Google’s Troubles

By Archean
Dec 6, 2010
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  1. Google’s Troubles

    Last year Google failed in its bid to acquire Yelp (a social networking, user review and local search site). Now again, Google has bettered that failure, by failing to acquire Groupon, which is a deal of the day site, marketing localized offerings to major geographic markets in US/Canada (official confirmation is still awaited).

    Groupon have one major advantage over Yelp, that it has successfully monetized its business model, and have a relatively healthy inflow of revenue (unlike Yelp, which is struggling to do this). The interesting thing in this saga is that how such a giant like Google have gotten itself into a position where it is no longer seen as a step in the right direction for success. Hence, the question, what has gone wrong with Google?

    Google Ads completely revolutionized the way businesses reach out to their customers, but this hasn’t always meant that this will also bring in profits. Just look at New York Times (in search based traffic) or YouTube, they have achieved considerable growth, but are lacking healthy profitability. Now look at the other side of the spectrum, the companies which have shown considerable potential for growth relying on Facebook’s social platform (e.g. Groupon, Zynga) have been very successful in monetizing and profiting from their business models. Their success underlines the power of Facebook’s social advertising, logical evolution of search.

    It seems that a war is about to break-out between two totally different methodologies i.e. open web and a rather closed web, with Google in one corner of the ring with its allies, and the rest aligning with Facebook in the other. But Google has miscalculated one thing, and that is, people seems to be reasonably comfortable in closed web, provided it can serve their needs; and interestingly that is exactly Facebook and its partners are doing. Somehow Facebook have pulled off the trick, i.e. it just doesn’t seem or feel like a castled world on internet.

    This also means that Google is no longer seen as a value addition for growth of a business. In its relentless pursuit to be open (Google’s recent spat with Facebook is just one more example of this), it is starting to forget what it needs to do, i.e. give people only what they want to get from its search. Even with all these setbacks, Google’s business model is not under any imminent threat; but it needs to understand the change is not what it thinks it can bring to internet at its own, but it is what people want it to be.

    Eric Schmidt has hinted in recent past that Google is facing its first real re-orientation as an organization, he and others at Google need to realize that change is going to be very painful experience for everyone, but core search will have to be re-organized to make social and local the real heart of their operations in future. If they fail to do so, then anyone who can bring the right search solution to users, can give them a very good run for their money.

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