Is Google Heading Down the Yahoo! Path?

By Josh Catone
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This week Google made the fourth announcement in the past 12 months that has made me question whether the company is beginning to lose focus. Google built itself to be the 33rd biggest company in the world (by market value) — the 10th largest in the US — based almost exclusively on one thing: its dominance of the online advertising market, specifically the search advertising market. But recent forays in areas outside of search and into content production and even areas notoriously difficult to monetize have has made me begin to wonder if Google is heading down the “kitchen sink” path that has been so disastrous for Yahoo!

It began last year with Google News. In August of 2007, Google News announced that it would begin hosting content from wire services. To be fair, this was mainly a response to legal troubles the site ran into for linking to wire content with excerpts. But even so, it was a shift from a service that nicely paralelled their core search business — one which indexed and linked to content, like search — to one that involved the publication of original content.

Yahoo!’s News site has been one of the major successes for the company, long the web leader in the news and media category according to market analytics firm Hitwise. Google’s move could be seen as a way to keep ad dollars in house (and thus fit in with their core offering), but Google does not display ads on its news site.

Next, in December of last year Google announced the Knol Project. Think of Knol, which is still in private beta, as Wikipedia with ad revenue sharing. Even with the advertising component, Knol is still a foray into content production rather than content indexing (one that the Guardian’s Jack Schofield called, “an attack on the media industry in general.”)

Why didn’t Google just invest in the non-profit Wikimedia Foundation’s Wikipedia project the way it has in the Mozilla Foundation’s Firefox web browser? Certainly, Knol could be an advertising play and could produce content that could be used as the basis for a semantic database to enhance their search engine, but it is also still a content play. And that’s dangerous waters. History has shown that Yahoo! was wrong to try and turn itself into a media company, so it is baffling to see Google make moves in that direction.

In the last couple of weeks things are really starting to come unglued. First, at the end of June the New York Times reported that Google had struck a deal with the creator of Family Guy to create original cartoon content to be distributed via the Adsense network as video ads. I like Family guy as much as the next guy, and being that I live a few blocks from where Seth MacFarlane went to college, I get a kick out of all the local references in the show, but this one is just a little too Yahoo!-like.

It was no secret that during Terry Semel’s reign as Yahoo! CEO he wanted to push the company more toward the media end of its business and away from search (he even commuted from LA). It hasn’t worked for Yahoo!, so why is Google trying it?

That’s the same sentiment that comes to mind with this week’s announcement: Lively. Google released a new 3D virtual world earlier this week called Lively. Yes, it started as a “20% project,” but now it has Google’s official blessing.

Second Life, the most well-known and perhaps largest non-game virtual world, has struggled to sell itself to businesses, so why is Google trying it? Second Life’s traffic has basically plateaued, so Lively seems like a strange application for Google to be launching. Is it and the rest indicative of a growing lack of focus at the company?

Most of Google’s forays outside of their core search business — YouTube, the Android phone platform, the Google Apps suite, etc. — can be looked at as somehow corollary to their other core business of web advertising or as strategic attempts to weaken key competitors. (Though YouTube is proving very difficult to monetize.)

But could Google be spreading itself too thin the way Yahoo! did over the past decade? Is Google starting to eat the peanut butter? What do you think: is the search giant losing focus of their core business?

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  • swombat

    I certainly agree that Google has lost something of the magic it once had. As an additional piece of evidence that not all is right in the Google-world, what was all that fuss about the new favicon? They boasted that they designed a couple of hundred alternatives, taking great care to design this “essential part of our brand presence” before settling on the current (lame) choice. That represents, probably, hundreds or even thousands of man-hours for designers, committees, etc. This is a long distance from the Google that used to boast that it produced its Google-Doodles in half an hour on Friday afternoon, and took pride in not wasting time on irrelevant little things.

    Losing focus indeed… maybe they need a new Google-doodle integrating bifocals into the Google logo :-)

  • EntrepreNerd

    I am not sure I agree with any of this. I mean, what does it mean to “Lose Focus”?

    As far as I can tell the future is 1000 overlapping lines that fade in and out of the desires and dreams of the masses. No line is the right line and unless you take the time to look down each line for a potential road worth traveling, you will never live up to share holders expectations.

    The Cooperate Titans of our age are made up of nimble minds that trek forth on every road less traveled and find ways to monetize them. A heavy focus and rooted foundation are the things of some lost cooperate civilization. Now is the time for the money scouts of myth and legend. Those sure footed angel investors that not only have the skill to see down more then one line at a time but have an innate ability to see how the lines will merge and expand to become mega apps that society will wonder how they ever lived with out.

    This is where your Google’s step in, providing the infrastructure to allow anything new to have a truly global reach. (See App Engine)

    To address your concerns about Google seemingly stepping into media creation, I would have to say that this is just one more line out of 1000 that must be traveled.

