why could google die ?

Why could Google die … maybe not now, but tomorrow

Paris, March 2009

March 2009 • Why could Google die ? • ..……. 2

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In December 2008, faberNovel published a white paper about Google’s key success factors :

Many comments dealt with Google’s weaknesses and the possible threats to Google’s market dominance. We are now trying to identify these threats and weaknesses.

The title of the presentation refers to Jeff Jarvis’ book What would Google do? which will be published in France in June 2009 (faberNovel/Télémaque publishing)

This presentation is an answer to the comments related to the previous faberNovel study

http://www.slideshare.net/misteroo/all-about-google-presentation


•  4 types of threats and weaknesses have been identified: Legal threat Internal weakness Strategic threat Other threat

•  For each threat or weakness, probability, forecast and impact have been evaluated on scales :

•  Probability: evaluation of the possibility that a threat or a weakness could impact Google’s business

•  Timing: evaluation of the time limit for the threat or a weakness to impact Google’s business

•  Impact: evaluation of the negative impact on Google’s revenues and profits

Methodology

Low Mild High

Short term

Long term

Low impact

High impact


12 main weaknesses or threats

Threats / Weaknesses Probability Timing Impact

Legal threats Antitrust suits against Google

Copyright infringement suits

Internal weaknesses

Inability to hire or retain key people

Inability to scale operational processes

Top management issues

Strategic threats

Acquisition difficulties

Competition with incumbents

Disruptive innovations

Inability to control points of entry

Other threats

Interruption or failure of Google’s services

Privacy concerns

Opensource’s ecosystem threats

Low > High Short > Long Low > High


Antitrust suits against Google

Impact Timing

Legal threat

In 2007, Microsoft called for regulator action to stop Google and DoubleClick merging

vs

In November 2008, Google and Yahoo ended their negotiations, abandoning attempts to overcome the objections of antitrust regulators

/

Probability

vs

In February 2009, Sourcetool, a B2B search engine, filed an antitrust suit against Google, accusing it of upping its ad rates unfairly

Google might constantly be subject to antitrust claims for (amongst others) :

Excluding companies from Google results

Over favoring in-house services

Issuing unclear ad rates

Google is increasingly subject to antitrust suits

High Middle term High


Copyright infringement suits Legal threat

May 2007: Viacom sued Google, accusing YouTube of "massive intentional copyright infringement" and asking for more than $1 billion in damages

October 2008: Google agreed to pay $125 million to settle two copyright lawsuits by publishers and authors

Google has been subject to copyright infringement claims all over the World (Australia, Austria, France, Israel, Italy,…)

May 2008: a group of Belgian newspapers filed a lawsuit against Google claiming that Google News made the papers' articles available for free. They asked Google for €49 million in damages

vs vs vs

Since most of Google’s services link or host copyrighted material,

The risk of monetary damages is substantial

Impact Timing Probability

High Moderate Short term


Inability to hire or retain key people

Internal weakness

Google set up processes to attract and motivate employees Since its performance depends on the talents and efforts of highly skilled individuals

05 06 07 08

200

400

600

Cool work environment

Transferable stock options program

In a more mature company, incentives became less efficient: Google’s work environment is becoming comparable to big corporations

At current stock price, 85% of its employees have underwater stock options Google’s hiring process is currently viewed as interminable (up to 5 months) and inefficient

Examples : Google stock price [$]

Very selective hiring process


High Moderate Middle term


Inability to scale operational processes

Internal weakness

Operational infrastructure and processes are key to Google favoring the growth of the company through innovation and quality

Google's 80/20 rule allowed to develop many products :

Organization based on a startup model: •  Project teams are small and autonomous •  Peer-reviewing: engineers work is subjected to the scrutiny of other engineers who are experts in the same field

Google will face issues adapting its infrastructure to quick growth

Implementation of heavy processes which could slow down innovations

Inability to maintain good quality level for Google products

Inability to maintain a corporate culture that fosters creativity and teamwork


Mild Short term Low


Top management issues Internal weakness

Top management is key to Google’s strategy

Larry Page, President in charge of products

Sergei Brin, President in charge of technology

Moreover, the triumvirate’s stocks account for 67% of the voting power of Google capital stock

