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Is Google Going Too Far?

I've been watching the internet giant Google for a while and I think they're trying to jump into every corner o the IT industry. We mostly know Google [or Goggles as some people know it] for it's search feature and we web developers / designers crave a good Google PageRank for our homepages.

Here's an excerpt from Yahoo News, and while I do not necessarily agree with everything Tim Beyers says, some points he raised are well worth noting:

Once again, Google (Nasdaq: GOOG - News) is out to prove conventional wisdom wrong. According to a story published in today's edition of The New York Times, Big Goo builds its own servers and could even get into the business of creating its own chip designs.

There's already plenty of hubbub over whether these initiatives will be good for the company or the industry at large. I have my opinions, but I'm loath to share them. I believe doing so would detract from the larger issue at hand -- namely, that Google has dramatically altered the competitive dynamics in its industry. And that may prove to be really, really bad.

At issue is how many competitors Google has gained in recent months. Here's how it looks now, assuming that server and chip vendors have officially joined the list:

SearchWeb AccessPortals

Yahoo! Earthlink Yahoo!

Microsoft United Online Microsoft

AOL Yahoo! AOL

Microsoft

Productivity

SoftwareServersChips

Microsoft Hewlett-Packard Intel

Sun Dell AMD

IBM Sun Freescale

IBM

Rackable Systems

What's more, this compilation isn't even close to complete. Dozens of private companies are competing in areas where Google wants to be or already is. Yet, when combined, these firms alone possess more than $34 billion in net cash. Compare that with Google, which has raised two rounds of funding in recent months, giving it roughly $8.4 billion in the bank as of this writing.

Here's my point: As rich as Google is, it may be woefully underfunded for taking on 90% or more of the tech universe. Yet that's what it seems to have planned. It's as if Google wants to build a tech infrastructure so big and impressive that no company will ever want to have an infrastructure of its own. Just outsource your Web applications to us, Google's pitch might read.

That would be an indirect assault on not only Intel (Nasdaq: INTC - News) and Advanced Micro Devices (NYSE: AMD - News), but also on every server vendor, including server-software vendors such as Red Hat (Nasdaq: RHAT - News), Sun Microsystems (Nasdaq: SUNW - News), and IBM (NYSE: IBM - News). After all, who needs servers when everything is uploaded to Big Goo?

History hasn't been kind to do-it-yourself tech firms. 1980's-era Bob Vilas such as Sun have since dumped most vertical-integration strategies to make room for the cost-efficiency that comes from working with partners. Now, Google wants to rewind the clock. I, for one, don't see it working out well.

I have quoted the article in it's entirety because it's short but my source is http://news.yahoo.com/s/fool/20060703/bs_fool_fool/115194956316.

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23 answers

Marissa Mayer, dubbed by Business Week as Google’s “31-year-old product-launch czar,” likes to “launch products early and often”.

While Mayer’s media spin on Google’s strategy of regularly releasing new products and services as “betas” and “limited tests” and “lab projects” is to characterize the company as “fearless,” Google’s “top brass” new product-reviews are most likely shrewd.

According to Mayer:

"We believe that we should be launching more products than what will ultimately become phenomenally popular. The way you find really successful new innovation is to release five things and hope that one or two of them really take off…We should be able to put products out there and, without a lot of promotion, a good product will grow. We like to put products out there early, see what users say about them, what additional features they'd like to see, and then build those out.

I think the core underpinnings of what we're doing make a lot of sense. That said, there certainly are some products that we've released that aren't market leaders and may never be. We anticipate that we're going to throw out a lot of products. People won't be able to remember them all, but they will remember the ones that really matter and the ones that have a lot of user potential".

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there is no harm in trying everything. if they have the manpower and resources to take over the IT market as we know it, then let them do it. they make enough money to recover from any failure. i am taking random quotes from an article i read.

