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Google’s three Ps

A company is nothing more (and nothing less) than three things: people, processes and purposes. In the language of the software engineer these would be inputs, algorithms and specifications. In the language of classical business analysis they are assets (or resources), organization structures and business models. In military theory, these are logistics, tactics and strategy.

This is the trinity which allows for an understanding of a complex system: the physical, the operational and the guiding principle. The what, the how and the why.

When approaching any analysis problem, these questions form the foundation of causal inference. What is it, how does it work and why does it exist?

When analyzing nature the sciences often help with the what and the how but rarely address the why.[1] In contrast, man-made systems (e.g. systems of law, religion and commerce) require an answer to the why as there is a presumption of a will in their creation and preservation. The why allows ultimate judgement on the merit of an enterprise. The why may escape us but it’s assumed to always be there. For instance, in criminal law the motive is often a crucial piece of evidence but it’s not always found. In business, the motive for action or for organization is a crucial piece of the puzzle which often explains the what, who and how, but here the ultimate why is usually profit. This the characteristic of a for-profit business, the purpose is explicit.

Some companies try to define their purposes beyond profit but they are often too vague or merely speak of values represent a quality not causality.

This is the case with Google. The problem isn’t only that “don’t be evil” isn’t a priority or a purpose, but also that its resources are not applied to cohesive goals. In fact, there seems to be no interest in pursuing a direction aligned with generating income.

This is not in itself a bad thing. The notion of operating as a learning (vs. a deliberate) organization, informed but not driven by a goal, is the best approach when seeking new markets or discovering new needs and new business models. The difference with Google is that there seems to be no expectation of business model discovery. In other words, that the learning is not for any purpose other than learning itself.

This might be noble but learning for its own sake has not been attempted by public, for-profit organizations[2] since there is an implicit fiduciary responsibility to generate profit and unrestricted experimentation, unguided by profit, is unlikely to ever learn the needs of markets.

 

The evidence I note supporting this is in the persona the company maintains, both internally and externally. There is no representation of themselves as a “business seeking profit” or even as a commercial entity. It’s not simply because their business model is embarrassing. It’s because all business models are embarrassing.

The representation is one of a research laboratory succeeding against difficult problems. Very similar to a successful academic or industrial laboratory sustained by grants from a benevolent (but messy) organization. Google becomes the embodiment of “big science” and “the world’s laboratory” unfettered by politics and unsoiled by commercial interests.

There is a business in Google but it’s a very obscure topic. The “business side” of the organization is only mentioned briefly in analyst conference calls and the conversation is not conducted with the same team that faces the public. Even then, analysts who should investigate the link between the business and its persona seem swept away by utopian dreams and look where the company suggests they should be looking (mainly the future.)

There are almost no discussions of cost structures (e.g. cost of sales, cost of distribution, operations and research), operating models (divisional, functional or otherwise) or of business models. In fact, the company operates only one business model which was an acquisition, reluctantly adopted.

It’s as if the management is not only uninterested in its own profit model but deeply scornful of it. For all the technology innovations the company can claim, it has not had one internally sourced business model innovation.

But is this wrong? Again, we need to ask if Google breaks with convention then maybe convention needs to be broken. This is the radical bet underlying the Google thesis: are business models necessary? This is in fact a bet many VCs are implicitly placing within the current start-up culture. The notion of making a profit or even having an interest in doing so seems passé. This notion is directly traceable to the Google ethos as it acts as the source of acquisition funding and is driving the agenda of VCs and entrepreneurs. This is leadership by example and the example is one of blissful ignorance of market constraints.

But we have to go back to the profit model, even if analysts, observers and the company itself sweep it under a rug. The reason is that this laboratory runs only as long as the grant money keeps coming. No bucks, no Buck Rogers. So far the money rains down from heaven, but that rain is not infinite nor permanent. The answer seems to be diversification, even the creation of a conglomerate. In other words, the answer seems to be that if enough great technology is developed or acquired, then a business model will appear (think about it as a probability problem) and the vulnerability of revenue sources is managed. Clever? Convenient? We’ll see.

