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Why could Google die …
   maybe not now, but tomorrow

               Paris, March 2009
This work is licensed under the Creative Commons to allow further
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months. To view a copy of this Attribution-NonCommercial-
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California, 94105, USA.




                                                                                  ..…….

                                                                                   2
                                          March 2009 • Why could Google die ? •
This presentation is an answer to the comments
related 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’ book
What would Google do? which will be published in France in June 2009 (faberNovel/Télémaque publishing)          ..…….

                                                                                                                 3
                                                                        March 2009 • Why could Google die ? •
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

                                                            Long
                             Short
                                                            term
                             term


    •  Impact: evaluation of the negative impact on Google’s revenues and profits
                                                            High
                             Low
                                                            impact
                             impact
                                                                                                       ..…….

                                                                                                        4
                                                          March 2009 • Why could Google die ? •
12 main weaknesses or threats
                            Threats / Weaknesses                  Probability       Timing         Impact
                                                                 Low    >   High Short > Long     Low > High

                Antitrust suits against Google
Legal threats
                Copyright infringement suits
                Inability to hire or retain key people
  Internal
                Inability to scale operational processes
weaknesses
                Top management issues
                Acquisition difficulties
                Competition with incumbents
  Strategic
   threats      Disruptive innovations

                Inability to control points of entry
                Interruption or failure of Google’s services

                Privacy concerns
Other threats
                Opensource’s ecosystem threats




                                                                                                               ..…….

                                                                                                                5
                                                               March 2009 • Why could Google die ? •
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                                  rates


Probability                        Timing                                           Impact

                   High                                         Middle term                          High
                                                                                                                      ..…….

                                                                                                                       6
                                                                     March 2009 • Why could Google die ? •
Legal threat
       Copyright infringement suits

        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 quot;massive         newspapers filed a lawsuit against     pay $125 million to settle two
  intentional copyright                Google claiming that Google News       copyright lawsuits by publishers
  infringementquot; 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 substantial
Probability                        Timing                                      Impact

                 High                                      Short term                           Moderate
                                                                                                                 ..…….

                                                                                                                  7
                                                                  March 2009 • Why could Google die ? •
Internal
      Inability to hire or retain key
                                                                                    weakness
                   people
      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 inefficient

Probability                    Timing                                          Impact

               High                                      Middle term                           Moderate
                                                                                                          ..…….

                                                                                                           8
                                                                  March 2009 • Why could Google die ? •
Internal
      Inability to scale operational
                                                                           weakness
                 processes
        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              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 products

Probability                  Timing                                   Impact

                                                                                    Low
                                                   Short term
              Mild
                                                                                                    ..…….

                                                                                                     9
                                                         March 2009 • Why could Google die ? •
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…                       responsibilities


Probability                 Timing                                     Impact
              Low
                                                     Long term                        High
                                                                                                   ..…….

                                                                                                    10
                                                         March 2009 • Why could Google die ? •
Strategic
       Strategic and operational
                                                                              threat
   difficulties acquiring companies
                 Most of 54 Google’s acquisitions were successful



    In the future, Google could face some serious issues acquiring
                               companies
Strategic issues                  Operating difficulties                Diversion of
                                                                        management time
•  Forecasted revenues may not    •  Integration of procedures and
fully materialize:                processes                             •  Rather than focusing on
                                  •  Technical integration of the       operating business, top
                                  companies:                            management could focus
                                                                        on acquisition integration
•  Google could miss investment
                                                                        challenges
opportunities:
                                  Eg : It took 16 months to
                                  relaunch Jotspot after its
                                  acquisition by Google
Probability                  Timing                                    Impact

                                                    Short term
                 Mild                                                                  Moderate
                                                                                                     ..…….

                                                                                                      11
                                                          March 2009 • Why could Google die ? •
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 markets
             merge                   partnership
Examples                                                              Apple search engine ?

                                                                           More efficient
                                                                            AdSense
                                                                           competitors?
Probability                  Timing                                Potential impact

              Mild                                 Middle term                     High
                                                                                              ..…….

