faberNovel: Why could google die?

Why could Google die … maybe not now, but tomorrow Paris, March 2009

This work is licensed under the Creative Commons to allow furthercontributions by other specialists and web users in the comingmonths. To view a copy of this Attribution-NonCommercial-ShareAlike3.0 Unported license, visithttp://creativecommons.org/licenses/by-nc-sa/3.0/ or send a letter toCreative Commons, 1712nd Street, Suite300, San Francisco,California, 94105, USA. ..……. March 2009 • Why could Google die ? • 2

This presentation is an answer to the commentsrelated to the previous faberNovel study In December 2008, faberNovel published a white paper about Google’s key success factors : http://www.slideshare.net/misteroo/all-about-google-presentation 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’ bookWhat would Google do? which will be published in France in June 2009 (faberNovel/Télémaque publishing) ..……. March 2009 • Why could Google die ? • 3

Methodology•  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 Low Mild High •  Timing: evaluation of the time limit for the threat or a weakness to impact Google’s business Short Long term term •  Impact: evaluation of the negative impact on Google’s revenues and profits Low High impact impact ..……. March 2009 • Why could Google die ? • 4

12 main weaknesses or threats Threats / Weaknesses Probability Timing Impact Low > High Short > Long Low > High Antitrust suits against GoogleLegal threats Copyright infringement suits Inability to hire or retain key people Internal Inability to scale operational processesweaknesses Top management issues Acquisition difficulties Strategic Competition with incumbents threats Disruptive innovations Inability to control points of entry Interruption or failure of Google’s servicesOther threats Privacy concerns Opensource’s ecosystem threats ..……. March 2009 • Why could Google die ? • 5

Antitrust suits against Google Legal threat Google is increasingly subject to antitrust suits vs / vs In 2007, Microsoft called for In November 2008, Google and In February 2009, Sourcetool, a B2B regulator action to stop Google Yahoo ended their negotiations, search engine, filed an antitrust suit and DoubleClick merging abandoning attempts to overcome against Google, accusing it of upping the objections of antitrust regulators its ad rates unfairly Google might constantly be subject to antitrust claims for (amongst others) : Excluding companies Over favoring in-house Issuing unclear ad from Google results services ratesProbability Timing Impact High Middle term High ..……. March 2009 • Why could Google die ? • 6

Copyright infringement suits Legal threat Google has been subject to copyright infringement claims all over the World (Australia, Austria, France, Israel, Italy,…) vs vs vs May 2007: Viacom sued Google, May 2008: a group of Belgian October 2008: Google agreed to accusing YouTube of "massive newspapers filed a lawsuit against pay $125 million to settle two intentional copyright Google claiming that Google News copyright lawsuits by publishers infringement" and asking for more made the papers articles available and authors than $1 billion in damages for free. They asked Google for €49 million in damages Since most of Google’s services link or host copyrighted material, The risk of monetary damages is substantialProbability Timing Impact High Short term Moderate ..……. March 2009 • Why could Google die ? • 7

Inability to hire or retain key Internal people weakness Google set up processes to attract and motivate employees Since its performance depends on the talents and efforts of highly skilled individuals 600 Examples : 400 Google stock 200 price [$] 05 06 07 08 Cool work Transferable stock Very selective environment options program hiring process 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 inefficientProbability Timing Impact High Middle term Moderate ..……. March 2009 • Why could Google die ? • 8

Inability to scale operational Internal processes weakness Operational infrastructure and processes are key to Google favoring the growth of the company through innovation and quality Googles 80/20 rule allowed to Organization based on a startup model: develop many products : •  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 Inability to maintain a corporate Inability to maintain processes which could culture that fosters creativity and good quality level for slow down innovations teamwork Google productsProbability Timing Impact Mild Short term Low ..……. March 2009 • Why could Google die ? • 9

Internal Top management issues weakness Top management is key to Google’s strategy Larry Page, President in Eric Schmidt, CEO Sergei Brin, President in charge of products 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 Internal dissensions Loss of key management leaders : Uncertain ability to between the members of accident / lack of interest for a more transfer or delegate key the top management mature company etc… responsibilitiesProbability Timing Impact Low Long term High ..……. March 2009 • Why could Google die ? • 10

