Posted by: rolfsky | July 3, 2007

does Google have the chops to sell its new products?

Is Google’s geek-culture the reason why their recent product offerings haven’t taken off? Sometimes a hit debut can be a curse in disguise.

Google’s business model is to pump money out of the ground. All you need to do is figure out how to get the good stuff out from underneath layers of rock and soil, clean it up a bit, and sell it for a tremendous markup. Your cost of goods? Just the cost of getting at the oil. Not the cost of the oil, nor the cost of the energy stored in the oil. This business model has made many fantastically rich and insanely powerful, just like Google today. It also tangentially explains why most of Google’s other products haven’t taken off.

The easy part about drilling for oil is that the intrinsic value lies in the hydrocarbon chain and it’s just waiting there to be collected. Millions of years ago, all those dinosaurs piled up and died, eventually being smashed down to a nice black paste we call petroleum. With some big machines, high technology and clever processes, it can be turned into something that everybody wants, and nobody seems to get enough of. It’s not surprising that oil is also called “black gold“. The important thing to recognize here is that big oil isn’t creating the primary point of value, merely changing it into something more accessible.

Google has done the same thing with its clever PageRank algorithm by converting the massive stored value already out there on the internet. Each time a thoughtful internet publisher creates a new link the value of that link is preserved as stored energy. Captured in the hypertext, each connection can be mined and sucked from the aether. Countless self-interested actions by individuals deliver tremendous value in aggregate when you know how to turn that data into a map.

Consider the alternative of refining the stored energy of the links on the internet. Pay knowledge workers to manually sift through the mountains of data, noting important connections as they come across them. You would in essence have to re-create all the work that’s been put onto the public internet. (If you don’t see the cost and value of cataloged content, observe companies such as Lexis Nexis who charge fees into the hundreds of dollars a month for human-indexed content.) So Google found a way of converting freely accesible information into indexed content as if by magic, and got fabulously rich.

Overnight success is wonderful but it sets up a dangerous precedent in the hearts and minds of those involved. Google built it, and they came — no advertising necessary. Your first project went astronomical, so obviously you know what people want, and how to build it.

My question is whether Google has the right muscles to step up and create real businesses against real competitors in fields other than search. Right now, everything is being released as “beta” because there’s a huge gap between the end of engineering and a successful product. They have the advantage in search because they know how to autonomously index, and they have the de facto advantage in targeted advertising because they have such a lead in search. But other than smart engineers, what advantage do they have in spreadsheets, online video, marketplaces, payment systems or personal homepages?

Time will tell if they can get serious about alternate revenue streams or if they will continue to embody the geek ethic and blithely ignore the fact that perception is reality, and products no not in fact stand on their technical merit alone.


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