I think it’s fair to say that I have not been 100% consistent regarding internet content networks such as AOL, Yahoo and IAC Interactive. (IACI). One of my main criticisms of their business model is how they try to do so many things instead of focusing on their core strengths. It’s certainly a challenge to not grow when you see how well the strategy has worked for players like Apple (AAPL) which have created their own little galaxy. That being said, I still think there is some cause for concern when looking at how Google is developing. If not concern, then it’s probably worth at least discussing their overall strategy.
The “Old Google”
Five to ten years ago, things were very simple for Google. You could say that the company had two important activities that kept executives busy.
-Search: Many have called Google a one trick pony and while it might not be as true these days, that one trick that Google does well, is done better than anyone else in the world. Search used to be the activity at Google both in terms of energy and resources invested.
-Advertising: Advertising is closely linked to search because in the opinion of most users, the ads generally succeed in enhancing the user experience. They are also the reason that Google has been able to generate profit.
This decade’s Google
If Google used to be about search and advertising, you can hardly see it now. Yes, they are still the two core activities and remain the primary focus of the search company but Google is now about a lot more than search and advertising… here are Google’s “new” priorities:
-Enhanced search: Search used to be crawling the internet for websites and displaying them when users went through Google. But now, Google is helping users search through images, local businesses, news, financial data and a lot more
-Enhanced advertising: While Google used to do advertising in a very simple way, it has greatly evolved. Google used to offer spots for text links on Google.com as well as other partner websites. Through purchases of Doubleclick, AdMob and other advertising plays, Google is now active in the display ad, has experienced with offline ads in newspapers, magazines, radio stations and even tv.
-Operating System: Android is now a wildly successful browser that is dominating the mobile space and has given Google a great position in the mobile space
-Browser: Google Chrome is part of Google’s strategy to capture more data from internet users as well as take market share from Microsoft’s Internet Explorer
-Google Docs: This is as much about profitability as it is about hurting Microsoft and gaining market share. Its docs line of products offers solid competition to Microsoft’s Office
-Content websites: Google is getting into the travel booking business thanks to its proposed purchase of ITA (which is being opposed by many other travel companies such as Expedia). Google also launched Boutiques.com, a fashion website and has other products offered
-Alternative energy: Google has been building wind energy centers and while it’s not clear how it fits with the overall company strategy, it seems to be a clear priority
-Electric Cars: Another “green” priority as Google has worked on an electric car and has been making inroads
-Google TV: It is unclear how this initiative will turn out since it is so new but Google TV aims to change the way TV is distributed and viewed. It has had a difficult time, as are other “innovative players” such as Apple but it is a clear priority of Google.
-Google Music: Google will be launching a service to compete with Apple’s Itunes, an online music store
-Apps: Through Android, Google has now gotten very much involved in the exploding apps business and has set its looks on more apps business in the near future for its other products.
-Youtube: Youtube is the dominant video player on the internet thanks to what now looks like a bargain, its purchase of Youtube.com for $1.65 billion.
-Social: This has been by far the biggest struggle for Google as it continues to try to develop an alternative to Facebook, Twitter and other “social” players.
-Ecommerce: Google has developed Google Checkout which is meant to be a “marketplace” that helps buyers and sellers of traditional and digital goods. The success has been limited but it also seems to be a fairly low priority for the company. Google has also been working on its Ebook arm, Google Books.
-Google Ventures: Google created a small fund that is basically a venture capital fund within Google. It invests in startups, usually in the technology or green technology sectors.
How much is too much?
Looking at the chart almost makes me dizzy. The reality is that Google has a lot on its plate and seems to be joining new initiatives every few months. My big question is how much they can do without getting lost among all of these projects and losing focus on its core; search, advertising and information. I think there is certainly danger involved and I personally have trouble seeing how some of these fit in the global strategy of Google. The company used to be a simple one to understand but that is less true every year.
The difference with Yahoo and IAC Interactive
The main difference in my opinion is that I don’t think Google is “settling” for average products. While Yahoo has basically ceased to innovate and improve some its core properties such as Yahoo Finance and Yahoo Email (except very recently), Google has mostly become either the leader or an emerging force in almost all of these initiatives. Android, Chrome, Youtube are all incredible successes and other initiatives such as their Green Energy products certainly look promising even though it will be difficult to judge them in the short term.
Am I still in love with Google’s stock?
Remember how I said I had fallen for Google’s stock? In fact, I am still very much a believer. Do I wish the company was a bit more focused? Certainly. But until I get the impression that they are losing direction, I will give the direction the benefit of the doubt. That being said, I will be monitoring how much revenues and costs these initiatives bring into the company in the quarterly results as much as possible in order to continue to get a more precise opinion.here