Strategic and operational Strategic difficulties acquiring companies threat Most of 54 Google’s acquisitions were successful In the future, Google could face some serious issues acquiring companiesStrategic issues Operating difficulties Diversion of•  Forecasted revenues may not •  Integration of procedures and management timefully materialize: processes •  Rather than focusing on •  Technical integration of the operating business, top companies: management could focus•  Google could miss investment on acquisition integrationopportunities: challenges Eg : It took 16 months to relaunch Jotspot after its acquisition by GoogleProbability Timing Impact Mild Short term Moderate ..……. March 2009 • Why could Google die ? • 11

Strategic Competition with incumbents threat Until now, Google withstands competition on its core business: US search market (Hitwise 2009) Yahoo 18% Microsoft 5% Google 72% Other companies 5% But this situation might change Microsoft and Google distributors New entrants on Yahoo could could break their Google’s marketsExamples merge partnership Apple search engine ? More efficient AdSense competitors?Probability Timing Potential impact Mild Middle term High ..……. March 2009 • Why could Google die ? • 12

Development of a disruptive Strategic innovation on Google’s markets threat Some of the most successful IT companies have been victims of disruptive innovations:HistoricalleadersDisruptive Broadband Google’sinnovations access PageRank Future disruptive innovations could seriously impact Google’s core business: Natural language search? Semantic Web? Other innovations?Probability Timing Impact Mild Long term High ..……. March 2009 • Why could Google die ? • 13

Strategic Inability to control points of entry threat Google already had some difficulties controlling strategic points of entry: Example : Social networks Google and MySpace $900 Million Except in Brazil and India, Google’s deal on search and contextual ads social network never managed to did not reach expected revenues compete with Facebook Google may have difficulties in controlling future points of entry Mobile Video games Television set-top Internet of things consoles boxes Eg :Probability Timing Impact Mild Middle term Moderate ..……. March 2009 • Why could Google die ? • 14

Interruption or failure of Google’s Other threat services Recently, several Google products experimented serious interruptions or failures: March 2009: some February 2009–March 2009: March 2009: some users private users had difficulties Gmail crashed twice across documents were accidentally creating events the world shared with other users These problems may strongly affect Google: Brand damage Loss of business users A strong brand is all the more important Users can very easily move to since barriers to entry are relatively low competitor’s products, and need to fully in the Internet market trust the serviceProbability Timing Impact High Short term High ..……. March 2009 • Why could Google die ? • 15

Privacy concerns Other threat Everyday, concerns are expressed about Google’s practices regarding the use of personal information A wide amount of information … …could be lost or used for unintended purposes Personal information Navigation tracking and logs Medical Data Location •  Governmental control Mails & Searches •  Commercial uses conversations •  Others. Eg. exploited by Personal WWW Web competitors documents behaviour As the amount of stored data is strongly increasing, privacy concerns will increase too, favoring: Claims Brand damage Loss of usersProbability Timing Impact High Short term High ..……. March 2009 • Why could Google die ? • 16

Opensource’s ecosystem threats Other threat Google is outsourcing its R&D to independent communities Google R&D is still important …but most of it is supported by Opensource actors :•  2,12 billion $ in 2007 •  The Mozilla foundation•  12 % of Google turnover •  Most of Google products integrate opensource code : from Android to•  vs. Microsoft’s R&D investments : 7,5 billion $ Google Chrome Google could be forced to internalize these efforts in the future Dissensions with the community Weaknesses of the community / X •  Google’s exploitation of Opensource •  Opensource business models may evolve efforts •  The long-term existence of these communities •  Google’s proprietary strategy : keeping is not ensured most parts of its developments secretProbability Timing Impact Mild Middle term Moderate ..……. March 2009 • Why could Google die ? • 17

What do you think? Of what Which threat ? kind?Probability Forecast ? ImpactFill this slide and send it tocontact@fabernovel.com to give your opinion! ..……. March 2009 • Why could Google die ? • 18

Download this presentation at :http://www.fabernovel.com/en/analyze/ news/why-could-google-die ..……. March 2009 • Why could Google die ? • 19

Stéphane Distinguin Founder and CEOstephane.distinguin@fabernovel.com Cyril Vart VP Strategy & Development cyril.vart@fabernovel.com Pierre Fremaux Project Analyst pierre.fremaux@fabernovel.com Matthieu Lecomte Junior Project Analyst matthieu.lecomte@fabernovel.com 42, bd de Sébastopol 75003 Paris Tél. : +33 1 42 72 20 04 Fax. : +33 1 42 72 20 03 www.fabernovel.com ..……. March 2009 • Why could Google die ? • 20

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