Analysts say that Google’s recent moves to expand beyond its initial model of search engine marketing revenue run the risk of losing focus but are vital to the company’s continued viability.
When Google was first launched 11 years ago, it was as a search engine business. The company’s main source of revenue came from search engine marketing conducted through its PPC sponsored link and display advertisements, now known as the AdWords service. Since then it has become a ‘search engine giant’, with a search market share of over 60% in almost every country in the world.
The success of their search engine marketing strategy encouraged Google to expand into other areas of online business. It now operates one of the internet’s largest display ad platforms through the Google Content Network, and offers hosted services such as Google Docs, Gmail, as well as software applications such as the Chrome O/S and internet browser. Throughout the last decade it has continued to develop its search engine capabilities through a series of planned expansions and internal development, adding features such as Google maps, custom search and localised results.
However, the company is increasingly perceived as expanding outwards from its core business. With the launch of the Nexus One smartphone, Google has branded, designed and created a physical product. Building on its previous purchase of the company behind the Android mobile O/S, it has definitively moved beyond its established role as a search engine provider.
ComputerWorld reports that business analysts say that though the company’s movement into other markets is “risky”, the expansion is vital.
Rob Enderle from the Enderle group has described the Nexus One as a “potentially brilliant move”, but warned that “as you try to do too many things, you start to lose track of who you are and lose focus on your customers.” However, Enderle believes that the company would run a greater risk by focusing on search.
“Underneath it all, Google doesn’t think of itself as a search company even though that’s been their big success. They don’t want to be just a search company” said Enderle. He says that Google search could even “become irrelevant”, and other other search providers could replace it eventually. ”The market has a tendency to move and one-trick ponies have a history of not surviving”
Other analysts share Enderle’s view that the company’s expansion is a wise move despite the risks, but disagree over the importance of search to Google’s business.
Ezra Gottheil of Technology Business Research says that Google’s core is “software design and development. That’s what they do. They can monetise it a dozen different ways”. He suggests that the search engine is important as a focus for the company to continue to innovate through new technology and applications, and will remain so even as Google expands into other markets.
However, Dan Olds of the Gabriel Consulting Group believes that “Google is still definitely a search company.”
Google says that despite all their other activities, the company still gets the “vast majority of their revenue and profit” from search and search engine marketing and they are “intimately identified with it”. Olds believes that all of Google’s activities beyond the search market is a “way for them to capture more user eyes and time, which furthers their position as the dominant web advertising company”.
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