But that’s not the only problem. The deeper problem is in us knowing their intentions. The absence of a purpose rooted in profit makes Google resistant to analysis. There might be a purpose, known only to the founders[3], but it’s one that is potentially naive, amoral or too abstract to be useful. Shareholders are aware of this and have agreed to entrust control to only three individuals. The purpose of the organization is in their hands alone and reflects their priorities. Bearing in mind that the road to hell is paved with good intentions, they must be brave indeed.

This would not be too troubling if the effect would be restricted to the company stakeholders. The trouble lies in that organization also having de-facto control over the online (and hence increasingly offline) lives of more than one billion people. Users, but not customers, of a company whose purpose is undefined. The absence of oversight is one thing, the absence of an understanding of the will of the leadership is quite another. The company becomes an object of faith alone.  Do we believe?

Notes:
  1. Religion attempts to answer the whys which science leaves as unanswerable. []
  2. The Bell Labs story in an interesting possible exception but on deeper inspection it was the by-product of a  government sanctioned monopoly and hence a ward of the state []
  3. or not known at all []
  • Stefan Constantinescu

    This conglomerate theory is something I can totally agree with, especially given how many disparate product categories seems to be getting themselves into, but is it culturally acceptable (does Google fit?) in the United States in much the same way that Samsung is accepted in Korea or Nokia used to be accepted in Finland?

    • marcoselmalo

      Look at GE, one of the most famous conglomerates.

      I think there is a unifying principle behind some of Google’s acquisitions. That principle underlies a major skillset of Google’s, which is machine intelligence, algorithms that learn. Targeted advertising is just one example. The mission of organizing the worlds information is moved forward by machine intelligence. Machine intelligence requires data to learn, which is why Google aggressively collects it and strategically seeks to remove obstacles from collection efforts.

      Horace’s thesis makes Google itself the machine that learns. The first P, the people (both the employees and users) are there to facilitate that learning.

      SkyNet, anyone?

      • jpintobks

        Great article, against the current A quote that is worth keeping in mind as user or shareholder of Google “There might be a purpose, known only to the founders[3], but it’s one that is potentially naive, amoral or too abstract to be useful. Shareholders are aware of this and have agreed to entrust control to only three individuals.”
        Without adds can Google survive with the current “Burn Rate”

      • marcoselmalo

        On the otherhand, and in contradiction to Horace’s theory, there is this bit by James Whittaker, on why he left Google:

        http://blogs.msdn.com/b/jw_on_tech/archive/2012/03/13/why-i-left-google.aspx

        Executive summary: Google lost its R&D lab atmosphere as it became ever more focused on advertising revenue.

        In this alternative narrative, Google management is quite aware if what it is doing by tying individual products into G+ (or even destroying them to get users to move to G+, in the case Google Reader). The freewheeling days are over as Google “puts more wood behind fewer arrows” (I believe that is a Schmidt quote, but it might be Page).

  • Khürt L. Williams

    Every acquisition and every service feeds the pattern recognition machine that is Google. They are very much focused in their mission statement.

    • H. Jaxon Kumaasi

      Only privacy laws slow them down a bit. Even though I can’t shake the feeling that they actively seek out and exploit any cracks or crevices in privacy laws. When that fails and the fracture a law, there’s always the “oops, that was unintended/accidental/… ” and payment of some absurdly insignificant fine.

      Don’t be evil? Right.

  • ReadingAtNight

    The lack of the Oxford comma surprises me.
    As someone who has never really thought about business in any analytical manner, your website is incredibly eye opening.

  • EW Parris

    If your only mission is “Don’t Be Evil” then that allows anything at all to be within your mission scope.

    Since “Evil” is a poorly defined concept and differs from person to person and culture to culture I guess it results in a complete lack of focus. The opposite of Apple which values focus over everything but its customers.

    • marcoselmalo

      The slogan is actually “don’t do evil.” This gives them a lot of scope because nowhere do they define evil, nor is it a pledge to mitigate unintended consequences. It is also not a pledge to do good, making Google essentially amoral, despite what it suggests and what the true believers think.

      It turns out that “Don’t do evil” is no more than marketing and PR. I’ll leave it to others to decide if cynical marketing is evil or not.