Top management issues could affect Google’s performance

Eric Schmidt, CEO


Internal dissensions between the members of the top management

Loss of key management leaders : accident / lack of interest for a more mature company etc…

Low Long term High

Uncertain ability to transfer or delegate key responsibilities


Strategic and operational difficulties acquiring companies

Strategic threat

Most of 54 Google’s acquisitions were successful

In the future, Google could face some serious issues acquiring companies

Strategic issues •  Forecasted revenues may not fully materialize:

•  Google could miss investment opportunities:

Operating difficulties •  Integration of procedures and processes •  Technical integration of the companies:

Eg : It took 16 months to relaunch Jotspot after its acquisition by Google

Diversion of management time •  Rather than focusing on operating business, top management could focus on acquisition integration challenges


Mild Short term Moderate


Competition with incumbents Strategic threat

Until now, Google withstands competition on its core business: US search market (Hitwise 2009)

Google 72%

Yahoo 18%

Microsoft 5% Other companies 5%

But this situation might change

Microsoft and Yahoo could

merge

New entrants on Google’s markets

Apple search engine ? Examples

Potential impact Timing Probability

More efficient AdSense

competitors?

Google distributors could break their

partnership

Middle term High Mild


Development of a disruptive innovation on Google’s markets

Strategic threat

Some of the most successful IT companies have been victims of disruptive innovations:


Broadband access

Disruptive innovations

Google’s PageRank

Future disruptive innovations could seriously impact Google’s core business:

Natural language search? Semantic Web? Other innovations?

Historical leaders

Long term High Mild


Inability to control points of entry Strategic threat

Google already had some difficulties controlling strategic points of entry:


Example : Social networks

Google and MySpace $900 Million deal on search and contextual ads did not reach expected revenues

Google may have difficulties in controlling future points of entry

Mobile Video games consoles

Television set-top boxes

Internet of things

Except in Brazil and India, Google’s social network never managed to compete with Facebook

Eg :

Middle term Mild Moderate


Interruption or failure of Google’s services Other threat


Recently, several Google products experimented serious interruptions or failures:

February 2009–March 2009: Gmail crashed twice across the world

March 2009: some users' private documents were accidentally shared with other users

March 2009: some users had difficulties creating events

These problems may strongly affect Google:

Brand damage A strong brand is all the more important since barriers to entry are relatively low

in the Internet market

Loss of business users Users can very easily move to

competitor’s products, and need to fully trust the service

High Short term High


Privacy concerns Other threat


Everyday, concerns are expressed about Google’s practices regarding the use of personal information

Claims

As the amount of stored data is strongly increasing, privacy concerns will increase too, favoring:

Brand damage Loss of users

A wide amount of information …

Personal information Navigation tracking and logs

Location

Searches

Web behaviour

WWW

Medical Data

Mails & conversations

Personal documents

…could be lost or used for unintended purposes

•  Governmental control •  Commercial uses •  Others. Eg. exploited by competitors

High Short term High


Opensource’s ecosystem threats Other threat


Google is outsourcing its R&D to independent communities

Dissensions with the community

Google could be forced to internalize these efforts in the future

Google R&D is still important …but most of it is supported by Opensource actors :

•  2,12 billion $ in 2007 •  12 % of Google turnover •  vs. Microsoft’s R&D investments : 7,5 billion $

•  The Mozilla foundation •  Most of Google products integrate opensource code : from Android to Google Chrome

Weaknesses of the community

•  Google’s exploitation of Opensource efforts •  Google’s proprietary strategy : keeping most parts of its developments secret

•  Opensource business models may evolve •  The long-term existence of these communities is not ensured

Mild Middle term Moderate

/ X


Which threat ? Of what kind?

Impact Forecast Probability

? What do you think?

Fill this slide and send it to [email protected] to give your opinion!


Download this presentation at : http://www.fabernovel.com/en/analyze/

news/why-could-google-die


Stéphane Distinguin Founder and CEO

[email protected]

Cyril Vart VP Strategy & Development

[email protected]

Pierre Fremaux Project Analyst

[email protected]

Matthieu Lecomte Junior Project Analyst

[email protected]

42, bd de Sébastopol 75003 Paris Tél. : +33 1 42 72 20 04 Fax. : +33 1 42 72 20 03

www.fabernovel.com

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