Tuesday, January 20, 2009

Google turns a corner?

I have nothing against Google. I admire them for the way they took a simple concept and turned it to everyone's advantage, in the process making many rich, and some extremely rich. Honestly, the only thing I hate about them is that I chose not to buy the shares at 85 USD.

However, I always hope there will be a day when Google's share price will fall to a level at which it will seem more attractive. Maybe there's hope and in that context an interesting bit of news reported on NYT caught my eye today. Google's foray into newspaper ad placements seems a failure. When it was launched, it was touted as the next big revolution - most of the hype coming from wall street analysts and not people in the business. A very common thing of the bull market era when every bit of news was analyzed and gains made, when in reality it meant very little in terms of real business impact.

Well it might seem that this failure shouldn't be much of a problem as many advertisers have already turned their eye to the Internet as a stable medium, making it the focus of the ad-placement wars. Here, Google rules the roost and hence, this failure with print ads might not seem like an issue.

However, Google's growth is always under a threat by some start-up that is surely going to sweep it aside in the next wave of technological evolution. The real question is when and how? If you ask me, we have only begun to exploit the real power of connectivity. The threat may come from some hot start-up that figures out a way of monetizing social networks, or maybe something else, but it will surely come. The other big problem that Google has is its source of revenues. It is still heavily dependent on one single stream - search ad placements and other than that Google has been largely unsuccessful in monetizing any of its other cool applications. I am sure the Google team is working on many more cool apps, however, their killer app still seems to be search. Given this, does this failure give any indication of Google's fortunes? Or, is it just another one of Google's missteps? Only time will tell.

There is definite potential for Google in its foray into software through android and the subsequent implications for open source hardware. With the growth of mobile web applications and Google's dominance over information and mapping, surely there will be a way to make money there. Additionally, Google's expertise in managing large server farms efficiently might give it an edge when cloud computing gains prominence in corporate IT budgets.