      • Sacto_Joe

        Yep. If you define patents as “evil”, then ripping off intellectual property is being a corporate Robin Hood.

      • Kizedek

        right, and if Google considers “useful” and “accessible” to apply to everyone’s information but their own, then keeping personal data private would be evil, and Google just can’t do that.

        I think Schmidt always says it best:
        “Google policy is to get right up to the creepy line and not cross it.”

        “…We don’t need you to type at all. We know where you are. We know where you’ve been. We can more or less know what you’re thinking about.”

  • http://www.isophist.com/ Emilio Orione

    Great post most agreed.
    Some caveats: money is the result of the action of why, how, who agents, not the goal.
    It could be the ultimate goal just as a way of saying because as a goal it has no relation with how or what.

    • charly

      The strategy of a war is not necessary winning it. The Chinese strategy in the Chinese Vietnamese war was to break up the Soviet Vietnamese alliance. By loosing it they showed Vietnam that the USSR wasn’t needed to defend Vietnam from China and that the Soviets wouldn’t back them up. This ended the reliability of the alliance and the Soviet encirclement of China

  • hatchwork

    What do Google shareholders hire the company to do?

    • claimchowder

      The majority of shares are held by the the founders, so it does not really matter what the rest of the shareholders would hire the company to do.

  • poke

    I guess I still fail to see why Google is different from other big tech companies with a cash cow and nowhere to go. Microsoft has made the majority of its revenue from Windows and Office for decades, but it has always launched me-too iniatives and indulged in strategically-irrelevant acquisitions, much like Google. It also, like most companies, has labs and develops all sorts of interesting prototype technologies. The only difference with Google is the unprecedented level of uncritical media attention, likely due to its position as a search and ad monopoly, so that we are all exposed to the constant drumbeat of its self-aggrandising propaganda.

    • http://blog.databigbang.com/ Sebastian Wain

      I see the Google position pretty different: they are able to connect their research in computer science with their business in a way that Xerox would envy. Even IBM does a lot of basic research but how Deep Blue leveraged the company?

      • poke

        That’s true of data centres, perhaps, which are part of its core business. Intel does the same for microprocessors (while its other research projects tend to lead nowhere). But Google hasn’t yet delivered on the rest of their vaunted technological innovation. Its output looks rather pedestrian. It innovates consistently where it makes money, copies or acquires other companies on the standard “not invented here” model Microsoft pioneered, and does stuff in labs that have so far amounted to little more than PR fluff. To me, it looks just like a Microsoft or an Intel or any other mature tech company that does one thing well.

      • airmanchairman

        “In a way that Xerox would envy”: Sorry, but I fail to see the Google equivalents of Ethernet, PostScript, Graphical User Interfacing and Object Orientated Programming, to name a few.

        Nothing Google has done to date, apart from their pretty awesome search algorithm, comes close to even a single one of those ground-breakers that emerged from PARC Xerox.

      • Jerry

        What Xerox would envy is the ability of Google itself to make use of its research. Xerox PARC indeed invented much of the basis of modern computing. But they were never able to profit from it. Even in what should have been a natural field for Xerox, computer printing, Xerox was unable to play a significant role. (In fact, Postscript wasn’t a PARC technology; that was Interpress, a language that died out. Two of its creators left PARC, founded Adobe, and created Postscript. Another technology that PARC invented but whose value Xerox was totally unable to capture.)

        Google’s R&D, even when fundamental, is much more closely tied to its product groups. It’s often hidden in internal operations and only shows up in publications years later. Or it’s visible but only as a tightly integrated component of something else.

        Two examples. As an internal-only invention, Google invented the Map Reduce algorithm, pretty much creating the field we now call “Big Data”. After Google published a paper on how they did it, others made use of the idea to build an open-source product called Hadoop, heavily used by everyone other than Google for their “Big Data” work. (BTW, before you say “Oh, that’s just some simple algorithm” – while the idea is simple, there are many complex pieces that are needed to actually make it useful – most also described in other Google papers and then re-implemented in the outside world. There are whole companies out there now selling stuff based on the fundamental ideas that Google published. Meanwhile, Google *has* managed to capture much of the value, as Map Reduce is what makes pretty much all of the stuff you see when you use Google work.)

