Google remains well positioned despite its missteps and setbacks.
A Google executive, James Whittaker, recently left the company for his second tour at Microsoft, and in the aftermath he posted a blog on Microsoft's site explaining why he left the search company. While promising "no drama" and "no tell-all," he nonetheless comes down pretty hard on his former employer.
The crux of his disenchantment? "The Google I was passionate about was a technology company that empowered its employees to innovate," he writes. "The Google I left was an advertising company with a single corporate-mandated focus."
That single focus? Facebook. As Whittaker describes it, since co-founder Larry Page took over from CEO Eric Schmidt a year ago, all company divisions were on notice to put Google+ and social networking front and center. Whittaker writes: "Search had to be social. Android had to be social. YouTube, once joyous in their independence, had to be … well, you get the point. Even worse was that innovation had to be social. Ideas that failed to put Google+ at the center of the universe were a distraction."
It's unclear what Whittaker thinks Google should focus on instead. He acknowledges that he's "never been much on advertising." Under Schmidt, he pines, "ads were always in the background. Google was run like an innovation factory, empowering employees to be entrepreneurial through founder’s awards, peer bonuses, and 20% time. Our advertising revenue gave us the headroom to think, innovate, and create." In other words, the worker bees generated the advertising revenues, giving the intellectuals the freedom to dream about self-driven cars and Google Goggles, "innovations" that had no material benefit to the company. Page ruined things by rallying Google employees around social and all that yucky advertising stuff.
But what Page astutely understands is that innovation for the sake of innovation doesn't pay the bills or support a $209 billion market cap.
Writing on CIO.com in a long column headlined "Is Google Facing The Beginning Of The End?", Rob Enderle, prince of pundits, piles on to Whittaker's post. In sizing up Google against the likes of Netscape, Sun, and Yahoo (companies he says lost their way chasing rivals and never recovered) and Apple, IBM, and Microsoft (companies he says lost their way but pulled things back together), Enderle urges Google to move past its Facebook envy. Unlike Whittaker, however, he doesn't turn his nose up at advertising.
"All of its focus should be on finding ways to make ads on the Internet more valuable and being the primary source for managing ad revenue for everyone," Enderle says. "Its winning formula was monetizing the Web, which is actually a super set of ads, but it is clear, institutionally, that Google is in denial about the real source of its success."
I'm not so sure Google is in denial about anything, though I do agree with Enderle and Whittaker that customers aren't clamoring for another social network. Where I disagree with them is on the depth of Google's problems. For all the concerns about Google's social awkwardness, it's still well positioned in three of the biggest markets of the day: search, mobile, and Web 2.0 collaboration.
But pundits will be pundits, divining the demise of even the most successful technology companies. What’s next--setting up March Madness brackets, starting with the top 64 industry players, and predicting, two by two, which tech companies will get knocked off?
The reality is that while all tech giants make mistakes, some of them make huge mistakes, and the smartest ones figure things out. Think Apple, IBM, and Cisco rather than DEC, Netscape, and Kodak. Google and its leaders have earned enough cred here, killing off high-profile products and projects (Wave, Buzz, Gears, Knol, etc.) when they haven't panned out.
The Whittaker post is reminiscent of a New York Times op-ed piece written two years ago by a former Microsoft exec, Dick Brass. Headlined "Microsoft's Creative Destruction," Brass contrasted Microsoft with innovation mavens such as Apple, Amazon … and Google. His main critique: Microsoft had become "a clumsy, uncompetitive innovator," despite having just reported record profits and revenue. His thesis: It was a company in decline.
Now Microsoft is back (for now), having dedicated itself to the cloud, rededicated itself to mobile, and put its Windows and Office cash cows on more solid footing. Meanwhile, Google--despite the fact that its stock is trading near its 52-week high—is seen as the clumsy innovator staring at the "beginning of the end."
No question, Google is vulnerable. The prices it fetches per paid search click are down, and rival Facebook, as Whittaker suggests, "knows so much more" about its users than Google does, an attribute that appeals to advertisers and media companies. It's still not clear how Google will monetize its Android franchise, especially with its $12.5 billion acquisition of device maker Motorola Mobility. Evidence that Google is playing fast with users' personal data has led to regulatory probes in the U.S. and Europe.
But the beginning of the end? Let's give Google's leaders a little more credit.
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