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Thursday, 21 May 2009

Google's Days are Numbered

Analysis: Sure Google's 73% share of U.S. searches is impressive, but business is a fragile ecosystem.

Kaila Colbin, Network World

Please trust me on this one: Google will die. If it hasn't happened by the time you read this post, you're just not patient enough.

Last week, Piper Jaffray analyst Gene Munster was quoted by Wall Street Journal blogger Andrew LaVallee as saying that Google is "essentially insurmountable." And certainly Google's 73 percent share of U.S. searches is, shall we say, intimidating.

But business is a fragile ecosystem, and even redwoods meet their makers. Yes, Google's lead is massive. But Internet Explorer had an even bigger lead in the browser market. Yes, Google has more money than anybody else. But so did Circuit City in 1999, when it was the 800-pound gorilla of big-box electronics retailers. By 2001, it was an also-ran; seven months ago, Circuit City filed for bankruptcy. And brick-and-mortar time frames are glacial compared to the fruit-flyish life spans found online.

To understand why Google will die, let's take a trip back in time to look at Clayton Christensen's 1997 book, The Innovator's Dilemma . I'll review three of Christensen's five principles here:

Companies depend on customers and investors for resources. Simply put, this means that Google can't afford to alienate its existing customer base by adopting disruptive technologies until those technologies are well proven -- by somebody else, who will then be the de facto leader in that technology. All it can do is roll them out into Google Labs and hope.

Small markets don't solve the growth needs of large companies. Google's 6 percent YoY revenue growth in the first quarter was modest by its historical standards, but to maintain even that level for the second quarter, the Google team is going to have to come up with an additional $180 million in revenue. Again, this means they can't afford to make a disruptive innovation into a primary strategy -- which means, again, that by the time a disruptive innovation is big enough to matter, somebody else will own the new space.

Markets that don't exist can't be analyzed. Post-Its. Twitter. Personal computers. The telephone. History is littered with innovations whose inventors had no idea of their future ubiquity. More than perhaps any other company, Google is data-driven to its core -- but there's no data on markets that are yet to exist.

Taken in this light, things aren't looking to good for the cheeky Mountain View upstart. In Part II, I'll cover Christensen's remaining two principles, plus one massive risk Google faces all on its own. In the meantime, what are your thoughts? Does poor Google even stand a chance?

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