                                                                                               12
                                                      March 2009 • Why could Google die ? •
Strategic
      Development of a disruptive
                                                                       threat
    innovation on Google’s markets
    Some of the most successful IT companies have been victims of
                       disruptive innovations:
Historical
leaders




                  Broadband                Google’s
Disruptive
innovations         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
                                                                                           ..…….

                                                                                            13
                                                   March 2009 • Why could Google die ? •
Strategic
  Inability to control points of entry
                                                                               threat
   Google already had some difficulties controlling strategic points
                            of entry:
                                        Example : Social networks



                                                           Except in Brazil and India, Google’s
              Google and MySpace $900 Million
                                                           social network never managed to
              deal on search and contextual ads
                                                           compete with Facebook
              did not reach expected revenues



         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
                                                                                                   ..…….

                                                                                                    14
                                                           March 2009 • Why could Google die ? •
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 service

Probability                    Timing                                Impact

               High                               Short term                         High
                                                                                                  ..…….

                                                                                                   15
                                                        March 2009 • Why could Google die ? •
Other threat
                      Privacy concerns
                    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
                                                                      •  Commercial uses
              Mails &
                                             Searches
              conversations
                                                                      •  Others. Eg. exploited by
                                                                      competitors
                               WWW
              Personal                       Web
              documents                      behaviour




      As the amount of stored data is strongly increasing, privacy
                concerns will increase too, favoring:
                   Claims                      Brand damage                       Loss of users
Probability                         Timing                                       Impact

                   High                                      Short term                         High
                                                                                                           ..…….

                                                                                                            16
                                                                   March 2009 • Why could Google die ? •
Other threat
 Opensource’s ecosystem threats
       Google is outsourcing its R&D to independent communities

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

                                                          •  The Mozilla foundation
•  2,12 billion $ in 2007
                                                          •  Most of Google products integrate
•  12 % of Google turnover
                                                          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
                        /
                                                            •  Opensource business models may evolve
      •  Google’s exploitation of Opensource
      efforts                                               •  The long-term existence of these communities
                                                            is not ensured
      •  Google’s proprietary strategy : keeping
      most parts of its developments secret

Probability                         Timing                                    Impact

                 Mild                                       Middle term                          Moderate
                                                                                                              ..…….

                                                                                                               17
                                                                March 2009 • Why could Google die ? •
What do you think?
                                                     Of what
              Which threat ?
                                                      kind?




                             ?
Probability       Forecast                    Impact




Fill this slide and send it to
contact@fabernovel.com to give your opinion!                             ..…….

                                                                          18
                                 March 2009 • Why could Google die ? •
Download this presentation at :
http://www.fabernovel.com/en/analyze/
       news/why-could-google-die



                                                              ..…….

                                                               19
                      March 2009 • Why could Google die ? •
Stéphane Distinguin
                   Founder and CEO
stephane.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                                    ..…….

                                                                      20
                             March 2009 • Why could Google die ? •

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Why Could Google Die...

