The Google Argument

From time-to-time, I hear from investors: what if Google decides to build it?

My replies are as follows:

1/ Google is the king of web-based advertising derived from search, and it does so extremely well and profitably. Yet Google is a pretty monolithic animal. While the company is capable of building virtually any technology outside of its core competency and brings a bright sparkle of innovation to Silicon Valley, it is consistently unsuccessful in turning that innovation into great Billion dollar businesses (which reminds me of Oracle, before Chuck Phillips came on board).

2/ Google is not a true marketplace, nor does it seem to understand free-market principles as witnessed by their actions. Google is a premium market for search-based advertising placements and it will continue to drive premium market DNA to the adoption of technology. Nothing wrong with that, unless they portray a more liberal character. So, you’ve got little to fear if a free-market platform is what you are building.

3/ Google does not understand any software category that doesn’t derive its revenue from advertising. While there may be a great future for software (as a service) that no consumer ever pays for directly, today, that is not the reality. Desktop software, proprietary enterprise applications, software-as-a-paid-service are examples of what Google is highly inexperienced and generally unsuccessful.

4/ It would be a great sign if Google decides to build a similar product or service, as it would produce a rhetorical blessing of the proposition and an impromptu acquisition play by its competitors. Isn’t that what you want as an investor.

Google’s relatively young age, massive growth, and company DNA are probably the best reasons why it hasn’t succeeded financially in many areas it operates in. But I greatly admire their drive to invest a large part of the difference between their (Wall-street) valuation and real value in new technology development.

Beyond search, Google is, in essence, a giant research institute with the limited financial successes that come with that model. But Google lays important development groundwork that has and will continue to do us all good. They also provide valuable incubation of new technology ideas a commoditized VC market rarely picks upon.

My startups have a different charter; turning great technologies into great businesses, now!

 

Let’s lead the world by example with new rigors of excellence we first and successfully apply to ourselves.

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