        For research that’s out there but that people don’t think about, consider language translation. Google’s been a leader in taking the leading edge academic work in the area, extending it itself, and actually applying it. While it’s not a solved problem by any means, if you play with Google Translate, you’ll be amazed at how useful even its stilted-sounding translations – among an astounding variety of languages – can be. (I might be able, with my limited French, to understand an article better in the original than in the Google translation. But I’d have no hope for an article in the vast majority of languages, from Afrikaans to Zulu, that Google translate handles.)

        As technology became more uniform and broadly used across companies in a given industry and across industries, the original industrial labs created on the Siemen’s model – developing unique, proprietary technologies for their own companies – gradually lost their relevance. The attempt to create labs to go off beyond the day-to-day concerns of their parent companies – epitomized by PARC, deliberately situated across the country from corporate headquarters – lead to labs that produced wonderful things for the world as a whole, but nothing but expenses for their parents.

        Google (and, from what one can tell, Apple; and probably a few others, though it’s not at all obvious who they might be) are taking a fresh approach to industrial research. They don’t limit themselves to research on incremental improvements in areas where they already have expertise and experience. Sometimes the look far beyond the company’s base competency, whether it’s linguistics at Google or basic metallurgy at Apple – actually integrated into the day-to-day operations of the company. So Google ends up with leading-edge translation engines and Apple may end up with unique products made of “liquid metal alloy” that no one else knows how to work with.

        — Jerry

      • ryanpederson

        I don’t see much, if any, innovation actually emerging from Google itself. It’s all in the form of acquisitions. AI companies, robotics companies, home automation companies… Even Google has gone stale with search. The only change I can recall in the past 5 years is the “Instant Updates” mode, which I find cumbersome and immediately turned off.

        They even shuttered Google Labs. Nowadays I fear it’s just folks who sit around all day thinking of new ways they can shove G+ down our throats. Oh, and also buying innovative companies.

      • Shawn Dehkhodaei

        I don’t think anyone here can argue that Google hasn’t made ANY innovative products whatsoever …. that would be patently false. I myself believe that aside from Search, they’ve done at least two to three products that are great; one being Gmail (and google Apps), the other is Google Maps, and indeed, their Translate product. However, if you put all those together plus search, it won’t amount to anything that came out of PARC (in context of their timeframe).

        Yes, Xerox as a company, didn’t have the vision to implement many of those ideas, but nevertheless, they hired a lot of smart people, and those ideas came out of PARC; we can’t discount that regardless of Xerox’s approach.

        And on the flip side, IBM’s research labs were very well focused and they made a lot of concrete products that IBM marketed and sold.

        Google gets A LOT MORE credit (and hype) than it deserves, as did Microsoft in the 90’s (though I believe Google has done more than Microsoft did in their prime). So while we’re not discounting their contribution to technology, we’re also careful not to FORGET their IP theft, their copying, and their sneaky business tactics (breaking privacy laws, etc.).

  • http://www.fatmixx.com/ sujal

    Is their purpose “Don’t be evil” or “Organize the world’s information” – the latter seems to be more likely to produce alignment, though it’s still nebulous enough to allow the current situation you describe to exist… (see their mission statement: http://www.google.com/about/company/ )

    • PCurc

      The way they are going about “organizing the world’s information” is to position themselves between people and information (via Gmail/Drive/etc., Chrome, and of course their near-monopoly on search). In that way they are effectively privatizing a big chunk of the Internet and skimming profit from the traffic (and information itself) by selling ads.

      Google’s institutional “purpose” seems to simply be able to do whatever they want in the field of tech, as reflected in its “throw things on the wall and see what sticks” approach to innovation. Given the current legal environment surrounding tech, I think they’ve made some of these recent acquisitions (Motorola certainly, Nest arguably) as defensive plays to bolster their patent portfolio to enable them to continue colonizing new areas of modern life with fewer IP repercussions.

      • Sacto_Joe

        The patent acquisition process is intended to give them bargaining power against the likes of Apple. If Google has something Apple needs and Apple has something Google needs, then a deal is struck. Until now, Google basically ripped off what it needed, but that door is quickly closing.

