Google, the Ultimate Deflator

Google’s mission statement is “to organize the world’s information and make it universally accessible and useful”. At this stage, I think it should be more along the lines of Honda’s original mission statement, which was, “five Honda’s in every garage” (e.g. car, motorcycle, lawnmower, etc.). I say that because it certainly seems, with every new Google service that comes to market, my garage… er, desktop, is filling up with their stuff! So, what is Google’s master plan?4 These days, that’s the big question everyone seems to be asking (it used to be: “What’s the next killer app?”). Just to add more fuel to the fire, I’ll speculate alongside the rest of you. But before I provide my answer to the big question, allow me to digress a little to provide some background and perspective.

Over the years, I’ve noticed that Google’s success has largely been based on their ability to be highly counterintuitive. For instance, they started a search engine when everyone thought that game was over. They started to place ads in search results when everyone thought it was highly controversial. They introduced simple text ads when everyone was developing rich media ads. They designed an ad engine to rank the placement of ads by their effectiveness (click-through-rate) when everyone else was placing ads based on the CPM rates they were able to sell. Their performance-based ad model enabled them to initially build their business on “mom-n-pop” small business advertisers (generating billions of dollars in revenues from the long tail) when everyone else was chasing after Fortune 1000 brand advertisers.

More recently, Google has introduced services that clearly indicate their desire to build a comprehensive “platform1,” one that challenges Microsoft’s dominance in this area head on (Gmail, Desktop Search, now GD2, and Google Talk). So what is Google’s master plan? I believe they are once again going counterintuitive, but in a manner that hits Microsoft where it hurts most. Google will make Microsoft’s entire strategic plan and mission, which revolves around the continued proliferation and dominance of the desktop PC operating system, obsolete by making Google itself the operating system. The model they are pursuing is very similar to Sun Microsystems’ (Jonathan Schwartz’s5) vision of turning computing into a utility, like electricity. The only difference is that Google is already almost there.

To some extent, Google is bringing back the architecture of the mainframe to render Microsoft obsolete. In the future, all computing devices, whether it be the PC, mobile phone, TV, etc., will simply be terminals that “plug-in” to Google’s massive server grid and application services. With the increasing price/performance of CPUs, memory, bandwidth, and storage, Google’s strategic edge will be based on their advantageous cost of processing bits. And as long as users are comfortable sharing their private data and behavior with Google, all services will remain free (and supported by advertising).

It’s not too difficult for me to imagine a day, very soon, when I rely on Google for almost all my computing needs and I buy hardware devices based on such criteria. That’s the day Google will have become my operating system. We all know that the internet has a deflationary effect on the assets of every industry it touches, whether it be printing & publishing, media & entertainment, telephony, etc. If what I pose above is indeed true, Google is using the internet to systematically devalue Microsoft’s assets. Perhaps there will be a day on Wall Street sometime in the future that’ll be known as “Microsoft’s Black Monday.

(originally posted at http://gigaom.com/2005/08/26/google-the-ultimate-deflator/)

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