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Why could Google die … maybe not now, but tomorrow
Paris, March 2009
March 2009 • Why could Google die ? • ..……. 2
This work is licensed under the Creative Commons to allow further contributions by other specialists and web users in the coming months. To view a copy of this Attribution-NonCommercial-ShareAlike3.0 Unported license, visit http://creativecommons.org/licenses/by-nc-sa/3.0/ or send a letter to Creative Commons, 1712nd Street, Suite300, San Francisco, California, 94105, USA.
March 2009 • Why could Google die ? • ..……. 3
In December 2008, faberNovel published a white paper about Google’s key success factors :
Many comments dealt with Google’s weaknesses and the possible threats to Google’s market dominance. We are now trying to identify these threats and weaknesses.
The title of the presentation refers to Jeff Jarvis’ book What would Google do? which will be published in France in June 2009 (faberNovel/Télémaque publishing)
This presentation is an answer to the comments related to the previous faberNovel study
http://www.slideshare.net/misteroo/all-about-google-presentation
March 2009 • Why could Google die ? • ..……. 4
• 4 types of threats and weaknesses have been identified: Legal threat Internal weakness Strategic threat Other threat
• For each threat or weakness, probability, forecast and impact have been evaluated on scales :
• Probability: evaluation of the possibility that a threat or a weakness could impact Google’s business
• Timing: evaluation of the time limit for the threat or a weakness to impact Google’s business
• Impact: evaluation of the negative impact on Google’s revenues and profits
Methodology
Low Mild High
Short term
Long term
Low impact
High impact
March 2009 • Why could Google die ? • ..……. 5
12 main weaknesses or threats
Threats / Weaknesses Probability Timing Impact
Legal threats Antitrust suits against Google
Copyright infringement suits
Internal weaknesses
Inability to hire or retain key people
Inability to scale operational processes
Top management issues
Strategic threats
Acquisition difficulties
Competition with incumbents
Disruptive innovations
Inability to control points of entry
Other threats
Interruption or failure of Google’s services
Privacy concerns
Opensource’s ecosystem threats
Low > High Short > Long Low > High
March 2009 • Why could Google die ? • ..……. 6
Antitrust suits against Google
Impact Timing
Legal threat
In 2007, Microsoft called for regulator action to stop Google and DoubleClick merging
vs
In November 2008, Google and Yahoo ended their negotiations, abandoning attempts to overcome the objections of antitrust regulators
/
Probability
vs
In February 2009, Sourcetool, a B2B search engine, filed an antitrust suit against Google, accusing it of upping its ad rates unfairly
Google might constantly be subject to antitrust claims for (amongst others) :
Excluding companies from Google results
Over favoring in-house services
Issuing unclear ad rates
Google is increasingly subject to antitrust suits
High Middle term High
March 2009 • Why could Google die ? • ..……. 7
Copyright infringement suits Legal threat
May 2007: Viacom sued Google, accusing YouTube of "massive intentional copyright infringement" and asking for more than $1 billion in damages
October 2008: Google agreed to pay $125 million to settle two copyright lawsuits by publishers and authors
Google has been subject to copyright infringement claims all over the World (Australia, Austria, France, Israel, Italy,…)
May 2008: a group of Belgian newspapers filed a lawsuit against Google claiming that Google News made the papers' articles available for free. They asked Google for €49 million in damages
vs vs vs
Since most of Google’s services link or host copyrighted material,
The risk of monetary damages is substantial
Impact Timing Probability
High Moderate Short term
March 2009 • Why could Google die ? • ..……. 8
Inability to hire or retain key people
Internal weakness
Google set up processes to attract and motivate employees Since its performance depends on the talents and efforts of highly skilled individuals
05 06 07 08
200
400
600
Cool work environment
Transferable stock options program
In a more mature company, incentives became less efficient: Google’s work environment is becoming comparable to big corporations
At current stock price, 85% of its employees have underwater stock options Google’s hiring process is currently viewed as interminable (up to 5 months) and inefficient
Examples : Google stock price [$]
Very selective hiring process
Impact Timing Probability
High Moderate Middle term
March 2009 • Why could Google die ? • ..……. 9
Inability to scale operational processes
Internal weakness
Operational infrastructure and processes are key to Google favoring the growth of the company through innovation and quality
Google's 80/20 rule allowed to develop many products :
Organization based on a startup model: • Project teams are small and autonomous • Peer-reviewing: engineers work is subjected to the scrutiny of other engineers who are experts in the same field
Google will face issues adapting its infrastructure to quick growth
Implementation of heavy processes which could slow down innovations
Inability to maintain good quality level for Google products
Inability to maintain a corporate culture that fosters creativity and teamwork
Impact Timing Probability
Mild Short term Low
March 2009 • Why could Google die ? • ..……. 10
Top management issues Internal weakness
Top management is key to Google’s strategy
Larry Page, President in charge of products
Sergei Brin, President in charge of technology
Moreover, the triumvirate’s stocks account for 67% of the voting power of Google capital stock
Top management issues could affect Google’s performance
Eric Schmidt, CEO
Impact Timing Probability
Internal dissensions between the members of the top management
Loss of key management leaders : accident / lack of interest for a more mature company etc…
Low Long term High
Uncertain ability to transfer or delegate key responsibilities
March 2009 • Why could Google die ? • ..……. 11
Strategic and operational difficulties acquiring companies
Strategic threat
Most of 54 Google’s acquisitions were successful
In the future, Google could face some serious issues acquiring companies
Strategic issues • Forecasted revenues may not fully materialize:
• Google could miss investment opportunities:
Operating difficulties • Integration of procedures and processes • Technical integration of the companies:
Eg : It took 16 months to relaunch Jotspot after its acquisition by Google
Diversion of management time • Rather than focusing on operating business, top management could focus on acquisition integration challenges
Impact Timing Probability
Mild Short term Moderate
March 2009 • Why could Google die ? • ..……. 12
Competition with incumbents Strategic threat
Until now, Google withstands competition on its core business: US search market (Hitwise 2009)
Google 72%
Yahoo 18%
Microsoft 5% Other companies 5%
But this situation might change
Microsoft and Yahoo could
merge
New entrants on Google’s markets
Apple search engine ? Examples
Potential impact Timing Probability
More efficient AdSense
competitors?
