Cloudy outlook as Google steps up push to rule web
Comment of the Day

December 09 2010

Commentary by David Fuller

Cloudy outlook as Google steps up push to rule web

This is an interesting article (link may require subscription registration, PDF also provided) by Richard Waters for the Financial Times. Here is the opening:
Google's ambitions are so sweeping, the theatres in which its campaign is being advanced so dispersed, that it is not always easy to trace the outlines of the broader war it is fighting. Sometimes it takes simultaneous advances on a number of fronts to bring its progress into focus. This has been one of those weeks.

What other company, after all, would take public aim at not one, but three big rivals - Amazon, Apple and Microsoft - in the space of just a couple of days? Not doing any one thing well enough against formidable competitors like these could end up being Google's biggest problem.

But it is counting on having an ace up its sleeve: the ability to connect with users across a broader range of devices, and with a wider array of services and media content, than anyone else. This "cloud" strategy - relying on services run in Google's data centres, and delivered to consumers using standard web technologies - is still a work in progress, but some of its contours are becoming more discernible.

Take Monday's launch of Google eBooks, a digital bookstore to rival the one behind Amazon's Kindle. This being Google, much was made of the cloud nature of this service. Readers can store their books on Google's servers and tap into them from different PCs, tablets, smartphones or eReaders (though not the Kindle) without losing the page they were on.

David Fuller's view To my irreverent mind Google is the closest thing to the 'Second Coming' that I am ever likely to see. I rely on it throughout the day and it knows more about most of us than we may realise. Like that revolting Santa song, Google "knows if you have been good or bad."

What about all those cloud strategy launches mentioned in the article?

A company that is not moving forward is almost certainly sliding backwards. However an aggressive push can indicate pressure felt by the board of directors. Consequently the expansion can just as easily result in hubristic overreach, as signal a bold and innovative new diversification.

In these situations the market's judgement is often revealing. Google's share price is down almost 5% on the year to date. In comparison, the S&P 500 Index is currently up 10.5%. The Nasdaq 100 Index, of which Google is a constituent, is currently up over 15% in 2010. Google is rangebound and needs a sustained break above $630 to reconfirm the upward trend from its November 2008 low.

Google is losing some advertising revenue to the mushrooming private company Facebook which is emerging as a major competitor, as you can see from this aricle kindly forwarded by a subscriber: Facebook's grand plan for the future, by David Gelles for FT Magazine (link may require registration, PDF also provided). Here is a brief sample:
 

Facebook's burgeoning power caught the attention of the biggest companies in Silicon Valley years ago. Many, including Yahoo, Microsoft and Ebay have sought to partner with Facebook. Google tried to invest in Facebook in 2007 but was beaten off by Microsoft. Since then, it has increasingly become Facebook's main adversary.

The fear, according to people close to Google, is that as Facebook users index the web through their Likes and shares, Google's algorithmic indexing of the web will become less relevant. "Search is a business that will be pretty profoundly disrupted by social media," said Augie Ray, an analyst with Forrester Research. "Ultimately, what matters to you is not what Google thinks is important, it's what your friends think is important."

Advertisers are already voting with their dollars. While Google still commands the lion's share of online ads, big brands are increasingly turning to Facebook, where they can target users based on stated preferences. According to comScore, about one in four online display adverts in the US now appears on Facebook.

In an effort to respond, Google is developing its own more coherent social product. Buzz, a social service it launched earlier this year, flopped. A new effort is tentatively called GoogleMe. "It feels like Google is on red alert," says one source close to both companies. "There is a feeling at Google that this could be for them what search was for Microsoft."

Few in Silicon Valley are optimistic that Google will deliver a Facebook killer. That Google just doesn't get social is widely accepted as fact. This being the case, Facebook looks on track to become an increasingly important part of people's online lives. The benefits should be easy to spot: as more sites integrate with Facebook, there will be fewer new accounts to create, fewer passwords to remember. Sites will be pre-populated with content you find interesting. The web, once anonymous, will be customised to each person.

The meteoric rise of these wunderkind companies is staggering. Facebook's eventual IPO should be quite an opportunity, especially if it is not priced too high initially.

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