Google and the Paradigm Computing Shift

It’s an ironic situation, and yet prophetic at the same time.

Google is set to take over Microsoft as the largest monopoly sometime next year, or so analysts say. Microsoft still has the very profitable Office software suite which is worth around $13 billion a year. Google made about $6 billion last year, so it still has some way to go.

However it’s certainly a sign. In fact “two successive Microsoft chief executives have long tried, and failed, to refute what we might call the Single-Era Conjecture, the invisible law that makes it impossible for a company in the computer business to enjoy pre-eminence that spans two technological eras.”

I’m quoting directly from Randall Stross’ article from the Sunday New York Times entitled “The Computing Industry with Built-In Term Limits”. It’s a very interesting piece and it got me thinking.

What will Google be facing in 2018? Can Google do what previous companies have successively failed to achieve; staying pre-eminent during “a major paradigm shift” in computing?

What this will be in 10 years time is anyone’s guess. Just as the Internet caught Microsoft unprepared, some new technological advance may have the same ‘disruptive’ effect upon the existing market leaders of the future.

Many will be quick to say that mobile Internet is already the next development in productivity and connectivity (beyond what it already is). But can Google recreate the presence on our phones that is has on our computers? Or more to the point, a profitable presence? It’s certainly recognized as such by Google who have been investing heavily into the industry over the last couple years. The least of which is the introduction of Adsense for mobile which was introduced recently.

It’s a well publicised failing of Microsoft that they have so far failed to make any significant impact upon Internet through search, services or online advertising. In fact as noted in Stross’ report Microsoft has been making losses on MSN since 2005.

The vast majority of Microsoft’s revenue is still made up from sales of of its Windows operating system and Office software suite. Attempts to branch out from this have so far been that, attempts. Windows Live is non-profitable and is designed to compliment existing Windows software and services such as Office.

Yet before we criticise Microsoft’s inability to innovate or develop something to bring the company back to it’s former strength, is Google any different?

Google makes, and has always made, almost the entirety of it’s income from targeted in-text advertising. Yet it has not made an impact that even approaches this dominance across any other form of advertising both online and offline regardless of acquisitions and investments.

Preceding the acquisition of DoubleClick last year Michuel Helft wrote for the New York Times:

Investors also believe that one or more of Google’s many new initiatives will soon begin to contribute more significantly to the company’s growth. And they expect that Google’s proposed $3.1 billion acquisition of DoubleClick, if it is approved by regulators, will help it gain share in the market for online display advertising.

A year later and the acquisition that was intended to increase Google’s share of display advertising has so far failed to be realised. As of April the 2nd 2008, 300 jobs where made redundant throughout the company and the Performics unit of the company is being sold off.

Another example is the $1.6 billion acquisition of YouTube in 2006 which has since failed to be monetized at the levels predicted by Google. In fact YouTube has returned barely $100 million in revenue through advertising despite dominating the online video market.

These are just a couple of examples, Google is of course still in a stage of healthy growth and profitability. However it interesting to consider what the future will hold for this company.

It has so many products that are extremely popular, yet do not provide the company with any additional streams of revenue. The constant project development of its many, many engineers has still failed to yield that next big market for Google to sell it’s advertising too.

Sound like a familiar story?

Laurence on May 30, 2008 Subscribe to our RSS Feed

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5 Responses to “Google and the Paradigm Computing Shift”

Arun on May 31st, 2008 2:06 pm

Thought provoking article really. Just like to mention that Google and Microsoft have had the spurt of innovation from the beginning. But what really matters it managing to stay innovative while growing in headcount. Its a management problem. Microsoft was able to count on Windows being the access point for computing on majority of desktops, Google is counting on its search engine as the access point to the internet. In that sense it does look possible that major search engines could innovate to the extent that searching on one or the other really does not make a major difference in terms of results and Google could see some stagnancy in search hits.

The next thing is about the sale of performics. That move was a necessary one to maintain independence from the influence of SEO/SEM. Google being the search engine that is the apple of SEO eyes, its not possible for Google itself to have an SEO/SEM firm within its ranks.

But if you are really looking at innovation at its best, you can’t get better than Apple. They are silent hunters. Few years back no one would have thought of it as a cellphone maker. Few years more down the line perhaps there is more to come.
Laurence on May 31st, 2008 3:22 pm

Thanks Arun!

Sorry I made a mistake in the first paragraph… that should be Google made 6 billion last quarter, quite a difference there!

And I think you’re right, rapidly growing companies just seem to struggle to maintain the culture and strengths they initially began with.
Rachel on June 3rd, 2008 4:27 pm

LOVE the article “Laurence”
Very thought provoking indeed. I never even considered this an issue till you compelled me to consider it. As a student of management studies i have to agree with “Arun” that managing to stay innovative whilst balancing profitability is not only a problem both Google and Microsoft are currently facing, but a problem that has, and will, forever face companies and managers alike.

I wonder, and i am opening the floor up to debate, if the problem these particular industries face is the lack of proitability in the internet domain? I personally don’t know much on the finances and payments of internet advertising but i don’t see how a service like MSN can really be profitable with all the maintenance and updates required for it, you know being free to consumers and all.

I am intrigued, enlighten me guru “Laurence” :)!
Laurence on June 3rd, 2008 4:47 pm

Well Rachel I am most happy to explain, and you are most welcome to open the floor up to debate whenever you so wish.

Now in fact, if you would like.

MSN is unprofitable because the service it provides is unsupported by the search market dominance that Google has.
Rachel on June 3rd, 2008 4:53 pm

Ahhh i see, thankyou for clarifying that issue mr. speaker
and i do declare the floor open for debate

night!