Google's search for business customers
Published: 23 Apr 2008 16:50 BST
...the majority of its revenues from serving adverts to its own sites and, as a result, is still growing faster than its partners.
"A lot of people talk about network-effect markets. So the more people use a platform, the more valuable it is. This lends itself to the idea of 'winner takes all' as, if there's one set of standards to program against, the platform grows faster because you don't need anyone else," said Card.
For Google, however, the aim is not so much to become a software giant as to provide users with an easy means of accessing and using online content — hence its decision to set up the OpenSocial Foundation with Facebook and Yahoo. The goal is to develop a common API that will enable social-networking application users to share information across multiple websites more easily than is now possible.
Rebecca Jennings, principal analyst at Forrester Research, explained the rationale: "Google has a vested interest in getting people online and sharing information as much as possible. It wants you online because you see advertising and, if you're using its software, you're more likely to use other services it can also generate money from."
Google can make money from many of these add-on services because they carry, or will carry, advertising themselves; the ones that are not suitable vehicles to do so will be offered as part of a broader suite.
Google has a vested interest in getting people online and sharing information as much as possible
Rebecca Jennings, Forrester Research
At the same time, however, Jennings indicated that Google is also building databases that aggregate user behaviour in relation to advertising, against which it uses predictive analysis technology in order to improve contextual targeting. >
"It's not about selling database lists in the old sense. It's about: when I launch a new product, the network can say where the users will be to whom I can target my advertising most effectively. So people will go through Google to do their advertising and Google can do it the most effectively as it's the best at analysis and knowing what people are doing online," Jennings said.
Extending the web-advertising platform
The importance of advertising to Google is not going to diminish any time soon, as evidenced by its purchase of DoubleClick last year. The move was an acknowledgement of how important advertising is to Google's business. It also represented the need for Google to diversify out of web-based advertising — where the company still makes the vast majority of its money — into other more sophisticated areas, such as rich-media display, which is more formatted and targeted, and an area in which Microsoft is currently ahead of Google, in terms of penetration.
Such a rationale is also likely to see Google dabbling in other areas, such as video, TV, radio and print, in order to extend its advertising platform reach still further.
Nonetheless, despite its astute manoeuvring, Google is unlikely to have everything its own way. As Card pointed out: "[Google's] still pretty much a one-trick pony" and has made little progress in making money from other services, which, presumably, over time, it will need to do in order to maintain its revenue growth.
On a practical level, it also needs to integrate DoubleClick, which, said Jennings, "with the size of that acquisition, will be a big challenge", especially if it is to continue keeping "ahead of Microsoft by developing products very quickly and having a culture of 'try it and see'".
Moreover, Google will also not be immune to the questions that are already being raised around privacy or to the ability of Microsoft to fight back, as evidenced, for example, by its attempted purchase of Yahoo.
As a result, Austin acknowledged that it is not yet clear how this scenario will play out. What he did say, however, is that Google "feels like the Microsoft of the 1990s — which is both positive and derogatory".
"People said that PCs would kill the mainframe but IBM is now selling more mainframe MIPs than ever, and this is the same kind of battle," said Austin. "The beauty of it is, however, that there's more real, intelligent competition that will deliver real benefits to the market than there's been in a long time".
Google would not comment on the issues raised in this article.
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