As Google readies for a possible IPO which could value the company at between USD 20-25 billion and raise USD 1-2 billion in the coming week, Business Week has a cover story which discusses “why the world’s hottest tech company will struggle to keep its edge”:
Google’s payday arrives just as the search phenom faces a withering battery of tests. The company’s spectacular success has lured brawny competitors such as Microsoft and Yahoo! Inc. into the arena. Those companies view search as a command center of the Internet, and they plan to wrest it from the upstart in Mountain View, Calif. The result will be a battle for the heart of the Net — one just as momentous as the browser war between Microsoft and Netscape Communications that took place a decade ago. Says Roger McNamee, managing partner at venture capitalist Silver Lake Partners, which has no stake in Google: “Search is the key to the kingdom.”
And the battle is raging at Google’s ramparts. Yahoo is leading the assault. In February, the portal giant fired up a new search engine that analysts say nearly matches Google’s performance. More worrisome, Yahoo CEO Terry S. Semel is driving Yahoo to the next frontier, customized search. Instead of today’s one-size-fits-all searches, he wants to offer queries tailored for an individual’s tastes, interests, even location. Advertisers are ready to pay royally to reach this type of targeted audience. And Yahoo is off to a big head start in gathering the personal information necessary to deliver such customization. It has amassed 141 million customer profiles; Google next to none. “They’re quite vulnerable,” says Michael A. Cusumano, professor of management at Massachusetts Institute of Technology.
Even if Google sidesteps that threat, it faces another, perhaps more daunting one. Microsoft is working to leverage every bit of its Windows monopoly in the effort to win the search market. Ballmer and Chairman William H. Gates III are working to embed search capabilities into nearly every aspect of future versions of the operating system. Have a question? Search the Web and the hard drive too from a Word document, an instant chat box, even an Excel spreadsheet. No need to pay a visit to a search site. If Microsoft makes good on this sweeping expansion, it could turn Googling into a quaint ramble down memory lane.
To defend its market, Google must come up with a better model, one that establishes its search engine as a central platform for computing. This pushes Google to extend from its slender specialized base and venture into many of the same broad services the giants offer. To keep the big powers from feasting on its specialty, Google must stretch and become a sprawling power of its own.
This is leading Google execs to weigh ideas that to some may seem dire in nature. For example, Jeffrey D. Ullman, a computer science professor at Stanford University and a member of Google’s four-person technology-advisory council, says he’s urged the company to acquire or team up with a Linux desktop company so Google can extend search to information stored on the computer. This means competing head-on with Microsoft’s dominant Windows operating system. “If Google doesn’t reach the desktop,” cautions Ullman, “Microsoft will eventually take Google’s business, just like it took Netscape’s.” Google execs say that they’ve discussed the possibility but aren’t poised to act.
In time, search engines will feast on every bit of personal information we’re willing to share, and serve up links that fit our tastes and locales — maybe even fine-tuning them according to the time of day. It’s a market headed for dramatic growth and change. No wonder so many investors are grasping for a piece of the brand that has become synonymous with search. “Google represents the new era,” says Michael Moe, chief executive of boutique investment bank ThinkEquity Partners. But buyers beware: Google’s biggest tests are dead ahead.
A related story has an interview with co-founder Larry Page. Excerpts:
People have consistently underestimated the size and importance of search. It’s a very, very large space of technologies, usage, and information. We’ve gone from 30 million to over 3 billion documents in just a small number of years. There’s going to be a lot of commercial activity in this space, a lot of companies doing things that are going to be very valuable.
It’s something people will care deeply about, because you want to trust your sources of information. If you’re doing a medical thing, wondering what’s wrong with you, or if you’re doing a commercial transaction, you’re really going to want unbiased, objective information that’s the best you can get.
The ultimate search engine would basically understand everything in the world, and it would always give you the right thing. And we’re a long, long ways from that.
Our mission is to organize the world’s information.