Monday, March 28, 2011

search is google's castle, everything else is moat

TechCrunch | Google is moving in many directions—mobile, browsers, productivity apps, operating systems, social. At first glance, it may seem like it is trying ever so hard to move beyond its giant one-trick pony: search. What people keep forgetting is that it is a pretty good trick. Benchmark Capital VC Bill Gurley reminds us how good this trick is in an excellent post that looks at Google’s market expansion strategy not as one of a series of aggressive offensives, but rather a highly defensive strategy.

Warren Buffet famously describes the best businesses as “economic castles protected by unbreachable ‘moats.’” Search is Google’s economic castle (perhaps with other forms of online advertising such as display thrown in there), and everything else is a moat trying to protect that castle. Android is a moat. The Chrome browser is a moat. The Chrome OS is a moat. Google Apps is a moat. These are all free products, subsidized by search profits, that are intended to protect the economic castle that is search.

Gurley goes further and says not only does Google build moats around itself, but then it scorches the earth surrounding the moat:
So here is the kicker. Android, as well as Chrome and Chrome OS for that matter, are not “products” in the classic business sense. They have no plan to become their own “economic castles.” Rather they are very expensive and very aggressive “moats,” funded by the height and magnitude of Google’s castle. Google’s aim is defensive not offensive. They are not trying to make a profit on Android or Chrome. They want to take any layer that lives between themselves and the consumer and make it free (or even less than free). Because these layers are basically software products with no variable costs, this is a very viable defensive strategy. In essence, they are not just building a moat; Google is also scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it. And best I can tell, they are doing a damn good job of it.
Remember, what is the default search engine of Android and Chrome? It’s Google. Android and Chrome are merely distribution nodes feeding into search. Without Android, Google would be more vulnerable to becoming displaced as the default search engine on mobile phones. The Chrome browser similarly keeps Google search front and center, just in case Firefox ever decides to go with Bing.

But the way that Google creates its moats, ravages the industries it enters because it offers it products for free or less than free. Carriers and cell phone manufacturers actually have an economic incentive to use Android. Google is essentially paying them to adopt it.

So don’t measure the success of Google’s new businesses by how much revenue or profit they generate directly. Measure it by how much they shore up Google’s core search business. Fist tap Dale.


Uglyblackjohn said...

So many bloggers have the google-ads widgets on their blogs - would a more compact "Brand Cloud" be a better use of space?
It could appear on the side bar and move in circles to expose all brands.
Each brand's representative logo would increase in size on the cloud by the amount each is mentioned in each blog.
Each brand logo within the cloud would link to a company's site.
I can't program for ish but I think it would be a next step for google or anyone one else wishing to take advantage of all these blogs.

CNu said...

that sounds like an excellent idea uncle john. dale is highly capable programmer, and I know another couple cats I'll run that idea by here locally to see how they respond. I think the key will be identifying exactly how you plan to extract your microgram of lucre from ever mouse-over, click, and/or rotation.

Wizznilliam said...

I've thought this for a while now.. They make SOOO much money from search why would they not do everything possible to stay dominant in it, including giving away great products.. As good as those products are they will never make as much money for them as search and ads do.

CNu said...

and that's ok because the products are fantastic and they have enormous potential to revolutionize the way in which education is delivered.

facebook, otoh, is simply and purely evil...,

Uglyblackjohn said...

IDK... maybe the same way Google does.
Those Word Clouds were all the rage on blogs a while back.
If people could get paid to put them back up, there should be some way to get a slice of the Big G's 2.06bn pie.

Here's what I've been thinking;
Sign up brands who wish to be mentioned on blogs.
From this list let each blogger pick ten (or so) which they feel are compatible with thier blog.
As bloggers mention brands in their posts (kind of a product placement-type of advert), each time would increase the size of the brand's representation on the site's cloud.
The larger font representation would probably get more clicks.
Sure... DeeVee would fill his spot with references to anything from Neiman-Marcus but you would be getting paid each time his followers click on his cloud.
Ed had a nice word cloud that moved in a circular motion. This would be a good starting point.

CNu said...

I picked up a little adsense cheque just last week, bought myself a really nice pellet rifle and a garden weasel. Once the widget was up and running, and you had a working show and tell, it would be fairly easy to sign up additional sponsors. I'll take a look at some of their ad programs to see if there are any straight shots into these that would make the job a very simple one of integrating the programmatic back end with a word-cloud interface.

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