    I would be willing to bet that Google is simply trying to show the Main Steam Media that there is a better way to produce content that makes everyone happy.

    Lets have a look;
    – I am not 100% clear on how the main stream media works out the contracts with the content creators. But I assume it has something to do with them providing the funding in exchange for all rights to the intellectual property of the artist.

    In steps Google;
    – Google tells the artist that they can keep all rights to there lifes work, and will get a % of the ad sales along with the media companies that fund and promote the production.
    – The media companies will still have the same role they have now only they will not have to pay the artists as much due to the Google Ad deal nor will they own the rights to it.
    – THIS IS IMPORTANT! Because the media companies do not own the rights to any future creations the copy right holder in the artist and it is for him/her to decide if the content should be strewn all over the internet making HIM/HER ad related revenue!

    So, lets assume that Google has something in place to make this an easy transition for the major media companies. Lets also assume that they are not interested in working with Google, and rightly so, even if they will make more money for their share holders.

    Taking into account that Google is indeed still the legendary company Google, I would be willing to bet that they force this idea onto the MSM by going through the Artist and telling them to insist on a Google Ad Deal. (Google Apps by-passing IT ring a bell?)

    So has Google “Lost Focus” or gained perspective? Only time will tell.

  • I agree — I think Google was known for its simplicity of searching the World Wide Web versus other search engines. I know that my choice of using Google is because it is so clean and it was there to do only one thing which is to search. Yahoo definitely lose my vote as it advertises way too much and it is crowded with text on their homepage which causes distractions.

    Google had best branch off to another DBA for other interactive medias instead of complicating the search environment.

  • greyman

    No, I don’t think they are losing focus. They just have resources to try other things, learn from them and make some money out of it. They are still improving both organic search and adwords, where they are still #1.

  • thateagle

    From a business standpoint, I think I understand why they would “cast a wide net” and see what they catch. For one, they have a lot of cash flow and it is always better to invest in different things than to let money sleep. It is also better to have a wide selection of services and extend those that grow, than to completely miss the train and have to buy big later. (Like what happened with YouTube.)

    But I agree with the article. It is true that I would prefer to see Google work on its core services. (I would not be the first one asking for a Google Analytics API for one.)

    But what do we know, Yahoo is opening its API and if it really works like they hope it will, we will see some or much innovation come from there. Google feels safe on their search front right now and it is probably part of why they are pushing other services, but this might change very soon.

  • joey

    I like reading Sitepoint blog articles, but I have one small request…
    Could you please stop using the words “play” and “monetize”? It’s tacky web 2.0 enterpreneurial marketeering speak that makes a grown man cry.

    When you say “youtube is difficult to monetize”, do you really mean “Youtube is difficult to adopt as a currency” or “Youtube is difficult to establish as legal tender”? It might be true but I’m sure you actually mean “It’s hard to make a profit from Youtube”. Simple and to the point.

    And “play”? C’mon…

  • disagree

    I don’t see a problem with casting a wide net. What’s important is having the necessary metrics (and discipline) to know when to close down what doesn’t work. That was one thing that was amiss in Yahoo!. The company simply does not have the discipline to build out the necessary metrics to understand what works, and what doesn’t work. When it does have the necessary metrics, it did not have the discipline to execute based on what the numbers say.

  • Mrinal

    Josh – I think its about the switching cost that Google is building. It is potentially very easy to go to another search engine but now that I use email, docs, igoogle, reader etc… the indirect switching costs through brand and usage make it hard for any of their competitors to woo me away from Google.

    I personally think its smart – if you dont embrace change and failure, you will become a big company waiting to be disrupted.
    Yes – execution is important but you cant do that and only stay in your comfort zone :)

    My 2 cents…….

  • I think a huge difference is that Google has thus far managed to continually and incrementally improve their existing offerings, something that Yahoo truly failed to do.


    The peanut butter analogy is reaching at best. Google has warehouses full of peanut butter (money and talent) to try new ideas. They are A. trying new ways to expand their market dominance and B. giving something back to the people who use their services. The situation between Google and its users is win/win and doesn’t necessitate alarmist posts like this one.

    Incidentally, Yahoo was a headless chicken for years. Google has an identity and it is unlikely to stray far from search.

  • Anonymous

    It is hard to be a bright star in all worlds . What most people don’t remember, is that most of these companies, call it Google, Yahoo Ebay, Amazon etc are where they are no really because of tech supremacy . Companies like Google are what they are because they hard the right service at the right time and did the right thing Q.E.D . Ia just hard to have the right service, do the right thing and be at the right time in a changing world .
    The reason why Microsoft is having a hard time catching up with Google in search is not because they don’t have enough talents . The advantage they have is their brand recognition that is what make Google a king . Google tried froogle to compete with Ebay we all know the result . Google failed in the auction venture not because they didn’t have the needed talents . Google will only be known for search . It will be hard for them to pull of an original idea that will be like their Google search service . Most people who use youtube don’t even know it is owned by Google . Youtube seems to be a success because it is original in creation . If they want to increase share holders value they should structure all this little bids they do into individual start-ups that can be seen as original this will help create a uinque user experience like what youtube provides .

