Tech company watchers can be like the cardiologist who says you won’t die today, but you’ve got some heart issues that could become serious. “Oh, yeah, and who gets out alive?” you ask the doctor.
Is Google the patient that doctors just want to pronounce on their last legs or more fittingly, past their prime, like Kobie Bryant may be for the Lakers?
Influential tech blogger, Benjamin Thompson, whose tech blog, Stratechery, is read by both Silicon Valley elites as well as those who cover the tech industry, think Mr. Thompson may have found a tear in Google’s Achilles Heel–its digital ad business and its reliance on direct response ads. Once the giant in ad revenue, Google sold about $45 billion in search ads where such income accounts for 90 percent of its revenue and Thompson thinks Google’s missing analysts’ expectations for the last five quarters is symptomatic of its failing to stay current with ad trends. What that failure amounts to, says Mr. Thompson, is the shift to smartphones and with it the digital ad business to more brand image advertising, more suitable to TV and print media, but also for Facebook, Snapchat or Pinterest that keep people engaged or long periods of time. Google’s search advertising doesn’t focus on brand image. Translation: emotions and stories still rule consumers’ minds and increasingly their wallets in the mobile computing age while direct response advertising, while still lucrative, is not where the growth is.
According to Mr. Thompson, “Google doesn’t create immersive experiences that you get lost in. Google creates transactional services. You go to Google to search, or for maps, or with something else in mind. But brand advertising isn’t about that kind of destination. It’s about an experience.”
Google says that’s not the case and points to YouTube that attracts more than a billion users a month. Google points to its workshop at YouTube’s headquarters that it calls BrandLab for that purpose, it says, for the very purpose of measuring brand awareness.
So is Facebook, however. A huge ad-technology infrastructure, updated sales team, and new ways to measure brand advertising and consumer response resulted in $11.5 billion in ad sales in 2014 for Facebook, a 65 percent increase over the prior year. Facebook’s brand advertising strategy is on a roll.
Thompson’s sketch above tells the story but more to the point he is saying that the far-out projects like the self-driving car, Google Glass, and other far-in-the-future payoffs, signal the symptoms of dominance, dominance that precludes Google from dominating the next thing. Or call it what Harvard Business School’s Clayton Christenson’s classic book does, “the innovator’s dilemma.”
But don’t bench Google just yet. You don’t get to accounting for three-quarters of the world’s web searches, control the world’s most widely used operating system, Android, and the world’s most popular video site, YouTube, by not knowing what you’re doing, or how to stay innovative and profitable.
Here’s Thompson’s much-talked about blog, “Peak Google”: http://stratechery.com/2014/peak-google/
And the piece in the NY Times by tech reporter Farhad Manjoo extolling its importance:http://www.nytimes.com/2015/02/12/technology/personaltech/googles-time-at-the-top-may-be-nearing-its-end.html