Google is using its domination of search advertising to confront Amazon, Microsoft, Apple, and others. It can't possibly succeed everywhere at once. Or can it?
In just 11 years, Google has evolved from a pair of graduate students noodling in a garage to what may be the most disruptive force the business world has ever seen.
Its meteoric rise has been driven by its mastery of technology and business strategy. Its Internet search engine and compellingly simple logo captured the imagination of Internet users, pushing one rival after another aside until it ended up with a 71 percent share of the U.S. market, equal to about 30 percent of all dollars spent on Web advertising. And that just happened to be the most strategically important position on the Web. Search soon supplanted the old Web portals as the users' gateway to the rest of the Internet and set up Google as the operator of a search-driven advertising empire.
Now the company founded by Sergey Brin and Larry Page while they were Stanford graduate students is using that death grip on search advertising to aggregate power by the day, expanding its reach in a dizzying array of directions at once. It's furiously inventing or buying the next generation of technology to challenge such players as Apple and Microsoft for dominance of the mobile Web to enterprise email and software, music, display advertising, and digital books. It even took satellite pictures of Earth to turn its mapping service into a commerce engine.
It is taking on every big company in the tech and media space, from Microsoft to AT&T and Apple. It can’t possibly succeed on all these fronts (or can it?), but no one can afford to assume that they are safe, so everyone is on guard. With a market cap of $169 billion and $22 billion in the bank, Google can pretty much stake a claim where it chooses.
The question now is whether even Google can handle the transition to its next stage of development. “It’s going in a lot of different directions very quickly. I think they’re in real danger of building a company that cannot be managed," said Rob Enderle of Enderle Consulting. Enderle, who has watched the tech scene for decades, says Google is making some of the mistakes other tech highfliers have made in the past. “With each battle, they pick up a different enemy,” he said. “They’ve made enemies of everyone from Apple to Microsoft to Rupert Murdoch. In theory, even with Microsoft, they would have been better off to partner than to battle them.”
The companies Google’s taking on aren’t exactly lightweights. AT&T, Microsoft, Murdoch’s News Corp., and Apple all rank ahead of Google on Fortune’s 2009 Fortune 1000 list of America’s biggest companies. AT&T alone last year had close to six times the revenue and five times the profit of Google. Microsoft had close to three times the revenue and four times the profit of Google. Apple and Google are more evenly matched; Apple had about $11 billion more in revenue and $6 million more in profit than Google. Apple, with a market capitalization of $176.5 billion, and Microsoft, with a market capitalization of $250.3 billion, both have higher market capitalizations than Google.
“Fights can be very expensive,” Enderle says. “It’s clearly something that youth doesn’t learn until later in its career, and this is a young company run by relatively young people.”
But those young people may be on to something that’s worth the fights.
“First of all,” says Tim Bajarin, president of Campbell, California-based Creative Strategies, “Google doesn’t do anything that is not a key part of their strategic vision.”
