Product Diversification or an effective flank?

Some see Google’s forays into mobile, operating systems, television, and their many other moves as simple product diversification, but the truth is that these are all feeding the same monster.

Search (and in turn, advertising).

Google wants you to be in their universe, and they know that web property, like the real estate market, is a bubble waiting to burst.  With mobile phones, people have the option to search before they even reach the web. 

If it’s already connected, why not install the search on the desktop of whatever device consumers are using?  They are taking this strategy with Android, Google TV, and their Chrome Operating System.  They know that Facebook is such a threat to their search empire that they need to get to consumers before they reach Facebook.  The desktop is the place to do that, and the place that will keep them relevant in the future.  That is until Facebook decides to install its own desktop client or operating system…

How Microsoft can cripple Google

Could a simple design tweak to Facebook
spell the end of Google's Search Domination?

Microsoft has always been about partnerships, and they have an ally waiting in the wings that could destroy their biggest threat.

Facebook already uses Bing to power its web searches, but it's hidden within the interface.  You need to perform a search, and then scroll down the options on the left to select "web results".  This is too difficult for the average consumer to discover, and too many steps to replace the familiarity and comfort of a typical Google search.

The solution is simple.  All Facebook has to do is add a “Search the Web Bar” to its interface.  Game over.  This replaces the need to ever leave the Facebook environment and reduces the number of steps each consumer needs to make.  Consumers will realize this quickly, and will no longer need to go to Google.

With Google’s Search accounting for 90% of its revenue, the Facebook + Microsoft partnership has the potential to put a serious dent in its cash flow, leaving Google with significantly less cash to branch out and invest into other areas; areas where Google threatens to overturn long-held Microsoft monopolies.

Source: http://www.businessinsider.com/chart-of-the-day-microsoft-operating-income-by-division-2010-2

Microsoft’s biggest revenue generators are its flagship product, Windows, and its productivity software, Office.  While no competitor can even shake a stick at Microsoft’s market share in either space, Google Docs adoption has been growing at an insane rate and I expect Chrome OS to follow suit when it is officially launched.  Removing the typical barrier to try new software, cost, it is only a matter of time until each of these products reaches “good enough” status to see more widespread adoption.  By devastating Google’s Search business, Microsoft could delay, if not keep that day from happening.

Facebook Search powered by Bing is coup for Microsoft because they automatically add hundreds of millions of users to Bing’s low market share, grab a piece of the social search revolution that’s coming, and devastate its biggest competitor to its flagship products.  Now they need to convince Facebook to make a simple design tweak, so soon after their major profile revamp.

Why Google is so desperate for friendship

It's unclear how many users will flock to Google's new 
social offering, but it's clear is that they need them to.

There is a reason that Google is throwing such extensive efforts behind its social network development, and it’s bigger than just access to more of your information for targeted advertising.

Google’s search business accounts for over 90% of its overall revenue, and Facebook has the potential to devastate this business by delivering a truly social web.  There is a revolutionary shift coming, and Facebook is holding all the cards.

It comes down to a difference in philosophies.  Google has long taken the approach of delivering search results by overall web activity.  It has crawlers that scour the web to rank pages based on their overall activity and presence of primary information (i.e. the number of page views, links to that page, etc.). 

Facebook, on the other hand, delivers you the news and information via your networks, allowing you to tweak which friends, and therefore information is most relevant, so it can deliver even more tailored information to you.

The question this poses is simple and easy to answer.  When thinking of each individual’s tastes and preferences, which model would serve up the most relevant information?  Something based on all web activity, or on your social network?  Or put another way, which is a better representation of you and what you care about, your friends or the average of every internet user?

Don't be fooled... Google
CEO Eric Schmidt is more than
a little scared by Facebook

Google CEO Schmidt answered it himself, “If you think about it, it’s obvious… knowing more about who your friends are, we can provide more tailored recommendations. Search quality can get better.”

Google revolutionized the search market by realizing that a search engine could be more than just something to look up random factoids.  But with Facebook set to outperform it in every other aspect, Google’s search engine may return to just that.  The news and information you care about will be delivered to you via your Facebook news feed, no searching, no effort required.  Taking it a scary step further, if Facebook adds a “Search the Web” bar, Google Search’s reason for existence may be in jeopardy.  If you are already on Facebook, why navigate to another site for something as simple as search?

So is this to say that Google has been going about its business all wrong?  That these were things they should have anticipated and foreseen?  It’s easy to say in hindsight, but incorrect.  Fueling the rise of Facebook has been a sudden shift away from caring about privacy, the very thing that people fear about Google—and the invasive Buzz launch and Street View fiasco haven’t helped the situation.  And how could Google have anticipated that almost overnight, 500 million users would entrust an early-20’s Harvard drop-out with every intimate detail about their lives?  The only real misstep one can point to was failing to put more focus and resources behind their last two attempts, Orkut and Buzz.

Considering all of this, it makes sense why Google is throwing such extensive resources (even having Sergey Brin on the development team) and delaying the product’s launch until it is close to perfected (unlike their typical “beta strategy”).  They need it to be good.  In fact, they need it to be great.  They can’t have this flop like Buzz, and their future may depend on it.