Google: In The Second Decade
The announcement of Google Chrome preceded Google’s 10th birthday by a few days. Google Chrome, for those who don’t yet know, is Google’s new browser and it qualifies as an excellent birthday present to itself, even if it was delivered a few days early. Google’s entry into the browser market might not seem particularly important, given that Google often appears to put its toes in the water without actually going for a swim. Nevertheless, it is.
The importance of the browser has been all but forgotten since Microsoft crushed the life out of Netscape Navigator. Admittedly the Netscape browser was reborn as FireFox, like a phoenix from the flames, and has taken a significant slice of the market. Apple has also grabbed a sliver of the market with Safari, with a little bit of help from the iPhone. But neither of these efforts have disturbed the status quo much.
Google Chrome will. My initial reaction to it (see Why Google Chrome Will Dominate) may have seemed a little ebullient, but not when you consider the context..
Google’s Second Decade
Microsoft spent a decade dominating the pre-GUI PC world with MS-DOS, but didn’t become truly dominant in the IT world until the advent of Windows. We may be about to observe the same pattern with Google. Admittedly, Google’s lightning growth makes Microsoft’s rise to prominence look a little leisurely, but the world moves faster now. Google’s first decade was about dominating search and web advertising and in doing so it has built up revenues that will probably be somewhere North of $20 bn this year.
With its current business model, it almost cannot help making money (see Why Microsoft Won’t Catch Google.) Every year web advertising revenues grow and Google’s share of them grows too. It almost doesn’t need to compete against its primary competitors; Yahoo! and Microsoft.
Yet, Google is not standing still, it is expanding in two directions:
- Filling out its portfolio of web properties.
- Expanding its cloud assets.
It’s not hard to understand most of Google’s activity with traditional web properties; Google Maps, Google Images, Google News, Google Finance, Google Shopping, Google Finance, Google Blogs, YouTube, etc. This is similar to Yahoo establishing or acquiring useful web properties that can generate ad revenue. Admittedly YouTube is still famously profitless, but Google’s acquisition of YouTube was probably more of a blocking tactic than anything else. For better or worse, Google now owns the largest video database in the world.
Google’s Cloud Assets are more interesting. They include Google Groups, Google Calendar, Gmail, Google Documents (including Spreadsheet and Presentation), Google Talk, Google Desktop, and now, Google Chrome. Some of these have been bundled together to form Google Apps, which are free for personal usage and available at very low prices for corporate use. Google has gradually been assembling a whole set of applications that are designed to undermine and ultimately replace the Microsoft Office bundle and it is gradually replacing the PC (or Mac) desktop with one that is built to run Google’s portfolio of software. Google Chrome was a big piece of the puzzle – perhaps the last important piece.
Google Chrome is not a browser as such, it is a cloud computing client. In a way, it is Google’s equivalent of Windows, but the applications it will run live both on the Internet and on the desktop and they will be switchable between the two. It has appeared at precisely the right time to take advantage of the much richer web interfaces that are now becoming possible.
Google’s second decade will involve three new pushes into the market, all of which may prove very lucrative.
- The Applications Market. Google will offer applications from the cloud free to individuals (with some advertising) and priced at very low rates for businesses. It will partner with other “Software as a Service” vendors as it already is with SalesForce.com
- The Mobile Market. Google has already demonstrated the power of combining its maps with other applications on the iPhone. It has every intention of taking a further large advertising revenue stream with location-based advertising where maps and location are the key. It also has the possibility of dominating the cloud market on the mobile device.
- The Communications Market. Google’s purchase of Grand Central over a year ago was a clear indication that it means to be a player in the Unified Communications market – at the low end naturally. It is already offering a VoIP service and ultimately I expect it to offer a complete portfolio of services, either through building it’s own or through acquisition. The communications market is, if you haven’t noticed, gradually disappearing into the cloud.
Google is fortunate in its position of being able to monetize the cloud far more effectively than any other vendor – it is able to be profitable at much lower price points. It is going to slowly dominate the “personal application software market” and the lower end of the communications market from the cloud with very little opposition.
In fact, it is pushing on an open door.
a very interesting analysis Robin, thank you.
When considering the comparative references to Microsoft’s trajectory, perhaps we should also remember that Microsoft built its empire from a vendor-centric [proprietary] perspective whereas Google has grown simply by adopting a customer-centric [user] perspective.
And, of course, the Google experience is often Yorkshire’s favourite price: nowt.
Colin
You make an important point about customer-centricity. I believe that the IT software model is now fast moving to:
Turn prospects into customers then turn customers into paying customers. In other words: minimize the cost of adoption, but build a viable strategy for garnering downstream revenue.