with the updating of default search engine in a user’s browser. The reason Google has dominated market share for almost a decade, is because it has been the superior search engine for almost a decade. But if a competitor could launch an engine that simply offers more relevant search results, loss of market share could be rapid. This could be a better Bing, or an unknown company simply developing a better algorithm.
Search Changes – It is possible that users in the future won’t search for information as they currently do. Rather than punching in www.google.com.au into a browser will we locate information differently? At present Google is struggling with the fact that Facebook is the most visited site on the internet and Google can’t show key Facebook data in its search results. Facebook users are locating information without Google’s assistance or ads. It is possible that overtime more information will be hidden from Google search bots in a similar way? Worse yet for Google, would be a radical new approach to the way that people search. As broadband killed AOL, and Google’s PageRank killed Altavista, a new innovation in the way we search could kill Google.
Why Google Is Different and Here For Good
Technology – There is just simply no doubt that Google’s search technology, and access to data, is superior to any serious competitor. From the superiority of search results, to taking imagery of virtually every street in the developed world, to mapping the entire world, Google’s technology and data, is more advanced, and entrenched than competitors. There has likely never been a company, nor Government, with greater access to the technology and data of Google. With strong profits to reinvest into technology, Google’s superiority can’t and won’t be matched.
Multiple Products – The number one criticism of Google from investors, and competitors, is that it is a “one trick pony” as Steve Ballmer, CEO of Microsoft once stated. The idea being that virtually all of Google’s revenue comes from advertising via Google AdWords. Whilst this is true today, Google is a thoroughly more entrenched entity when it comes to its relationship with users than that of a mere ‘search engine’. Think Google Maps, Gmail, YouTube, Google Chrome and the Android operating system. This will be even truer if Google+ takes off. Whilst these properties might not generate revenue, they make us rely on Google for more than just search and make barriers to exit higher.
Android – There is no doubt that Google has a patchy record of rolling out new products. Think Google Wave (supposed Facebook killer), Google Checkout (supposed PayPal killer), Google Video (supposed YouTube killer). Regardless of these, the Android operating system is shaping up as a winner. When Google bought Android in 2005 it was clear that something big was planned. In rolling out the operating system free of charge to smart-phone manufacturers, Google has overtaken the iPhone, and made Android the most prolific smartphone operating system in the world. The recent $12bn Google purchase of Motorola underlines how seriously they are taking Android. As smartphones take on an ever increasing market share of internet access, being the company powering the operating system will pay increased dividends. Google could become tomorrow’s Microsoft in the operating system space.
The Way Forward
Google’s inability to diversify its revenue stream is concerning to investors and is therefore a risk to long-term stability. But there seems no logical end to the dominance that Google currently enjoys. There is no doubt that Google is a far more entrenched and sophisticated entity than any search engine to date. More importantly, Google has moved past the point of being a search engine to being a company at the centre of how we live. Google will be facing threats of a nature that they haven’t experienced to date over the next decade. Given Google’s dominance of search, and possible inroads into operating systems, social networks and other areas of technology, they are shaping up more like a Microsoft of the early 90’s than an AltaVista of the late 90’s.
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