      • marcoselmalo

        That’s a really good point regarding Google’s mediation of information. One might even say that their mission has drifted from organizing the worlds’ information to owning the most valuable chunks of it (or as you out it, privatizing it).

  • peter

    The seeming lack of a clear purpose is troublesome not just for the reasons mentioned above.

    There are a few other issues:
    1) a clear purpose serves an important role in directing the “centrally planned economy” that exists in every large company
    2) profit and price signals from customers are extremely important in finding out which activities are valuable (and durable). Offering “free” products to end users creates a dangerous kind of blindness
    3) if investors do not know where a company intends to go then it is extremely difficult to spot whether they have gone off track.

    Right now it is nearly impossible to answer questions such as:
    — are the acquisitions of Motorola and Nest good or bad?
    — are Android and Chrome successful or not from the perspective of Google shareholders?
    — Google is still increasing its share of advertising dollars, while its technology is shrinking the pie by reducing overall advertising rates. What is their plan out of this trap?

    • Sacto_Joe

      Re: 2), Google’s “customers” aren’t the end users; they’re the advertisers. Google sells advert space.

      • peter

        I know. But you could compare Google to a free newspaper. While they might enjoy a very broad circulation, it is very hard to gauge the value the publication brings to readers. The advertisers pay based on the number of users, not based on the quality of those users’ experience.

    • charly

      Motorola was defensive against MS and Apples patent attack. Have no idea if it was successful but the patents do seem to have died down.

      ChromeOS is an attack against Windows and is extremely successful (compared to BeOS, that Oracle consumer PC running on a CD, that Canadian Mozilla thing running on linux, etc who all failed miserable) and probably very cheap

      Without Android somebody else would be king. That wouldn’t be IOS because Apple doesn’t like selling its OS. So that would likely have been Microsoft, its competitor/enemy.

      Ad rates are shrinking slower than tech is becoming cheaper so alright for Google

      • abject

        “Motorola was defensive against MS and Apples patent attack.”

        If this is true then it’s an abject failure.

      • charly

        If i was Google i would sell it as that. Doesn’t mean it is

      • abject

        I have no idea what this means. You would sell it as what?

      • Shawn Dehkhodaei

        ChromeOS is not doing ANYTHING to Windows …. it’s not even unseating Linux on the desktop, which in itself is a rounding error. Windows is not scared of ChromeOS …. the last figures I looked at in terms of USAGE (not shipped laptops), ChromeOS was less than 0.5%, so for now, it’s safe to ignore it.

        And iOS is giving Android a good run for the money, in the USA for now, and later on, China (the biggest market for Android), so we’ll have to wait and see …. it’s still way to early.

        I would argue that Motorola was an attempt BOTH for [useless] patents, and trying to do their own hardware … it didn’t work out, so now they’re trying a new avenue (Nest), and as they’ve said before … “keep throwing them against the wall until one of them sticks”, so let’s give them another 12 months and see what they do with Nest.

        And indeed, as you suggested, they have sold Moto for a $5.5B loss, so, abject failure is the right term.

    • Shawn Dehkhodaei

      While your #2 was addressed earlier, I must chime in that with #3, it’s a total non-issue, not just for Google, but most companies. Fact is, that most investors in the tech sector, are institutional investors (as is the case with AMZN and AAPL), and they literally don’t give a shit what the company is doing … they’re a bunch of hedge fund managers whose sole purpose is to manipulate the market to their benefit. So as long as they’re making gains in GOOG or whatever, they’re happy; they could care less HOW the stock is going up, as long as it’s going up (case in point, Carl Icahn). They don’t have any ethics :-)

      And as for the acquisitions, it’s really hard to tell, because with some creative accounting, you can bury the costs so that you wash them off with the cash cow, in which case, again the investors don’t give a shit; and I’d be hard pressed if the founders ever do ….. it’s not in their ethos.

      Most “authoritarian” public companies like Google and FaceBook are run like a dictatorship, so no one really has a say in the direction of the company other the the top 2 or 3 people (look at Microsoft’s last 10 years …. it’s all Ballmer).

