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Farhad Manjoo writes at the New York Timesthat at first glance Google looks plenty healthy, but growth in Google’s primary business, search advertising, has flattened out at about 20 percent a year for the last few years and although Google has spent considerable resources inventing technologies for the future, it has failed to turn many of its innovations into new moneymakers.
According to Manjoo, as smartphones eclipse laptop and desktop computers to become the planet’s most important computing devices, the digital ad business is rapidly changing and Facebook, Google’s arch rival for advertising dollars, has been quick to profit from the shift. Here’s why: The advertising business is split, roughly, into two. On one side are direct-response ads meant to induce an immediate purchase: Think classifieds, the Yellow Pages, catalogs or Google's own text-based ads running alongside its search results. But the bulk of the ad industry is devoted to something called brand ads, the ads you see on television and print magazines that work on your emotions in the belief that, in time, your dollars will follow.
“Google doesn’t create immersive experiences that you get lost in,” says Ben Thompson. “Google creates transactional services. You go to Google to search, or for maps, or with something else in mind. And those are the types of ads they have. But brand advertising isn’t about that kind of destination. It’s about an experience.” According to Thompson the future of online advertising looks increasingly like the business of television and is likely to be dominated by services like Facebook, Snapchat or Pinterest that keep people engaged for long periods of time and whose ads are proving to be massively more effective and engaging than banner advertisements.
In less than five years, Facebook has also built an enviable ad-technology infrastructure, a huge sales team that aims to persuade marketers of the benefits of Facebook ads over TV ads, and new ways for brands to measure how well their ads are doing. These efforts have paid off quickly: In 2014 Facebook sold $11.5 billion in ads, up 65 percent over 2013.
Google will still make a lot of money if it doesn’t dominate online ads the way it does now. But it will need to find other businesses to keep growing. This is why Google is spending on projects like a self-driving car, Google Glass, fiber-optic lines in American cities, space exploration, and other audacious innovations that have a slim chance of succeeding but might revolutionize the world if they do. But the far-out projects remind Thompson of Microsoft, which has also invested heavily in research and development, and has seen little return on its investments. “To me the Microsoft comparison can’t be more clear. This is the price of being so successful — what you’re seeing is that when a company becomes dominant, its dominance precludes it from dominating the next thing. It’s almost like a natural law of business.”
(Score: 0) by Anonymous Coward on Friday February 13 2015, @12:39PM
tl;dr - Patience, luck and due diligence are the key (though knowing how to throw dice doesn't hurt).
I'm not going to say "Google is too big to fail!" because all of them are ripe for complacency and corporate mindset rot. But ...
... this is a long game and Google is well suited to wait out some of the flavor-of-the-month sites/apps/whathaveyou. This strategy isn't always a good practice. It didn't work well for Microsoft when it came to mobile (hell, they almost were late to the whole Internet party). Google needs to be smart about what companies (established or startups) that it acquires. Facebook is pretty aggressive when it comes to buying up companies, though that may hurt them in the long haul (just ask HP ... and was it Yahoo?). It's not uncommon for a startup's business model to be "create niche idea, get app to market, get some social media buzz, and then get bought by somebody".
Google, as well as MS, Apple, et al, need to weigh the pros and cons of chasing every "new and better" idea and market. Spread yourself too thin and you fail. Buy too many companies that have "synergies and potential" and you fail. Buy too many companies that will get sued for patents, past business practices, etc, and you fail. Sit on your war chest and you fail. Miss the boat and you fail. Cautionary acquisitions aren't just for the tech sector. Ask some of the big banks that gobbled up troubled competitors back in '07 - '10. Those guys are still paying billions in new fines.
(Score: 2, Interesting) by FlatPepsi on Friday February 13 2015, @03:50PM
Microsoft WAS late to the Internet game. Remember WinSock? Netscape was the face of the internet for a very long time. Microsoft managed a turnaround, but came very, very close to losing the desktop market.
Apple & Google have a huge war-chest saved up. They can ride out the next big mistake if they don't squander it. Apple got lucky with the iPhone- but they've stopped looking for the next big thing. Google, on the other hand, is reaching out in many directions. Google Glass, their self driving car, floating data centers, and other wild & crazy ideas are them looking for the next big thing. If only one out of 100 of these makes money, it will be enough to keep Google into the future.
We might be at peak "search results advertising", which happens to be Google's bread & butter - but peak Google? I think not.
(Score: 0) by Anonymous Coward on Friday February 13 2015, @04:17PM
Apple Pay could become a lucrative new revenue stream for the company. Forget songs and apps, get a cut of every purchase an apple drone makes.
I'm skeptical of Apple Watch but if they can sell 26 million of the stupid things as J.P. Morgan believes, that's more than 5 times the current smartwatch market.
A while after Apple Watch comes out, they will probably have $200 billion in cash reserves.
There's almost no way they can fuck this up, right?
(Score: 2) by TheRaven on Saturday February 14 2015, @08:09PM
Remember WinSock?
Even later than that, Windows 95 shipped without a web browser and Bill Gates thought that MSN would be a good competitor for services like AOL and Compuserve, which were the real threats and not this 'Internet' thing that didn't have big commercial backers...
sudo mod me up