Google is a joint founded by geeks and run by geeks. It is a collection of 650 really smart people who are almost frighteningly single-minded. "These are people who think they are creating something that's the best in the world," says Peter Norvig, a Google engineering director. "And that product is changing people's lives. Geeks are different from the rest of us, so it's no surprise that they've created a different sort of company. Google is, in fact, their dream house. It also happens to be among the best-run companies in the technology sector. At a moment when much of business has resigned itself to the pursuit of sameness and safety, Google proposes an almost joyous antidote to mediocrity, a model for smart innovation in challenging times."

Google is a company overbuilt to be stronger than it has to be. Its extravagance of talent allows it crucial flexibility -- the ability to experiment, to try many things at once. "Flexibility is expensive," says Craig Silverstein, a 30-year-old engineer who dropped his pursuit of a Stanford PhD to become Google's first employee. "But we think that flexibility gives you a better product. Are we right? I think we're right. More important, that's the sort of company I want to work for."

One big factor is the company's willingness to fail. Google engineers are free to experiment with new features and new services and free to do so in public. The company frequently posts early versions of new features on the site and waits for its users to react.

TRUE

THIS IS THE REVENGE OF THE NERD AND THEY DESERVE OUR APPLAUSE. if the world was urs for the taking, wouldn't u take it too?

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R&D = Innovation and Innovation in new technologies= More Revenue/profits. That is always good for shareholders. It is always a good sign when companies spend their money on new things.

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There's no harm in trying out new things -- who knows if in future online transactions will be the most important thing? I'm not saying Google ought to try out everything but it doesn't hurt to try out some.

When you've got the money, why not use it for R & D?

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Are you advocating buying and holding, or are covered calls and calender calls about of your strategy?

Yeah, google is doing what google does. They exemplify the newer breed of powerful companies that refuse to abide by the "old" ways of doing business. The bottomline is that we are on the outside looking in but still must study these companies, along with their tactics and strategies, and prepare for the time when our compaines and organizations will have to weather these same, if not more intense, waters.

Nkonim!!!

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Seun

Google will not fail.They learned from the mistakes of IBM's and Yahoo's of the world. They Will be much bigger than they are today in a few years. I think they will end up being the only search engine soon in the world. You might want to buy their stock NASDAQ: GOOG.

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You may be the world's most intelligent person, but if you don't focus on the right things, you will fail.

IBM engineers were not silly, yet they underestimated the PC market. Yahoo isn't silly, yet they underestimated search. In the same way, Google isn't silly, but they are being tempted to take their eyes off the true secrets of their success: relevant search results, the resulting traffic, relevant ads, and respect for the little guy.

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I just wan to reinterate that news is what drives the markets. Stocks, foreign exchange, bonds, etc, etc all driven by news, aka fundamentals. Chart readers, like me, learn to take a back seat to news no matter what the technical indicators say. So the more positive news about a company, the more investors want the stock, the higher the price goes. Heavy buying makes prices rise. At the same time, if there is bad news, people toss the stocks over board, and some dummies try to exercise their options before prices fall and then say "no i didn't know the stock price was going to fall so this is not insider trading". whatever, go tell it to martha steward and soon noel forgeard. So yeah, heavy selling makes prices fall.

So impressing the journalists and guys like crazy a$$ "BOO YAH!!" kramer is very important.

Google could be purposely leaking info way before hand to tenderise the competition. Let's see what new player they pick up from the recent axe fest over at paypal/ebay. Those guys sure got shook. I don't even think google wallet will be ready this christmas, i think they just poppin off at the mouf makin the competition run scared. I think (^_^)

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A couple of links to shed further light on google's strategy:

Referances to AI

http://radar.oreilly.com/archives/2006/06/big_brother_is_listening.html

"We are scanning them to be read by an AI."

http://www.edge.org/3rd_culture/dyson05/dyson05_index.html

New Oregon facility

http://www.nytimes.com/2006/06/14/technology/14search.html?ex=1307937600&en=d96a72b3c5f91c47&ei=5090

More about the oregon facility

http://dailywireless.org/modules.php?name=News&file=article&sid=5530

A little real estate

http://www.redherring.com/Article.aspx?a=15906&hed=Google%e2%80%99s+PayPal+Could+Be+Big

Indept analysis of payment service

http://www.redherring.com/Article.aspx?a=15906&hed=Google%e2%80%99s+PayPal+Could+Be+Big

The bottomline? The folks running google aint silly. Ambitious? Oh yea. They have the initiative and they are exploiting it.

