As many commenters have pointed out, this is indeed an horrible article. The author premise goes something like "Yahoo did search. Yahoo was so $$$. Yahoo failed. Google is doing search. Since Yahoo failed Google must fail. Hurp derp chirp"
Google owns a vast stake in mobile domain through Android. If mobile native ads is the way of future then I am sure Google will use it to their advantage and thrive at it. Plus Google has been diversifying it's revenue stream a lot lately. Also, a few people had internet and personal computers at home back then. People are more tech and internet savvy these days.
A bigger problem that a lot of people fail to acknowledge when it comes to demise of Yahoo is the brain drain. Top talent left Yahoo when Mayers joined.
The real issue with Yahoo! was that they focuses less on engineering and more on "we are a media company" thing. While in reality all FB, GOOG etc are media companies engineering culture is what is at the heart of their success.
77% of Google ad revenue comes from their own sites.
Only 10% of google revenue and almost none of the profits come from other business than ads. Google has tried but has not been successful in creating profits from elsewhere. Motorola Mobility was huge blunder.
Google is successful there is no moat that keeps it safe. It hast to keep running to to stay ahead.
I tend to disagree that Google is similar to Yahoo in 2000. If you look at Yahoo in retrospect, portal to the rest of the web is pretty banal. Google has a lot of core things going for it which are no longer the search-market: Android (and store), Google Maps, Youtube, Cloud Business, Office Suite, research into self-driving vehicles, that should make it more comparable to Microsoft than Yahoo.
They don't break it down, but I am guess profit margin for search is much higher than things like youtube since with youtube they need to send some money to copyright holders. I wonder how profitable it is? If it was super profitable they would be breaking it down. When AWS started doing well Amazon broke down how much AWS was making.
Except for Android, which is facing legal challenges across the globe, advertising remains pretty much their sole profit channel. While Google may exist in many product areas, they need to find a new source of actual revenue.
Don't forget about Google Apps, Vault, and Google Cloud. Google Apps for Business with Vault costs my employer over 18 million dollars a year and my department has a five figure monthly Google Cloud budget.
They're definitely trying here, but from my understanding, Google Cloud Platform is a distant third to Amazon and Microsoft's clouds, and the revenue total barely is worth mention in Google's earnings calls.
> and the revenue total barely is worth mention in Google's earnings calls.
"Barely worth mentioning" because they don't even break out the $2 billion in quarterly revenue from non-advertising sources beyond "non-advertising sources" in financial reports, but in the most recent, the $400+ million increase in quarterly revenue in that category was primarily attributed to two sources -- increases in Play store revenue, and increases in "revenues from cloud and apps offerings for enterprise".
Its just hard for anything else to seem significant against the background of $18 billion in quarterly advertising revenue.
> While Google may exist in many product areas, they need to find a new source of actual revenue.
I suspect the fact they make so much revenue from advertising has actually blown tepid at the efforts to seek revenue elsewhere (e.g. is Youtube even profitable? Google Docs?).
> I suspect the fact they make so much revenue from advertising has actually blown tepid at the efforts to seek revenue elsewhere
I'm not sure it has -- I think (certainly this is true of the most recent quarter, but I think its a longer term trend) non-advertising revenue is growing at a faster rate (% increase/unit time) than advertising revenue. Its just that the fact that advertising revenue is so much bigger to start with makes the increase in non-advertising revenue seem insignificant in relation to overall revenue.
If you are setting up a company, one check to Google can be your IT department, and people already know the tools. That's a pretty good potential revenue stream.
"Advertising" is a pretty big bucket, and it seems a safe assumption that there's always going to be a lot of money in advertising. The problem is that where advertising dollars go changes, just ask the newspapers.
They have (at least) 4 large sources of ad revenue: search, adwords, mobile & youtube. If one dries up, the others may grow to compensate.
Some of the analysis in the article is rather on point; but to me it solidifies the belief that the 'Google of the Future' will be like the 'Microsoft of Today': possessing a large portfolio of diverse, user- and business-centric services, some premium, some free.
They'll collect data from their free services, they'll run an ad network, they'll run several social and/or communications networks, so they still have access to social graphs and interests. They may even produce or aggregate some content on content portals like Microsoft does with MSN. They'll make some of their money from display ads, but less than they do now. Meanwhile they'll have subscription-based products from which they'll derive the rest of their revenue.
It's tempting to look at where Google's current revenue comes from and accuse them of being a one-trick pony, but they've done what like Microsoft did in the 1990s and have ingrained themselves into the daily lives of people, through Gmail, Android, Chrome, Drive, Docs, and more niche ones like Hangouts, Allo/Duo, Google Photos. They're even guilty of some of the same mistakes as Microsoft: confusing product strategies and messaging, letting some services stagnate for years, sudden shutdown of others and releasing a hip new but slightly inferior alternative soon after.
The transformation of ad consumption and the relevance of search in the app-driven, app-curated world; these are all good points raised in the article. But I think Google's current set of non-money-making products is exactly what will save them from Yahoo's fate -- you may no longer search with Google, you may not even like Google, but all your files and personal data is still going to be with them, their OS running on your phones and laptops, and network effects and platform lock-in (in the sense that it's not worth the effort to switch) will keep people with Google for years to come.
