Google once promised that is mission was “to organize the world’s information”. Nominally that remains its mission today.
On the 10th anniversary of its IPO, in this morning's WSJ, Rolfe Winkler shows how that all changed:
Just before Google Inc. went public 10 years ago, co-founder Larry Page said he wanted to get the search engine's users "out of Google and to the right place as fast as possible."At first, leveraging its dominant share in search, Google was content to have people linger longer (ala Yahoo or later Facebook) to sell them to more advertisers. Now they want to monetize that customer hold directly by doing transactions and taking a piece of the action. The dead tree (and online edition) shows the before and after — Google the indexer of the Internet vs. Google the horizontally diversified Internet portal:
Today, Mr. Page's Google often is doing the opposite: Providing as much information as possible to keep users in Google's virtual universe.
In other words, Google once created an ecosystem (including APIs and a two-sided advertising market) and wanted to make its ecosystem partners successful. Now, in its relentless pursuit of growth, it is crowding aside its onetime partners and trying to take more money from its customers.
This is exactly what DEC, Apple, Microsoft, Oracle and countless other tech companies have done over the decades. Joining an ecosystem is a viable startup business until the ecosystem sponsor wants to take that business away. The book Keystone Advantage refers to this as an ecosystem “dominator.” Among tech companies, only IBM seems to be a reliable partner for win-win alliances, in part because its integration services business model allows it to make money with almost any sort of component.
Of course, this was inevitable. Companies like Google want to grow, because it supports the stock price and puts more money into the hands of shareholders, employees and executives. Since Larry Page and Sergey Brin are now worth $32 billion apiece, I’m guessing it’s less about the money and more about the control, the ego, the success of making the world’s most dominant influential company of all time.
As we teach in strategy, there’s only two ways to grow: reach more customers or make more money out of your existing customers. If Google is serving almost everyone on the Internet, it either has to connect more people to the Internet (who will be less profitable than their existing customers) or sell more stuff to those already locked into Google. Obviously (with its $50 billion in cash horde and 60+% gross margins) it’s doing all of these things.
Unfortunately, a dominant vertically integrated (and horizontally diversified) monoculture is bad for the economy, bad for consumers and bad for society. It takes transactions that should be happening in the market and internalizes them into an internal hierarchy. Europe has been trying to nibble at the edges of Google’s efforts at Total World Domination for years, but had little impact. The U.S. seems disinterested, because the GOP believes in free markets and the Democrats receive millions in campaign donations from Google's wealth.
Normally we can count on the curse of success to eventually kick in: big companies either become complacent, bureaucratic or otherwise lose their way (cf. GM, Microsoft). The Google founders seem determined to make sure this doesn’t happen during their lifetime, which could be 30 years (with a normal retirement) or 50 (if they last like Warren Buffett). Since I’m older than both men, I may not live to see the end game — which is a depressing thought.