Why Google's New Products Need Not Succeed

RJS writes "There have been some industry analysts lately who have called into question Google's real success, claiming that while Google's search remains a big winner, it has missed the mark when it comes to generating profitable, secondary products. BusinessWeek has just such an article ("So much fanfare, so few hits") but others argue that success relative to the size of Google's bread-and-butter (search) ultimately doesn't matter because it doesn't cost Google much extra to keep these secondary services — like Gmail — operational: the Google grid is on and growing regardless of what services are being run on top of it."

Comments

Economies of Scale,Buliding a Brand,Marginal Cost

[Marc2k]

These are all basic principles of economics. Nothing for you to see here, move along.

Sure, they want to make money

[solidtransient]

Gmail is by far my favorite web-based email client. Google Calendar has proven to be a very useful tool as well. I use Google Local at least once a week and on and on and on. Maybe Google knows they make enough money on search and that they just want to release good, useful, user-friendly products that are miles better than the competition, even if they aren't profitable. Yahoo's gazillion ads on their email service is one reason I don't use it anymore.

Re:Sure, they want to make money

[lowid (24) _________]

Maybe Google knows they make enough money on search and that they just want to release good, useful, user-friendly products that are miles better than the competition, even if they aren't profitable.

I think that the point of them doing this is that it adds value to their brand. Maybe they aren't turning a profit with some of their niche services, but those services are driving users to the rest of google's more profitable offerings. Have you used the google text messaging service? It's incredibly useful, and probably not directly profitable for google. Often when i'm driving around and realize i need to go somewhere (for example a hardware store) i can just text google, and seconds later receive a text with addresses and phone numbers of nearby hardware stores. They haven't made any money directly off me with this service, but since I enjoy and use the service so much I'd say I'm more likely to look out for other google offerings and use other google products in the future.

It's kind of like advertising - they're just building their brand and driving more and more users to their products. Even if their new products don't "succeed," per se, as long as they're pretty neat it will help them in the long run.

Funny thing

[WindBourne]

it took google's search engine 3-5 years to overcome inertia in a relatively new arena (web search). Now, it is competing against much longer established business (e-mail has been around for multiple decades). It will not be overnight that Google services will grow, but they will grow.

Re:Funny thing

[Billosaur]

Nice thing for Google, is that although they are the new player on the block (vs. yahoo, aol, MS, etc), they have a superior reputation to all the other players. They just have to capitalize on that (i.e. no crap products that take their name down).

The thing that bothers me about Google is: is it too much of a good thing? Put aside quality for a moment; is it possible Google's continuing expansion will spread it too thin? Mind you, Amazon has been expanding for what seems like eons now, but their main site is starting to get cluttered and I think they've been overstepping their reach with some of the areas they've gotten into (Groceries?). I'd be afraid of Google diluting itself too much in an attempt to become universally ubiquitous.

Googles real strategy

[Anonymous Coward]

These analysts miss the point. The big win for Google is to replace Micro$oft as the default platform. As Google tools, google desktop and of course Google search as the homepage become the default start point for users, the operating system becomes less relevant.

Put another way, once people are Google-centric, they can use a Mac or a "GooglePC" or anything else. Linux anyone?

Money, bah!

[Dystopian Rebel]

That's right: Bah! Following the example of my heroes W Buffett and W Gates III, I hereby announce that I'm giving all my savings to the Bill And Melinda Gates Foundation. I don't want any dynasty founded on my $763.84.

Google is building highly usable applications that are not OS-dependent. THAT is what is scaring the traditional software makers. The browser is the interpreter. Firefox is Google's wedge and everything they do is helping to change the way people use computers.

critical mass, similar to M$ approach

[192939495969798999]

Actually, their approach isnt that much different from Microsoft's, at least from an abstract view. They are slowly accumulating more and more useful products, and over time this will bring them to a critical mass. Once they surpass this, then more and more of their "other tools" will be the tools of choice in their specific areas, and then Google will be a monster in the marketplace. The trick will be to not then turn around and be "evil" (i.e. charge for services that were once free because you can, etc).

Um. Yes they do need to succeed.

[washirv]

Whoever wrote this silly blogpost clearly hasn't considered the real reason Google needs their products to succeed. Google's bread and butter is their search product. But here's the problem: search growth is slowing. The only way for Google to keep growing their business at the breakneck speed that they and Wall St have become accustomed to is to find new places besides search pages that they can stick their ads on. Right now Google gets to do that using their Adsense program. Thousands of websites around the world are making Google tons of money. But the margins there will keep slipping as more competitors (Yahoo, MSN etc) come on in and offer to share higher percentages of their revenue with 3rd party publishers. This leaves Google with having to own their own "content" pages where they can stick their ads and book 100% of revenues from them. Unless their other products succeed, Google will truly become a one trick pony as far as their revenues are concerned. No responsible business can afford to become a one trick pony. That way lies death.

Re:Economies of Scale,Buliding a Brand,Marginal Co

[Xichekolas]

I think the GP's point is that all these secondary 'misses' are just another way to keep the google brand (and google search and adwords) front in center in Internet culture. One could argue that Coke wastes tons of money developing advertisements and promotions, but they have a very strong brandname and they got it because they continually push it. As soon as Google stops releasing a new beta for everyone to go gaga over once a month, they will no longer hold the spotlight, and people will take them for granted. As long as google uses new products to generate buzz, they will keep generating revenue for their ads.

An analogy would be how Nintendo used to operate... I'm sure they didn't make a ton of money on each game title, but having a good collection of games was critical to get people to buy the console in the first place. This analogy isn't too great though, because nowdays the consoles most likely sell at a loss and the bread and butter are the games and accessories.