>'Google of the Future' will be like the 'Microsoft of Today'
Microsoft has diversified it's revenue but most of it's profits comes from Windows & Office licensing. Its' amazing how little Microsoft's' way of generating profits has changed while it has changed so much.
If you give me a few billion dollars, I will build you a nice portfolio of services, too. What Google lacks is a large portfolio of services that actually make money. From a money making point of view, Google has Adwords.
You could say the same for Facebook, if facebook.com is no longer relevant Facebook dies they don't have anything else.
The fact that Google has Search, #1 mobile platform + many other services is a good sign of diversity.
Android is kind of become like windows mobile. It is on a ton of devices. Its super popular in Asia and other countries, but they have morphed android to their own needs and at times don't have google products on there.
They're working on it. There's no tried and true formula for succeeding as a business, we all know that. I'm not sure why the expectation from everyone is "well, they have BILLIONS, they should just be able to churn out more success shouldn't they?".
I agree that the article is stupid. No company is safe from Yahoo's fate. Given enough time, there is 100% certainty that all companies will suffer Yahoo's fate.
That said, if they haven't diversified by the time the need for Google's search engine disappears, or if most people start to use the service without clicking on paid ads (e.g. because of adblockers), they will clearly have problems. "They're working on it" isn't the same as "they have it" when it comes to sources of revenue.
I've always said that Facebook is the one that will end up like yahoo. They may have a popular site and have bought a bunch successful social media apps like WhatsApp and Instagram, but other than oculus, they haven't done anything outside of social media. They're death is probably going to be one by 1000 paper cuts. There are already several social media companies like Twitter, Snapchat, Pinterest, Tinder, ect that Fb doesn't own and I think it's safe to assume that there will be a lot more social media apps/sites/platforms in the coming years, which kill Fbs usage very very slowly.
I think, they are aware of this, since they already made a few defensive acquisitions. Facebook the platform could slow this by buying the biggest of these and by becoming more of a platform underlying the actual communities. Also at least for a long while they can work on creating new markets (Africa etc.).
Facebook the company has several options to branch out with synergies and create additional revenue streams: Identity and content are the first that come to mind, but there are probably a lot more.
Overall the problem of not being able to grow, because you already have all the users is really nice to have.
Nokia had 75 billion dollars in revenue 10 years ago. The cell phone part of the company is gone today. Basically all of googles revenue comes from ads.
Its very unlikely, but if 10 years ago if someone said Nokia wouldn't be making cell phones in 10 years ago who would have believed you.
Everyone was on AOL in the late 90s and now its mostly gone. Tech is just so fast moving I could see it happen. It just isn't likely.
I'm not sure the Nokia analogy applies here. Nokia faltered because others came along and made better phones, where most of the 'better' was because of the app ecosystem of the underlying OS -- but still, they were beaten at their own game, and they only made phones. If you didn't buy a Nokia phone, Nokia was out of your life for good.
Google makes many different kinds of things, making it less likely that Google will be thoroughly replaced in people's lives.
Exactly what I was thinking. Not sure this article is making much sense. Google's cloud business alone is lightyears ahead of anything Yahoo! was ever capable of.
Apples and Oranges. This is like the way bloggers used to compare facebook (the next AOL, like yahoo) with Google.
Google was founded based on a set of highly algorithmic methods for Search (part of today's AI), which is something that is extremely difficult to do correctly and even harder to duplicate (just ask Apple). Google never morphed into a 'content' site, like AOL. It was not founded based on easy-to-to duplicate code and content of others.
They've come a long a way in terms of real innovation and real technology in addition to revenue that is 10x greater than twitter, facebook, yahoo and others. Now add to this traffic reach, if you look at the top 10-20 sites on the net in terms of traffic, Google actually owns several of them including YouTube, Gmail etc. http://www.alexa.com/topsites Add to this an entire operating system that runs most of the worlds mobile devices. If you aggregate all their platforms and properties, it's orders of magnitude greater than any other.
There are deep technology companies and then there are not so deep technology companies that have limited lifespans.
Google probably has another 10 years before it begins to crumble within. Meanwhile and in a larger historical context, the new AOLs will come and go, repeating a cycle of duplicating one anothers content and so-called technology.
I feel that the article is not complete. Google is way more diversified (Google Apps, Cloud and so on).
Furthermore, it also takes risks (with Google X).
While Google does make a lot of it's earnings from Ads, Google Cloud is supposed to surpass it's Ads business in the next 4 years.
Google owns a vast stake in mobile domain through Android. If mobile native ads is the way of future then I am sure Google will use it to their advantage and thrive at it. Plus Google has been diversifying it's revenue stream a lot lately. Also, a few people had internet and personal computers at home back then. People are more tech and internet savvy these days.
A bigger problem that a lot of people fail to acknowledge when it comes to demise of Yahoo is the brain drain. Top talent left Yahoo when Mayers joined.