Wall Street Journal
Google's announcement last week that it would offer free turn-by-turn navigation software prompted a nosedive in the stocks of Garmin and other navigation device makers. The jolt was just the latest such disruption caused by Google since its founding in 1998 by Larry Page and Sergey Brin. During that time the company has grown into a $22 billion behemoth—yet, remarkably, it is still in the early stages of a long growth phase. Eric Schmidt, Google's chairman and chief executive, expects that one day it will be a $100 billion enterprise. Being the gatekeeper for the world's information turns out to be a lucrative business, especially without the expense of creating any of it.
In "Googled," New Yorker writer Ken Auletta tells the familiar story of the company's rapid transformation from Silicon Valley start-up to global corporation. As expected, we hear about the young Rollerblading employees at Google's Mountain View, Calif., headquarters, with its massage rooms, pool tables and free meals. But thanks to the unusual degree of access that the company granted the author—and thanks to his sharp eye—"Googled" also presents interesting new details. The book describes, for instance, Google's close relationship with former Vice President Al Gore—during a meeting with him, back in his hirsute phase after leaving office, Google executives showed their solidarity by donning fake beards.
While the story of Google's creation and evolution still holds interest, what fascinates is the company's growing power and expanding horizons. Mr. Auletta observes that the "Google wave has crashed into entire industries: advertising, newspapers, book publishing, television, telephones, movies, software or hardware makers." This impact has forced companies to make difficult choices. One response has been to try to emulate Google, redrawing business plans to emphasize online advertising—although few other companies have so far managed to build a large, profitable business from it.
Google's focus on advertising has led the company to maximize usage by giving away most of its services. For companies selling similar products—like navigation systems—Google's approach is alarming. And even its partners are wary. Martin Sorrell, the chief executive of the advertising giant WPP, describes Google as a "frenemy"—a valuable ally and formidable competitor. Advertising firms worry about being "disintermediated" by Google. Content providers appreciate the traffic that Google sends their way but worry about the erosion of their franchises by aggregation that emphasizes Google's brand, not their own. Some businesses that rely on Google to generate both their traffic and their revenue risk becoming the chimp in the survival maxim "eat what the monkey eats and then eat the monkey."
In contrast to all this corporate anxiety, consumers so far have been upbeat about the extraordinary power that Google wields. As Mr. Brin explains, Google's importance in people's lives comes from "determining what information they get to look at." Lawrence Lessig, who was an expert in the Microsoft antitrust case (and is now a professor at Harvard Law School), tells Mr. Auletta that Google will soon be more powerful than Microsoft ever was, since primacy in search gives the company unprecedented control over commerce and content.
Remember when Google used to point to Mapquest for maps and Yahoo Finance for stock quotes before they substituted Google Maps and Google Finance? Google's favor turned Wikipedia into the world's leading reference source, but a few algorithm tweaks would easily send that torrent of Google SEO traffic elsewhere. Mr. Lessig says that, for the moment, we take comfort from the fact that Google has been led by "good guys." But then he asks: "Why do we expect them to be good guys from now until the end of time?"
Mr. Auletta notes that many successful companies have appeared "impregnable"—until they didn't. IBM once had a 70% share of the massive mainframe computer market. Then came antitrust action and the personal computer. A company expanding into as many arenas as Google is will almost certainly "wake up the bears," as Verizon Chairman and CEO Ivan Seidenberg puts it.
Google faces challenges on multiple fronts, including the real-time Web (where users can access information the instant it's published). Of most concern are the more than 800 million global users on social networks—where much of the information is unavailable to Google. In some parts of the world—for instance, China, South Korea and Russia—Google is even the underdog, trailing such search engines as Baidu, Naver and Yandex. Microsoft remains a formidable competitor, with a newly invigorated search strategy. And of course, given Google's increasing market power, regulatory intervention may be lurking, although perhaps not anytime soon in the U.S., where the company is very friendly with the current administration. Perhaps the greatest risk, as entrepreneur Yossi Vardi notes, is the "hubris" that often afflicts wildly successful companies.