  • Sacto_Joe

    Back at the beginning of the year, Walt Mossberg had this to say: “The biggest tech religion is the Church of Apple…”.

    http://recode.net/2014/01/02/its-not-a-church-its-just-an-apple-store/

    Wrong. It’s the Church of Google.

    • marcoselmalo

      Also, church rhymes with search. That’s got to be more than just a coincidence. :D

    • Kizedek

      What about the Church of Marketshare? That’s a pretty big one, too. A few of its members keep proselytizing around here.

      • Shawn Dehkhodaei

        Indeed, it has more subscribers … IDC and the bean counters.

  • Ian Ollmann

    As a former scientist, this notion of having scientists run the world should appeal to me. However, it appears that in this case, it doesn’t. I was strongly advocating getting a NestLabs thermostat at home, but after the acquisition, I no longer want it. I don’t trust Google.

    Why? The root of the problem is that I just don’t understand Google. The work of a real scientist is peer reviewed and published. Google functions more like the NSA.

    • slauterman

      I had a similar feeling – intrigued by Nest but now that it is under Google’s umbrella, my unease with Google’s intentions is making me not want one anymore. The source is no longer trustworthy.

      As an aside, could it be that what Google buys with ambiguity is time? Rather than allowing markets/government/users make snap judgments about stated intentions, silence lets the experiment continue to run while the results are still incomplete. It strikes me as unique to think about several Google services that, if offered by another company justifying their actions on a measured and regular basis, would otherwise be judged unsuccessful more rapidly. Maybe hiding behind the curtain gives Google the most precious commodity – time – so as to continue to grow the experiment.

      • pixelfunk

        I think you are on the right track. We (including Horace and Clayton Christensen) criticize companies that are focused on short term profits and what the “market” thinks. Google has built a large organization that is not beholden to this master. While this does not eliminate the threat, in theory this should make them less susceptible to disruption. It should also give them more flexibility to disrupt others. Still a great challenge to execute on this, but I am very curious to see what they can do with this latitude.

      • Ian Ollmann

        Prediction: mostly waste money.

        I was delighted to see the glucose monitoring contact lenses. Hopefully they will license it to pharma and not sit on it or attempt to commercialize it themselves.

      • Fran_Kostella

        The problem being that diabetics are not supposed to wear contacts. It comes across to me as research for google glass in search of a product. Great concept in isolation from the real needs of the market.

      • telcodud

        That was proven to be BS 10 years ago. Ref: http://www.ncbi.nlm.nih.gov/pubmed/15000769

      • Fran_Kostella

        I suppose one study resolves that issue completely? I am not fit to judge it, but this is what diabetics tell me and what they seem to believe, even well educated diabetics. My point was that it looks like work done without considering the market nor how to do products. If the goal was to do medical devices they’d be addressing this, it seems.

      • Fran_Kostella

        Does one study make it BS? I’m definitely not an expert but visits to online medical sites, including one government site I found from your link, are less definitive than “BS”. The consensus seems to be “it depends” on your condition and the type of lens.

        I can’t speak to the truth or complexity of the issue, however, a business that is getting into the medical device business needs to address these kinds of issues. It is commonly understood to be an area of concern. Since all of the diabetics I know tell me that they can’t wear contacts at all, or not very often, I don’t see how they missed the issue. Again, it just comes across as a part of research for some future version of Glass and not as a medical product plan.

    • Anton Nekhaenko

      At the same time it doesn’t mean they don’t yield results.

    • peter

      Things like thermostats have a 10-year life (if not longer), you have got to wonder how that sits within Google — who have a much shorter attention span and could discontinue the product at the drop of a hat.

      • Anton Nekhaenko

        Why do you think Google has short attention span? IMO they give off the vibe of people with long-term vision.

      • peter

        There is a rather long list of discontinued Google services that they lost patience with, see here: http://en.wikipedia.org/wiki/List_of_Google_products#Discontinued_products_and_services

        No trolling: what gives you the vibe that they have a long-term vision and what do you think that vision is?

      • Fran_Kostella

        Hmm, I read them as being mostly reactive. They do these “moonshot” projects, yes, but I don’t see any real products there. The vibe I get is of a lot of really smart guys with tons of money who want to do research for personal reasons who then look for justification for doing it.