  • Anonymous

    I agree completely with this post. Last week, when I heard about Lively for the first time from my brother, the first thing I said is, “that’s what will kill Google.”. I know it’s good to be strategically diversified, and you can never be in too many markets if they all make money… but you can be stretched too thin. When your revenue is growing steadily and/or plateauing, it’s probably not good to do either of the following:

    a) Stretch your resources, and investment capital dangerously thin by broadening into markets the diverge from your core strengths (ie, Google has some great apps, but they are by no means a software company like Oracle. Everything Google makes is broken in more ways than the normal user would understand. Even Gmail goes down on a bi-daily basis for short periods… The permanent “Beta” status of everything they build proves my point here.)

    b) Move into markets that don’t make money, just to make sure your signs can be seen from every corner. Brand building is one thing, but I think that when a company grows to be the 10th largest company in the USA from a garage status in less than a decade, this always happens. They think that if they don’t hang the moon in every corner of the world, people will forget the light that shined during their brightest days, so they continue to 20% their way to self-destruction.

    Google is strikingly easy to use as a search tool, and very powerful for advanced users, and it’s simplicity is part of what makes it that way. but sometimes companies that experience big results from a) dumb luck, or b) no-competent competitors, they seem to get this “I’m a genius” attitude, and fail to change the way they do things. Well, they created a whole internet mentality of “I can do that”, and along with that came lots of little fish that think they can eat a whale also, if they just try hard enough. What I’m trying to say is that Google really doesn’t have any competitive edge anymore with any of there services. Take a look at 37 signals. They’ve created software suites in no-time that tower over some of what Google Apps puts out. If you get enough small fish in the pond, they will eat the whale. Google needs to put some of their capital into making there applications (Other than Gmail & Search) better than what can be whipped up in Ruby no Rails in a week, or they will get eaten. In three years Google will be nothing more than a pile of decentralized startups with ideas all over the chalk board, and nothing to show their investors.

  • Lively, ugh. Looks like SimChat.

  • Google certainly has a foothold on search today, however, I think it’s not impossible for an unknown person or startup to take over Google one day, with better technology. Just like Yahoo search being taken over by Google today.

  • ruby-lang

    Actually Lively’s inspiration is imvu. Instead of a unified world with islands, it has chat rooms with customizable avatars. In fact, one of imvu’s founders joined Google to work on Lively.

  • I’m sorry, I just don’t see it. It took me about 15 minutes to become uninterested in avatar chat, virtual chat, and so forth back in 199-whatever, and I’m no more interested now. But that’s just me.

  • Not complacent with being a noun AND a verb, Google’s philosophy seems more and more like Pinky and the Brain…

    Hey brain, what do you want to do tonight? Same thing we do every night, try to take over the world!

    If you think of it from that perspective, then venturing into all areas for acquisition and dominance starts to make sense.

  • That Dude

    Wrong. Wrong. Wrong. Comparing Google to Yahoo is a big mistake. Some would argue that Yahoo’s problem was that it didn’t do enough outside of it’s search business to insure it’s future. Google is doing the right thing by diversifying it’s business, and while everything they attempt may not work out as planned (what company can claim a 100% track record) their management team has shown they have a pretty good idea of the direction they want to take the company.

  • disagree

    I couldn’t disagree more with this article.

    Google is not a search engine company and they are not an advertising company. Even though search was how they started and advertising is the current major source of revenue, Google has a simple and clear mission; “to organize the world’s information and make it universally accessible and useful.” All of their products and services from Talk to Blogger to Grand Central to Google Earth and Analytics provides them with direct access to information and data allowing them to organize it and make it easy to access and Lively will be no exception. Think of all that data and information from this new entry to the inevitable 3-d web.

    Don’t underestimate Google. They have a long view and their long view will be about making all that data easy to access and they’ll make money by either selling that easy access, helping analyze the information, or charging a premium to keep it “unlisted” like the old phone company used to do with unpublished phone numbers.

    Yahoo changed their mission fairly recently and while it’s surely a lot better than before it’s still not as simple and focused as Google’s. If you have any experience with corporate mission statements and how companies use them to provide vision and guidance irrespective of time and technology and specific products or services, Google’s is one of the top of all time on these criteria alone.

  • Foxhound

    Well, they launched Lively because they are going to start in-game advertising, also in PS3 and other consoles.

    at least we see new ideas from Google, I prefer the idea of Google leading the internet (not owning it of course)