Questioning Google's Business Model

3 comments

Todays Issue of Business Week questions where Google is headed

In an article headed

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Google: A $50 Billion "One-Trick Pony"? Its focus on Web-searching -- an increasingly limited arena -- may be blinding it to big opportunities elsewhere

It points out

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Google remains almost entirely dependent for growth on search -- a business that's poised to slow.

And whilst acknowleding that Google has been sucessful in getting revenue from Search, then goes on to say

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But Google's belief in search may be blinding the company to other opportunities. To see what they risk missing out on, Google execs need look no further than key rival Yahoo! (YHOO ), which tirelessly looks for new business models. While search accounts for 45% of Yahoo's sales, the portal also snares one-third of its revenues from so-called display ads that contain graphics and multimedia, as well as 16% of sales from subscription services, such as online personals and fantasy football. By comparison, Google gleans 98% of its sales from text ads, primarily placed around search results.

They do not see much growth from Gmail

Quote:
So even if targeted e-mail ads take off -- a questionable proposition, since most industry observers believe e-mailers are far less likely to click on links than searchers -- the money will come from the same budgets that buy the rest of Google's ads.

Business Week is euivocal as to where display ads will lead and concludes with

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Google, rightly, has plenty to tackle in its core business of search. But those aren't the only opportunities for the search kingpin. Others deserve exploration, lest its narrow focus become a case of tunnel vision.

Comments

The Business Week story picked up by Yield

Yield reckon Google is best off staying in search

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If Google would set its mind to take on the big challenges in Search, it certainly won’t be a one trick pony.
Rather, it will be a one trick mustang.
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Google’s inability to diversify isn’t bad at all. On the contrary.

I would prefer to broaden the definition of “Search”, including other information retrieval mechanisms than conventional Search. With XML, RSS feeds, semantics and tagging, we’re only beginning to see how information will be organized in future.

This business is still absolutely in its infancy, meaning it will continue to grow. In addition, the economic importance of finding information through the Internet will grow dramatically. In other words, not only will the number of searches grow, but the average economic importance of a single search will increase too.

No reason why both Google and Yahoo cannot grow on their different business models - however the broader your base the more stable you are.

I'd never accuse them of lack of vision

Google has clearly stated it doesn't want to be a Portal so that leaves it with an income generated by advertising in various formats - already it's branching into banners and graphics and there are still a lot of ways Google can expand to encourage more advertisers (obviously AutoLink being one).

They haven't nearly saturated verticals yet, and once they get semantic relevancy right then I expect the toolbar to feature a 'show me similar sites' button as well. Google Maps opens up a whole new income source from local advertisers. They have strategic partnerships which are going to let them leverage books, cinema tickets, image search etc and we haven't even started on blog searches and ads into RSS feeds yet. I think Google have a few areas to expand yet.

Paid Search Backlash - Earn Rupees!

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