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think about what makes Google a success. All you need to do is read their reports.

What makes Google a success:

1) A search engine that draws more traffic - because it's more accurate and comprehensive than the others.

2) A system for showing highly relevant ads on the search engine's result pages - copied from Overture.

3) A system for displaying these same adverts on 3rd party websites as well as Google's other sites.

4) There is no 4.

What makes Google a success is what puts money into their bank account: their highly effective ads.

News coverage is not success. A product that impresses a journalist is not necessarily a winner. Look at Nairaland, we've never been featured in a newspaper yet we have more traffic than the featured ones.

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lolz funny thread, I am totally with Seun in regards to the debate.

"Google's primary goal is to organize all of the world's public information, and this includes the widest range of opinions,"

This I assume, also means while still remaining profitable; which is from my understanding of what a business really entails.

Google made money alright from adwords, but they are wasting more money than they are actually making, but thanks to public offerings (Other Peoples money like Old Glory's for example), they happen to have a lot of money to be able to spend, I love the idea of Public listing of corporate interest, and precisely that its beauty, unlimited inflow of funds without questioning.

Nevertheless, I think they should concentrate on more reasonable projects that have ties with their core product, of popularity "The Google Search Engine" supported by their powerful publicity tool, adsense and of course immense revenue from adwords.

Project's fail not because the developer's or the entrepreneur's involved didn't study the alternatives, but rather they fail, because of "wastefulness"; inefficiency and also ineffectiveness. A good project must be not only efficient but effective in the market it resides. The question in regards to google is; Is googlecheckout for example effective enough, in the sense of achieving their main goals.

The primary goal of Checkout is goodwill with retailers who buy its AdWords search ads, the little ads that show up with Google search results.

Another question is do you guys know that google's net earning's from its operation is less than, the amount they are spending doing crazy project's? Doesn't that makes us ponder, What exactly the definition of a business enterprise is from google's perspective? Well the before cashing out of Sergey and Larry, speaks for itself. I love business, especially Public offerings.

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Interesting. Before Google jumps into any market I'd assume they've studied it from all angles.

Yahoo, Ask, Alexis and MSN are all portals with distracting content on their home pages -- Google went for the searchbox and logo-only design, and it worked. Today they're more than twice as big as their nearest rival -- Yahoo.

Yahoo Mail, MSN Mail / Hotmail, and most other free e-mail services required signups -- Google used the invite method, offered 2GB of space, used AJAX, and the free email service has never been the same again.

Yahoo 360, MSN Spaces and most other e-journal services display ads on your page and make money from you but Google allows you to display their ads on Blogger -- and pays you! I think it's because of Google more people are turning towards professional blogging to make money.

MapQuest and Expedia have been around for a while but I'm beginning to trust Google Maps more. Why? Because they're more accurate -- here in the US, MapQuest and Expedia sometimes give wrong directions!

I think the unconventional approach Google takes to everything is what makes them such a success. If they were to follow the exact steps you advocate, they'd be just another EBay and GCheckout would be just another Paypal [which Ebay owns]. You can trust Google to find a way to make money from it without displaying ads.

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Seun

Companies use that imaginary number called "market caps" to buy up other companies (Stock swaps). Market Cap is what the company is worth in the stock market. Investors have poured in Billions of $ into the company and are getting huge dividends back. Even you in Ogun state survives off google and you think that it is a fluke. Zahymaka is right they are too big to be taken over. The worst that can happen is a merger. Google is the largest player in it's space. I think they have more to explore.

Disclaimer: I have Google shares in my portfolio.

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They are actually trying

I don't believe that they gone too far.

there is nothing like too far in the height of success attained.

