“Google’s
not a real company. It’s a house of cards,” Microsoft CEO Steve Ballmer
allegedly said recently. His jealous remark is at least half true. What
is it about Google that so mystifies every group that tries to analyze
it? The more I study them, the more convinced I am that Google has a
truly revolutionary business model, and are the most visible pioneers
of the emerging 21st century Gift Economy. Microsoft, and the
irresponsible brokers who keep flogging overpriced stocks based on
unsustainable growth promises, and everyone else who owes their living
to the Ponzi scheme that is the modern growth/market economy, should be very afraid.
There
is a giant gulf between Google and its investors. The investors,
justifiably recognizing that Google is the most customer-obsessed
(their #1 principle, even ahead of 'doing no evil') and innovative (a
neat trick -- the two rarely come together) company in the world,
believe that that will necessarily translate into the greatest revenues
and profits in the world. They're mistaken.
Google, meanwhile,
behaves as if it really doesn't care much about revenues and profits.
Until recently, its two principal sources of revenue were (and still
are) marginal and fragile: Advertising online, Google's #1 revenue
source, is a virtual oxymoron. As the economy moves from a
supplier-driven to a customer-driven one, a revolution Google is
helping engineer, advertising as a whole will be history, and Google's
advertising is no exception, notwithstanding their attempt to 'qualify'
ads as relevant to each viewer. Its #2 revenue source is selling search
tools to corporate customers. But the type of search tool that is
needed for an Intranet is very different from the 'popularity-based'
Google search technology that works so well in the complex Internet
world. You can get a sense of this from Google Desktop, whose
refreshing speed and ease of use is just a delight to its users, but
which often doesn't locate the precise document you were looking for
nearly as deftly as it finds the Internet page you were looking for in
a vastly larger haystack.
But recently Google discovered there's a third great source of revenue in today's wildly inflated and delusional stock market: IPOs.
I'm convinced that, more than anything else, Google went public because
it gave them a ton of cash to do even more things for free for their
customers -- which is exactly what they've done since then, offering a
never-ending stream of wonderful goodies. Far from a sellout to
corporatist philosophy, with its IPO Google may have pulled off the
biggest Robin Hood act in history.
There are some who believe
Google will be successful, ultimately, by realizing the promise of Web
2.0 -- moving the focus of the 21st century worker from the desktop
(documents on the hard drive) to the network (where everything is kept
online). Indeed, Google has been pivotal in the advance of AJAX, the
fusion of technologies that allow users to assemble a page of
information from multiple web-based applications, much as MS Office
allowed users to assemble a page of information from multiple
desktop-based applications. I have long espoused the development of two
simple desktop meta-applications
-- a document annotator that would let you do, electronically and
intuitively, everything your pencil can do with manual documents, and a
workspace manipulator that would do, electronically and intuitively,
everything your hand can do in a physical office, saving, storing,
moving, aggregating, receiving and sending stuff (the illustration
above shows how these applications drive all our essential information
processing processes). If there is any hope of getting the 80% of the
population that are not power users of computer and Internet technology
on board, the use of these tools must be made this simple and
intuitive, and I believe these two meta-applications are the best way
to accomplish this.
But Google and Web 2.0 may offer another
alternative -- making the personal document, desktop and office
disappear entirely. Instead of having a collection of documents on your
desktop and in your 'files', Web 2.0 keeps all those documents out on
the Web (subject to security and access permissioning rules that you
set) as a designated, tagged subset of all the documents in the world
on the Web. And instead of having an office that routes documents to
files and mailboxes, you keep your 'virtual' office on Web 2.0,
accessible anywhere anytime.
With Web 2.0 the two
meta-applications are still the same (we all understand the
functionality of the pencil and the hand) but they move from the hard
drive to cyberspace. Or perhaps you have the choice of either or both
-- the applications work the same regardless of where you choose to
keep your stuff. But strategically the development of these
applications is different if the primary locus of data processing is
physically local on a hard drive or virtual. Google may be waiting to
see which primary locus emerges -- which will depend on legal,
cultural, security and technological advances and developments we
cannot yet predict.
But Google surely understands that however
this unfolds, Web 2.0 and future desktop applications are not going to
be profit-making ventures. They will necessarily be Open Source. They
will be gifts, from Google and others, to their beloved and grateful
customers. Unfortunately, investors will eventually realize this, so it
is unlikely that public offerings are going to provide Google with much
more revenue. The money, as I've said before, is not in software and
content, but in hardware and personalized applications (concerts and
customizations).
So how will Google make money? It won't.
Perhaps it won't have to. Perhaps in a Gift Economy customers will be
so delighted by Google's innovations that they will volunteer their
time to identify and develop the next generation of applications. Open
Source institutionalized.
Or perhaps we'll find that,
fundamentally, there are only so many applications for computer
technology, and the Internet will become, like phone lines and
pipelines, another utility, to be maintained more or less unchanged.
But
back to the revolutionary Google business model. Traditionally
customers have needs, wants, and nice-to-haves. Needs they will pay
'market' value for. Wants they will pay modestly for, especially if
they're bundled with needs. Nice-to-haves they will not pay for at all,
but they'll take them, and may make differential purchase decisions
based on them (if the needs and wants of two vendors are
indistinguishable). The market economy is focused on needs, since they
are the corporation's bread and butter, the only source of reliable
revenue and growth, and hence profit.
Now enter Google. They fulfil needs, wants, and nice-to-haves, all free.
So those of us on the leading side of the digital divide gratefully
take all three, and we don't even really differentiate between them
(unless some of the nice-to-haves unduly complicate the application, in
which case we don't want them). Those on the other side of the digital
divide get none of them, widening the divide to a chasm. The market
understands none of this behaviour, since it doesn't conform to any
accepted business model. Google doesn't really seem to care. They're
too busy doing what they do so well -- delighting customers with
valuable, intuitive, boldly innovative and expansive new products, on a
scale that is the envy of every entrepreneur.
There is one last
'search' frontier that Google has not yet conquered, however, and it
could be Google's biggest hit yet, and possibly generate significant
revenue as well. Google is well established as the company that best
helps you find what. And recently with Google Maps/Earth they are becoming established as the company that best helps you find where. What if Google is now working on becoming the company that best helps you find who?
The company that becomes the expertise finders, the shared-interest
finders, the companion finders, the people who, at last, will help us
find, effectively and intuitively, the people we're looking for, not
just their stuff. And not just find them, but make sure they're
available (and if applicable affordable) and seamlessly put us in touch
with them.
If they could do that, even I might consider buying shares in the company. |
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