Is Google Scrambling?

By Aaron Goldman, VP Marketing & Strategic Partnerships
Appeared In MediaPosts’s Search Insider

THAT'S WHAT I FIRST THOUGHT when I heard about the latest spat of new products from Google--Google Co-op, Google Desktop 4, Google Notebook, and Google Trends. You might be asking yourself why Google would need to scramble. It's the clear market leader in search, with over 40 percent of all U.S. search queries. Its stock is trading around $400 and it has $8 billion in cash at its disposal. Indeed, Google is positioned quite well.

But it's not that simple. With each passing day, Google has more and more constituencies to please--shareholders. And, unlike Google's other key constituencies ( end users and marketers) shareholders demand more than just continued innovation. They demand continued growth (read: profit.)

So, in an effort to satisfy everyone, Google has been scrambling. Somehow, though, its aggressive product launches, acquisitions, and forays into different platforms appear almost methodical and, for the most part, have been well-executed. Overlay this with its knack for crafty PR, and it becomes apparent how Google's been able to navigate this tangled web (no pun intended--OK, yes, it was.)

This balancing act is becoming increasingly difficult, however, and if Google scrambles too much to please shareholders, it may risk alienating its other constituencies. To see how it all might play out, let's take a look back at how Google became what it is today.

When Google first went from a cool dorm room experiment to a full-fledged business, its stated mission was to "organize the world's information." This meant providing utility to one group and one group only-- end users. By creating a technology that helped people easily find anything and everything on the Web, Google quickly gained notoriety.

Before long, Google realized that in order to continue to attract and retain end users, it would need to make significant investments in its technology and infrastructure. After scrambling to raise all the money it could through VC channels, Google found a way to monetize its search technology. Enter Google AdWords. And enter a new constituency to please--marketers.

Marketers flocked to this cost-effective advertising channel. Through AdWords, Google was able to continue to grow revenue quarter over quarter based on the sheer increase in search volume alone. As more people made Google their default search engine and more marketers diverted budget to search ads, Google saw both its number of page views climb along with its revenue per page. Now Google could just sit back and count the money, right?

Not quite. Marketers couldn't get enough of Google. Savvy marketers began to expand their AdWords campaigns to include variations of keywords relevant to their business (and some not-so-relevant) in an effort to drive more traffic to their Web sites. Google's challenge quickly became reach and scale. For each person searching for something on the Web, there were infinitely more people already engaging with the content they were seeking. And, unlike top competitors Yahoo and MSN, Google did not own any of that content, so it had no way of monetizing it

Enter the Google AdWords and AdSense networks. By creating a syndication model that allowed its search listings to appear on third-party Web sites, Google was able to satisfy marketers' insatiable appetite for paid search inventory and drive revenue outside its domain proper. But Google didn't stop there. Enter Google News, Froogle, Blogger, Picasa, Google Alerts and Gmail. Does that sound like scrambling?

With its revenue soaring and its popularity among end users and marketers at an all-time high, it was time to cash in--er, I mean, raise more money to fund continued innovation. Enter Google's IPO. And enter the most demanding set of constituencies yet --shareholders.

How could Google find a way to please shareholders by continuing its astronomic growth and delivering record profits quarter over quarter? By doing what it does best--scrambling. In the two years following its IPO, Google's scramble to be all things to all people has been nothing short of extraordinary. Enter Google Book Search, Google Video, Google Desktop Search, Google Maps, Google Earth, Google Base, Google Talk, Google Finance, Google Page Creator, and Google Calendar. How would you like your Google Eggs?

All this scrambling was really paying off. At its height, Google was trading at 90 times earnings, a valuation unheard of since the dot-com heyday of the late '90s.

Then came the fourth quarter of 2005. This marked the first time Google publicly fell short of pleasing all three of its key constituents. First, marketers like FTD and Blue Nile cited irrational paid search bid competition as contributing factors in missing holiday sales goals. Then Google fell short of analysts' estimates of $1.76 earnings per share, sending its stock plummeting. Finally, Google was subpoenaed by the Department of Justice in the context of anti-porn legislation, unsettling end users at the possibility of having their search queries turned over to the government.

So how did Google react to the turmoil? Scramble on. Enter Google's bid to bring Wi-Fi to San Francisco--a way to get more people online more often. Enter Writely and Google Pack--attempts to create an operating system of sorts. Enter dMarc Broadcasting--an entry into radio that promises to Google-ize the medium.

Sure enough, after Q1'06, Google was back on track, beating analysts' estimates after nearly doubling quarter over quarter revenue. Its 400,000-some marketers are salivating over opportunities to expand their Google campaigns on and off-line. And end users have a new set of tools (i.e. Co-op) to help, as Google put it, "discover, organize, and share" information. Sound familiar? Somehow, throughout its mad scramble, Google is still delivering on its original mission.

Continued growth, however, will not be possible without the support of all its key constituencies. And, although Google has continually found ways to balance the needs of end users, marketers, and shareholders alike, at some point, the demands of one of these groups (not to mention increased competition) will force Google to make some tough decisions and, ultimately, sacrifices. Let's just hope that, regardless of how things play out during the ensuing scramble, Google won't lose site of its other stated mantra: "Do No Evil."

Enter Google China. Uh-oh.