Google distributors could break their
partnership
Middle term High Mild
March 2009 • Why could Google die ? • ..……. 13
Development of a disruptive innovation on Google’s markets
Strategic threat
Some of the most successful IT companies have been victims of disruptive innovations:
Impact Timing Probability
Broadband access
Disruptive innovations
Google’s PageRank
Future disruptive innovations could seriously impact Google’s core business:
Natural language search? Semantic Web? Other innovations?
Historical leaders
Long term High Mild
March 2009 • Why could Google die ? • ..……. 14
Inability to control points of entry Strategic threat
Google already had some difficulties controlling strategic points of entry:
Impact Timing Probability
Example : Social networks
Google and MySpace $900 Million deal on search and contextual ads did not reach expected revenues
Google may have difficulties in controlling future points of entry
Mobile Video games consoles
Television set-top boxes
Internet of things
Except in Brazil and India, Google’s social network never managed to compete with Facebook
Eg :
Middle term Mild Moderate
March 2009 • Why could Google die ? • ..……. 15
Interruption or failure of Google’s services Other threat
Impact Timing Probability
Recently, several Google products experimented serious interruptions or failures:
February 2009–March 2009: Gmail crashed twice across the world
March 2009: some users' private documents were accidentally shared with other users
March 2009: some users had difficulties creating events
These problems may strongly affect Google:
Brand damage A strong brand is all the more important since barriers to entry are relatively low
in the Internet market
Loss of business users Users can very easily move to
competitor’s products, and need to fully trust the service
High Short term High
March 2009 • Why could Google die ? • ..……. 16
Privacy concerns Other threat
Impact Timing Probability
Everyday, concerns are expressed about Google’s practices regarding the use of personal information
Claims
As the amount of stored data is strongly increasing, privacy concerns will increase too, favoring:
Brand damage Loss of users
A wide amount of information …
Personal information Navigation tracking and logs
Location
Searches
Web behaviour
WWW
Medical Data
Mails & conversations
Personal documents
…could be lost or used for unintended purposes
• Governmental control • Commercial uses • Others. Eg. exploited by competitors
High Short term High
March 2009 • Why could Google die ? • ..……. 17
Opensource’s ecosystem threats Other threat
Impact Timing Probability
Google is outsourcing its R&D to independent communities
Dissensions with the community
Google could be forced to internalize these efforts in the future
Google R&D is still important …but most of it is supported by Opensource actors :
• 2,12 billion $ in 2007 • 12 % of Google turnover • vs. Microsoft’s R&D investments : 7,5 billion $
• The Mozilla foundation • Most of Google products integrate opensource code : from Android to Google Chrome
Weaknesses of the community
• Google’s exploitation of Opensource efforts • Google’s proprietary strategy : keeping most parts of its developments secret
• Opensource business models may evolve • The long-term existence of these communities is not ensured
Mild Middle term Moderate
/ X
March 2009 • Why could Google die ? • ..……. 18
Which threat ? Of what kind?
Impact Forecast Probability
? What do you think?
Fill this slide and send it to contact@fabernovel.com to give your opinion!
March 2009 • Why could Google die ? • ..……. 19
Download this presentation at : http://www.fabernovel.com/en/analyze/
news/why-could-google-die
March 2009 • Why could Google die ? • ..……. 20
Stéphane Distinguin Founder and CEO
stephane.distinguin@fabernovel.com
Cyril Vart VP Strategy & Development
cyril.vart@fabernovel.com
Pierre Fremaux Project Analyst
pierre.fremaux@fabernovel.com
Matthieu Lecomte Junior Project Analyst
matthieu.lecomte@fabernovel.com
42, bd de Sébastopol 75003 Paris Tél. : +33 1 42 72 20 04 Fax. : +33 1 42 72 20 03
www.fabernovel.com
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