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Is Google Plus A Big Minus For Investors?

01 July, 2011

Internet usage is changing. Dramatically. Once the Web was the world's largest library and simultaneously, the world's biggest shopping mall. In that environment, what everyone needed was to find things. And Google was the world's best tool for finding things. When the noun, Google, became the verb 'googled' (as in "I googled your history" or "I googled your brand to see where I could buy it"), it was clear that Google had permanently placed itself in the long history of products that changed the world. But increasingly, the Internet is not about just finding things. Today, people are using the Internet more as a way to network, communicate and co-operatively share information using sites like Facebook, LinkedIn and Twitter. Although Web usage is increasing, old-style, 'search-based' use is declining, with all the growth coming from 'social-based' use. So, you would think it's a good thing for Google to launch Google+. Although earlier efforts to enter this market were unsuccessful (Google Buzz and Google Wave being two well-known efforts) it would, on the surface, seem like Google has no option but to try, try again. Only, Google+ is not a breakthrough in social media. By all accounts, it's a collection of things already offered by Facebook and others, without any remarkable new packaging (see BusinessInsider.com's 'Google's Launch of Google+ is, once again, deeply embarrassing' or "Google Plus looks like everything else' or 'Wow, Google+ looks EXACTLY like Facebook'). With Facebook closing in on 1 billion users, it's probably too late and will be far too expensive for Google to ever catch the big lead. Especially, with Facebook in China and Google noticeably not. Like many tech competitors, Google had a game-changer that came along and moved its customers toward a different solution. Google+ will be in a gladiator war, where everyone gets bloody and several end up dead. NewsCorp is finally exiting social media as it sells MySpace for a $550 million loss clearly a body being dragged from the coliseum! Even with its early lead, and big expenditures of time and managerial talent, NewsCorp was thrashed in the gladiator war. Google may have a lot of money to spend on this battle, but shareholders will NOT benefit from the fight. It will be long, costly and inevitably not profitable. Yes, Google needs to find new ways to grow as the market shifts. But trying to do so by engaging such powerful, funded and well-positioned competitors as the big three of social media, is not a smart investment. And that leads us to why Google+ is really problematic. Resources spent there cannot be spent on other opportunities which have high growth potential and fewer competitors. BI's headline Google kills off two of its most ambitious projects should send shudders of fear down shareholders' backs. Google had practically no competitors in its efforts to change how Americans buy and use both healthcare services and utilities such as electricity and natural gas. Two enormous markets, where Google was alone in its efforts to partner with other companies and rebuild supply chains in ways that would benefit consumers. Neither of these projects is as costly as Google+ and neither has entrenched competition. Both are enormous and Google was the early entrant, with game-changing solutions, from which it could capture most, if not all, the value just as it did with its early search and AdWords success. Additionally, Chromebooks is now coming to market. Android has been a remarkable success, trouncing RIM and with multiple vendors supporting it, this platform is rapidly taking ground from Apple's iPhone. Only Google has made almost nothing from this platform. Chromebooks offer a way for Google to improve monetising its growing and perhaps someday the No. 1 spot to the platform in the rapidly growing tablet business against a very weak Microsoft. But, with so much attention on Google+, Microsoft is given berth for launching its Office 365 product as a challenger. With so much opportunity in cloud computing and Google's early lead in multiple products, Google has a real chance of being bigger than Apple someday. But its movement into social media will not allow it to focus on cloud products as it should, and will give Microsoft renewed opportunity to compete. Google is setting itself up for potential disaster. While its historical business slowly starts losing its growth, the company is entering into three very expensive gladiator wars. First is the on-going battle for smartphone users against Apple, where it is spending money on Android that largely benefits handset manufacturers. Secondly, it is now facing a battle for enterprise and personal productivity apps based in cloud computing where it has not yet succeeded in taking the lead position, but is still facing increasing competition from Apple's iCloud and Microsoft's new round of cloud apps. And on top of that, Google now tells investors that it is going to go toe-to-toe with the fastest-growing software companies out there Facebook, LinkedIn, Twitter and a host of other entrants. And to fund this, it is abandoning markets where it is practically the only game-changing solution. There's a lot yet to happen in the fast-moving tech markets. But now is the time for investors to wait and see. Google's engineers are very talented. But its strategy may well be very costly, and unable to compete on all fronts. You may not want to sell Google shares today, but it's hard to find a reason to buy them


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Is Google Plus A Big Minus For Investors?

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