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We got to remember that acquisitions also come into play here. . . in addition to current profitable divisions. Capitalization may only be a number, but it is one of the numbers that Wall Street takes into major account. WIth capitalization, you buy a profitable company for it's already established cash flow. Look at adobe and macromedia. RJ Renolds and nabisco. Those really aren't good examples but you get the idea (hopefully (^_^).

Mark my word. These more mature companies that can't catch a clue are going to find themselves on the chopping block of this new business revolution.

The telecom infrastructure guys also need to check they necks too. The guys at google are serious about net neutrality and it would not be good for the old guard if google decided to flex, just a little to show they mean hard ball.

One thing i will say about microsoft is that to do understand what it takes to build a franchise: Halo will be huge after it's all over and done with, but their battles against sony in that arena may end up putting more pressure on them no matter how successful the Halo franchise is.

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Market capitalization means nothing. What matters is cash flow. You cannot spend your market capitalization, can you? Capitalization is not even paper money; it's just an extrapolated figure based on current share price.

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If need be there are always rich billionaires who are ready to pour money into google. Just to get a piece of the action.

Somebody (Rupert Murdoch)just bought myspace for over 500 million dollars. So if money is all google needs it shouldn't be too much of a problem.

You guys should give google credit. These dudes dont sell anything you can buy in a store and yet the company is worth 80 billion dollars http://news.bbc.co.uk/2/hi/business/4072772.stm. Have you ever seen a google ad on t.v?

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The last time I checked, Google's market capitalization was $118.32 billion (source: Wikipedia) up from 2005's $80 (source: InsideGoogle), so it's big enough to take on others.

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google is a very good company as of now. trynn@ take over the IT world by force. they are really pushing the envelope and it might backfire. the other companies that are richer than google might come up with an idea to pull it down. google should focus on projects that they can execute properly without much damages or suffering losses.

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Gmail as a good project because it gives google another avenue to display ads and make money.

I notice that once a company has discovered a way to make a lot of money, most of the other projects they engage in will tend to be unprofitable. Example? Microsoft: without Windows XP and MS Office they are nothing.

The advantage of only spending time on profitable projects is that the time, energy, and resources you don't waste in building 'cool' projects could be spent on more useful products that people are willing to pay for.

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I think a company doesn't always need to be business-oriented. Google Maps an dGmail have opened frontiers in web development. People are no longer scared to do what Google originally did with AJAX and the free Google APIs.

In all, it's a good thing. I just think they don't have the finacial werewithal to do all the things they're doing, but I guess I'm looking at it from current paradigms - eveything's expensive, but they came up with their Gmali filesystem and even run their own operating system that fits their model.

As Anton pointed out, Google is equal to the task. What's the point making money all the time the way Microsoft does?

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There are only three things that Google needs to achieve, really:

1) Sign up more publishers to display google ads.

2) Get more business people to advertise with Google.

3) Create a competitor to Ebay by using the search engine to drive traffic.

The others things they are doing? that's just geeks gone wild. Hackers love to waste money on 'cool' but useless projects. Instead of being customer-focussed, they are focussed on their own egos.

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I hear you, but look at the numbers this way, google's war chest is 8 billion but the other guys combined is only 4 times that. . . The soldier in me say those are damn good odds, especially considering that the initiative, in many cases reside with google. They are the younger company, much more accustomied to unconvential ideas, and moving in a manner that the older buearacracies can't match. They have the luxery of looking at other companies history of mistakes and successes and not making those same mistakes.

Also, their powermoves will be attracting the best and brightest young students who, in many cases, would have their creativity stifled ina traditional corporate environment. I don't know, google could be the herald of an entire new paradigm that pushes this planet in a new direction. Google deserves our study.

I don't think they will go too far. They are pushing the envelop, this is very true, but let's be very realistic here, the way companies and industries have been operating in the past and currently is only a phase and the next phase may be here already. I expect to hear of google taking down several fortune 500 companies before 2010.

If Sun's reentrance into the server market is less than stellar, for instance, they could find themselves at the guilitine by becoming the vehicle that google uses to get into that business and pick up the SPARC processor at the same time. I'm not saying that will happen, but who knows,

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