If Search Is Google's Castle, Android Is the Moat

Hugh Pickens writes "Warren Buffet once said that the best businesses were economic castles protected by unbreachable moats. Now, Erick Schonfeld writes that if search is Google's economic castle, Android is a moat, Chrome browser is a moat, and Google Apps is a moat — all free products, subsidized by search profits, intended to protect the economic castle that is search. '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,"' says Benchmark Capital VC Bill Gurley. '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).' So don't measure the success of Google's new businesses by how much revenue or profit they generate directly but measure it by how much they shore up Google's core search business. 'Google is ... 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.'"

Comments

Re:So they're being anticompetitive

[ZankerH]

IIRC "Windows" has never been synonymous with operating system

For the sole reason that MS's target audience can't tell the difference between an OS, a computer and a browser.

Re:Google is the best company ever

[Zandamesh]

Everyone remember: Google promises that they will do no evil, so you know it's true. After all... they say so.

Well, if I had to pick which one of the major software companies is the least evil, it would be Google. They're open source friendly, create innovative products, I've never read of Google patent trolling other companies, they generally have a good reputation.

Re:Search isn't the product.

[bgarcia]

If it's been said once, it's been said a million times. Search isn't the product. Viewers are the product and they're being sold to advertisers.

Yes! Someone who gets it!

The moats are there to keep you in, not to keep other people out.

Wait, what???? No, no, no!
Look, Google does a damn good job of giving advertisers targeted viewers.
And they get LOTS of viewers because the viewers like the products that Google entices them with (search), and are willing to pay the cost (advertisements).
Google doesn't have to keep anybody in - the people want to be there!

So what does Google perceive as a threat?
Simple - anything (and I mean anything) that keeps people from being able to access their products.
Browsers suck? Well, let's build a browser that's fast. Google doesn't care if it wins the market, as long as all the other browsers become faster in an effort to compete.
Cell phones too locked down? Let's make an open operating system for phones, and make sure that at least one phone model is standard setting. Google doesn't care if that phone wins the market, as long as it sets a standard for all the other smartphones.

Perhaps the analogy works better if you say that search is the castle, the competitors keep people from the castle with their moats, and Google's ancillary products are the various drawbridges made to make sure the plebs can always access the castle.

Re:Exactly! Why use an analogy in this case?

[grcumb]

Google's position is extremely precarious for two reasons. First, there isn't anything that prevents the majority of its users from switching to a rival search engine.

Oh, but there is: Google is better. At least, that's the premise on which Google operates. They do what's necessary to make the Web and the Internet in general more amenable to sharing data, searching, etc. and use their engineering skills to separate themselves from the pack.

Recently, they realised that the only way they could maintain a landscape conducive to their style was to give Microsoft a kick in the pants. Hence the Chrome browser. Likewise, Apple's walled-garden approach was a threat to their long-term survival, so they created Android. The 'scorched earth' phrase is a poor one, because Google is really doing the opposite, they're opening fertile new ground in order to give the population somewhere to move.

If we absolutely need a territory-based analogy, then Microsoft is a slumlord. It didn't set out to be, but all those little ticky-tacky sheds quickly degraded and the poor roads and communications made policing difficult. Apple, on the other hand, is a city planner. It creates gated communities that offer you everything they imagine you could want, all within the perceived safety and comfort of their ivy-covered walls.

Google wants something completely different. They want an Oklahoma Land Rush - rather than seeking to contain and corral people into their own plantation (sorry), they want a generation of homesteaders. They're confident that the homesteaders will keep coming to them for materials because they believe in the quality of their engineering.

Second, the vast majority of its users cannot reach its services except by using Microsoft products. Therefore Microsoft is trying to leverage its monopoly position on the desktop and in IT to nudge people away from Google toward Bing.

Hence the need for Google to move the stakes. They're not interested in fighting over Microsoft's turf; they're interested in creating new territory. Territory that, not coincidentally, they feel confident they can dominate.

Microsoft is playing itself into a holding action. They are on the defensive, trying to hold onto what they have, and all the while people are leaving the slums for an often ragged and imperfect existence, free however from the constraints that once bound them.

None of this should be taken as an endorsement of one tactic over another. The preceding is simply an effort to explain the lay of the land.