  • 1. Why could Google die … maybe not now, but tomorrow Paris, March 2009
  • 2. This work is licensed under the Creative Commons to allow further contributions by other specialists and web users in the coming months. To view a copy of this Attribution-NonCommercial- ShareAlike3.0 Unported license, visit http://creativecommons.org/licenses/by-nc-sa/3.0/ or send a letter to Creative Commons, 1712nd Street, Suite300, San Francisco, California, 94105, USA. ..……. 2 March 2009 • Why could Google die ? •
  • 3. This presentation is an answer to the comments related 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’ book What would Google do? which will be published in France in June 2009 (faberNovel/Télémaque publishing) ..……. 3 March 2009 • Why could Google die ? •
  • 4. 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 Long Short term term •  Impact: evaluation of the negative impact on Google’s revenues and profits High Low impact impact ..……. 4 March 2009 • Why could Google die ? •
  • 5. 12 main weaknesses or threats Threats / Weaknesses Probability Timing Impact Low > High Short > Long Low > High Antitrust suits against Google Legal threats Copyright infringement suits Inability to hire or retain key people Internal Inability to scale operational processes weaknesses Top management issues Acquisition difficulties Competition with incumbents Strategic threats Disruptive innovations Inability to control points of entry Interruption or failure of Google’s services Privacy concerns Other threats Opensource’s ecosystem threats ..……. 5 March 2009 • Why could Google die ? •
  • 6. 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 rates Probability Timing Impact High Middle term High ..……. 6 March 2009 • Why could Google die ? •
  • 7. Legal threat Copyright infringement suits 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 quot;massive newspapers filed a lawsuit against pay $125 million to settle two intentional copyright Google claiming that Google News copyright lawsuits by publishers infringementquot; and asking for more made the papers' articles available and authors than $1 billion in damages for free. They asked Google for €49 million in damages Since most of Google’s services link or host copyrighted material, The risk of monetary damages is substantial Probability Timing Impact High Short term Moderate ..……. 7 March 2009 • Why could Google die ? •
  • 8. Internal Inability to hire or retain key weakness people Google set up processes to attract and motivate employees Since its performance depends on the talents and efforts of highly skilled individuals 600 Examples : 400 Google stock 200 price [$] 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 inefficient Probability Timing Impact High Middle term Moderate ..……. 8 March 2009 • Why could Google die ? •
  • 9. Internal Inability to scale operational weakness processes 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 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 products Probability Timing Impact Low Short term Mild ..……. 9 March 2009 • Why could Google die ? •
  • 10. 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… responsibilities Probability Timing Impact Low Long term High ..……. 10 March 2009 • Why could Google die ? •
  • 11. Strategic Strategic and operational threat difficulties acquiring companies Most of 54 Google’s acquisitions were successful In the future, Google could face some serious issues acquiring companies Strategic issues Operating difficulties Diversion of management time •  Forecasted revenues may not •  Integration of procedures and fully materialize: processes •  Rather than focusing on •  Technical integration of the operating business, top companies: management could focus on acquisition integration •  Google could miss investment challenges opportunities: Eg : It took 16 months to relaunch Jotspot after its acquisition by Google Probability Timing Impact Short term Mild Moderate ..……. 11 March 2009 • Why could Google die ? •
  • 12. 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 markets merge partnership Examples Apple search engine ? More efficient AdSense competitors? Probability Timing Potential impact Mild Middle term High ..……. 12 March 2009 • Why could Google die ? •
  • 13. Strategic Development of a disruptive threat innovation on Google’s markets Some of the most successful IT companies have been victims of disruptive innovations: Historical leaders Broadband Google’s Disruptive innovations 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 ..……. 13 March 2009 • Why could Google die ? •
  • 14. Strategic Inability to control points of entry threat Google already had some difficulties controlling strategic points of entry: Example : Social networks Except in Brazil and India, Google’s Google and MySpace $900 Million social network never managed to deal on search and contextual ads compete with Facebook did not reach expected revenues 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 ..……. 14 March 2009 • Why could Google die ? •
  • 15. 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 service Probability Timing Impact High Short term High ..……. 15 March 2009 • Why could Google die ? •
  • 16. Other threat Privacy concerns 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 •  Commercial uses Mails & Searches conversations •  Others. Eg. exploited by competitors WWW Personal Web documents behaviour As the amount of stored data is strongly increasing, privacy concerns will increase too, favoring: Claims Brand damage Loss of users Probability Timing Impact High Short term High ..……. 16 March 2009 • Why could Google die ? •
  • 17. Other threat Opensource’s ecosystem threats Google is outsourcing its R&D to independent communities Google R&D is still important …but most of it is supported by Opensource actors : •  The Mozilla foundation •  2,12 billion $ in 2007 •  Most of Google products integrate •  12 % of Google turnover 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 / •  Opensource business models may evolve •  Google’s exploitation of Opensource efforts •  The long-term existence of these communities is not ensured •  Google’s proprietary strategy : keeping most parts of its developments secret Probability Timing Impact Mild Middle term Moderate ..……. 17 March 2009 • Why could Google die ? •
  • 18. What do you think? Of what Which threat ? kind? ? Probability Forecast Impact Fill this slide and send it to contact@fabernovel.com to give your opinion! ..……. 18 March 2009 • Why could Google die ? •
  • 19. Download this presentation at : http://www.fabernovel.com/en/analyze/ news/why-could-google-die ..……. 19 March 2009 • Why could Google die ? •
  • 20. Stéphane Distinguin Founder and CEO stephane.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 ..……. 20 March 2009 • Why could Google die ? •