Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

The limits of Google's limitless business model

Posted by Tom Foremski - May 15, 2006

(A distributed column.)

Is it OK for Google to launch numerous businesses and not seek to monetize those businesses? Is it OK for Google to take advantage of its huge scale, its global operations to muscle into new markets and create businesses and not monetize those business groups?

Is GOOG acting in a similar way to Microsoft, when it used its huge scale, its global operations to muscle into new markets and businesses and not monetize them?

When I was at the Googleplex HQ last week for the annual Press Day, Google announced four products. It already has a multitude of products, ranging from web based email, to desktop applications, and even drawing and photo management software. Also, sophisticated web analytics, web site creation software, maps, instant messaging, news, and lots more.

Only a tiny fraction of those products are monetized, the rest are free, and free of advertising. Larry Page, co-founder called them "experiments" and said that they are "beta" products.

He can call them what he wants but each one of those products competes with many much smaller companies, and the fact is that the smaller competitors cannot compete. Because Google has the scale, it can integrate those products into a global operation and global platform because of its size.

And it can continue doing this again and again. Its organizational structure is that its engineers spend one-fifth of their time creating new online products and services. Its development teams are self-forming, and don't require any extra investment, Google already pays their salaries for their regular jobs, it gets the innovation for free.

This means it will continue to produce ever more products and services, again and again. At the Press Day event Eric Schmidt, the CEO announced a "limitless" business model for Google, he said the company saw no limit to its expansion and predicted that it would become a $100bn revenue company.

(Please continue reading part two....)

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