[ZESTEconomics] Think Again: Google

Wed, 31 May 2006 05:14:05 -0700


  Think Again: Google
  In only eight years, the darling of the Internet world has rocketed
to fame and fortune. Boasting users in every corner of the world, the
popular search engine is the quintessential American success story.
Yet it has begun to draw skepticism from Wall Street and the ire of
human rights groups. Is Google really as kind, ubiquitous, and
omnipotent as it seems?

  By David A. Vise 
  Foreign Policy | May/June 2006
 
  Find out more such stories at:
  http://www.foreignpolicy.com/story/cms.php?
story_id=3425&fpsrc=ealert060530


"Google Is Truly Global"

Not really. Google is the gateway to the Internet for hundreds of
millions of users worldwide. From Arabic to Zulu, the search engine
can be used in more than 100 languages—even fake ones such as
Esperanto and Klingon. In the United States, Google is the
unquestionable market leader. It holds a commanding lead, with an
estimated 48 percent of all Internet searches in early 2006, over
rival Yahoo, which is used 22 percent of the time. Google is growing
more rapidly than its major U.S. competitors, and it continues to
develop new technologies to attract new users. In fact, you could
even say that it's on its way to becoming universal; Google Mars
offers interactive maps of the Red Planet. As a brand whose name was
officially listed as a verb in Webster's Dictionary earlier this
year, Google has entered Americans' everyday lexicon.

But around the world, Google faces tough obstacles. In developing
nations, the Web is inaccessible for all but a wealthy few. In
technologically advanced countries, Google faces the emergence of
government-backed rivals. The competition in Asia is especially
fierce. In Japan, Yahoo leads the pack with its millions of
registered e-mail users. The leading search engine in China is
Baidu.com, which enjoys strong government support. And, though
Google's popularity in China is increasing, it can't seem to gain any
traction in nearby South Korea. There, the government has invested
heavily in making high-speed Internet service widely available, as
well as facilitated the creation of a number of domestic Web search
firms that are the market leaders. Google has become so frustrated by
its inability to crack the Korean consciousness that it has done the
unthinkable—spent money to promote its brand name, something the
online giant has rarely had to do anywhere else.

"Google Is the Next Microsoft"

Wrong. Talking heads like to say that Google is like Microsoft 20
years ago—a fledgling company led by young, iconoclastic engineers
who aim to change the world with ubiquitous, innovative technologies.
Critics of both companies think Google could eventually grow so large
that, just like Microsoft, it will stomp on its competitors and
strong-arm those that get in the way. As proof, they cite areas in
which Mountain View has already managed to surpass Redmond. Google's
search engine leads both Microsoft's and Yahoo's in its number of
users. In addition, Microsoft has lost more than a dozen of its best
and brightest employees (including the former head of its China
operations) to Google, which has set up its own outpost near
Microsoft headquarters to attract defectors who don't want to move
from Seattle to Silicon Valley.


But those who fear that Google is aiming for world dominance forget
one important fact: Though Google must compete against Microsoft,
Microsoft never had a Microsoft to compete against. Microsoft's deep
pockets—more than $40 billion in cash—and its continued dominance of
desktop computer operating systems have already forced Google to make
a number of costly decisions that are hurting its bottom line. Google
recently paid $1 billion to Time Warner for a 5 percent ownership
stake in AOL. That defensive maneuver was driven entirely by Time
Warner's simultaneous negotiations with Microsoft, which was willing
to pay big bucks to knock Google from its perch as AOL's search
engine of choice.

In addition, Google fears that Bill Gates will leverage the ubiquity
of his operating system by embedding MSN Search in the next version
of Windows for new computers. To keep Microsoft at bay, Google is
paying millions of dollars to Dell, one of the largest PC
manufacturers in the world, to make Google the default search engine
on its new machines. Google may be a giant, but Microsoft is still
many orders of magnitude bigger.

"Google Is the Most Inventive Force in the World"

Hardly. Google Desktop, Google Talk, Google Earth. These are just a
few of the new, free products that Google has rolled out in the past
couple years. There's no question that the company has provided high-
quality service and remained nimble and creative. But Google rarely
comes up with new ideas; instead, it improves on the inventions of
others. For starters, it was Yahoo that first rolled out a major
directory of Internet sites in the 1990s. As the Web grew, AltaVista
did the best job of any search engine by comprehensively crawling the
entire Internet. Google did not invent the Internet search. Users
flocked to Google because it did a superior job of ranking search
results based on relevance, and returning those results in the blink
of an eye.

Nor did Google create the pay-per-click advertising model that earned
it more than $6 billion in Internet advertising revenue last year,
roughly half of all the money spent by advertisers online in 2005.
That pay-per-click model was created by a company called Overture,
which was eventually acquired by Yahoo. Once again, Google improved
upon what came before it. Whereas Overture sold premium placement of
text ads alongside search results based on how much an advertiser was
willing to pay, Google added an important twist: It ranked ads based
on a combination of how much an advertiser would pay, plus the
popularity of the ad as measured by the number of clicks it
generated. Google is also widely credited with inventing the concept
of 70-20-10 time, so energized engineers may devote 20 percent of
their time to brainstorming company-related ideas, and 10 percent on
anything else that interests them. But when Google founders Larry
Page and Sergey Brin were mere schoolchildren, 3M was already giving
its employees free time to work on outside passions, which led to the
creation of Post-it Notes, among other things.








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