Problems for Google might lie beyond the horizon, but the immediate future promises more success: Google is well-positioned for the transition to "cloud computing," where software and data are stored online rather than on personal computers. Mr. Schmidt says that cloud computing will be "the defining technological shift of our generation." Accordingly, Google's greatest value creation probably still lies ahead.
In "Googled," New Yorker writer Ken Auletta tells the familiar story of the company's rapid transformation from Silicon Valley start-up to global corporation. As expected, we hear about the young Rollerblading employees at Google's Mountain View, Calif., headquarters, with its massage rooms, pool tables and free meals. But thanks to the unusual degree of access that the company granted the author—and thanks to his sharp eye—"Googled" also presents interesting new details. The book describes, for instance, Google's close relationship with former Vice President Al Gore—during a meeting with him, back in his hirsute phase after leaving office, Google executives showed their solidarity by donning fake beards.
While the story of Google's creation and evolution still holds interest, what fascinates is the company's growing power and expanding horizons. Mr. Auletta observes that the "Google wave has crashed into entire industries: advertising, newspapers, book publishing, television, telephones, movies, software or hardware makers." This impact has forced companies to make difficult choices. One response has been to try to emulate Google, redrawing business plans to emphasize online advertising—although few other companies have so far managed to build a large, profitable business from it.
Google's focus on advertising has led the company to maximize usage by giving away most of its services. For companies selling similar products—like navigation systems—Google's approach is alarming. And even its partners are wary. Martin Sorrell, the chief executive of the advertising giant WPP, describes Google as a "frenemy"—a valuable ally and formidable competitor. Advertising firms worry about being "disintermediated" by Google. Content providers appreciate the traffic that Google sends their way but worry about the erosion of their franchises by aggregation that emphasizes Google's brand, not their own. Some businesses that rely on Google to generate both their traffic and their revenue risk becoming the chimp in the survival maxim "eat what the monkey eats and then eat the monkey."
In contrast to all this corporate anxiety, consumers so far have been upbeat about the extraordinary power that Google wields. As Mr. Brin explains, Google's importance in people's lives comes from "determining what information they get to look at." Lawrence Lessig, who was an expert in the Microsoft antitrust case (and is now a professor at Harvard Law School), tells Mr. Auletta that Google will soon be more powerful than Microsoft ever was, since primacy in search gives the company unprecedented control over commerce and content.
Remember when Google used to point to Mapquest for maps and Yahoo Finance for stock quotes before they substituted Google Maps and Google Finance? Google's favor turned Wikipedia into the world's leading reference source, but a few algorithm tweaks would easily send that torrent of Google SEO traffic elsewhere. Mr. Lessig says that, for the moment, we take comfort from the fact that Google has been led by "good guys." But then he asks: "Why do we expect them to be good guys from now until the end of time?"
Mr. Auletta notes that many successful companies have appeared "impregnable"—until they didn't. IBM once had a 70% share of the massive mainframe computer market. Then came antitrust action and the personal computer. A company expanding into as many arenas as Google is will almost certainly "wake up the bears," as Verizon Chairman and CEO Ivan Seidenberg puts it.
Google faces challenges on multiple fronts, including the real-time Web (where users can access information the instant it's published). Of most concern are the more than 800 million global users on social networks—where much of the information is unavailable to Google. In some parts of the world—for instance, China, South Korea and Russia—Google is even the underdog, trailing such search engines as Baidu, Naver and Yandex. Microsoft remains a formidable competitor, with a newly invigorated search strategy. And of course, given Google's increasing market power, regulatory intervention may be lurking, although perhaps not anytime soon in the U.S., where the company is very friendly with the current administration. Perhaps the greatest risk, as entrepreneur Yossi Vardi notes, is the "hubris" that often afflicts wildly successful companies.
Problems for Google might lie beyond the horizon, but the immediate future promises more success: Google is well-positioned for the transition to "cloud computing," where software and data are stored online rather than on personal computers. Mr. Schmidt says that cloud computing will be "the defining technological shift of our generation." Accordingly, Google's greatest value creation probably still lies ahead.