      • ryanpederson

        I don’t think they bought Nest for just a smart thermostat. That’s just the beginning. They bought it for Tony Fadell and his visionary team. It works well with their idea of the future. They will most likely run it as a startup.

        They want to build The Google Home of the Future. An intelligent house that keeps you safe, knows your habits, who you are, what you do, what you want. Wake up in the morning to your favorite breakfast food already cooked. Your fridge senses you are out of milk so it orders more from Amazon Local which delivers it same day and your Google Robot puts it into the house.

        Everything wired together not by Android, but simply the all-knowing Google eco-system. Android will just be individual nodes.

      • Engels Vargas

        Adding to your great observation Ryan, what seems to go unnoticed by everyone is that Nest & Google Fiber will be the key to the future. Google will leave everyone behind once they are able to take Google Fiber to every city. People will use all the connected devices in their home without having to worry about running out of data or their connection being too slow. Comcast will try to meter your data usage and that will prevent people from having a ‘connected’ home but Google will free up innovation by allowing people to stop worrying about Data usage and Net Neutrality.

  • http://coolchaser.com chaodoze

    Is Google really breaking from convention? Profits (eventually) are necessary, but all the great tech companies (e.g. Apple, Facebook, Amazon) have a stated greater purpose. As Jony Ive said, Apple’s goal is not to make money but to make great products. That sounds pretty vague and all-encompassing too!
    Why single out Google?

    • Sacto_Joe

      “Making great products” is a lot more exact than “do no evil”. As others have pointed out, “evil” is a relative term. For example, Google’s penchant for ripping off the intellectual property of others (in the case of Android by giving the product away and making no profit on it) can be seen as defining intellectual property as evil.

      Along those same lines, it’s also true that what one perceives as “evil” one day can change the next. Ergo, Google’s apparent “conversion” to seeing the “good” of owning intellectual property.

      How convenient for them.

      • http://coolchaser.com chaodoze

        Except “do no evil” is not Google’s mission as many have stated here. “Google’s mission is to organize the world’s information and make it universally accessible and useful.” which is a lot more exact than “Making great products” although they are still both hugely vague (altho’ I’m not the one criticizing the vagueness)

        fyi, Google’s *informal* motto is “Don’t be evil” which sounds the similar but has a more nuanced connotation than “do no evil”

      • http://coolchaser.com chaodoze

        As a few have stated, Google’s mission is to organize the world’s information and make it universally accessible and useful. (just google it!) I think that’s a lot more exact than “Make great products”, although I’m not the one criticizing the vagueness

        Google’s informal motto is “Don’t be Evil”, which sounds similar to “Do no evil” but IMHO sounds more nuanced. Most human knowledge is built upon the works of others (standing on the shoulder of giants), I don’t see that as inherently evil.

      • Sacto_Joe

        “Don’t be evil” or “do no evil” are close enough. My point about defining “evil” still stands.

        Google’s money is earned from the advertising business that it has placed between people’s eyeballs and the information they desire. Their “mission” may or may not be what you say, but it’s only a means to an end, which is, again, to place ads between eyeballs and information.

        Personally, I’d say that’s pretty evil….

      • Kizedek

        On reading those two statements, I think you can only say Google’s is “a lot more exact than” Apple’s in a grammatical sense.

        But in reality, the opposite may be true…

        Apple simply makes the best products it can, and I judge whether my money was well spent and I will buy another Apple product.

        But we don’t know whether Google is truly organizing the world’s information in a useful way, and to whom it is supposed to be useful — to the searcher or the advertiser, for example. Perhaps the “information” they mean is really Analytics and the personal data and browsing habits of the world’s inhabitants.

        As Horace points out: if Google was more financially accountable with a stated business model, then that might provide some rough parameters for judging how they view their stated purposes, and how well they are adhering to them.

      • charly

        Best as in best form. In function their designs aren’t always … let say best.

      • Kizedek

        Sure, that’s debatable on a case by case basis. No-one would deny that, me included.

        Thing is, I’m not going to spend my time searching out each and every best example of every function I might ever need and try to get them on my one Android phone or tablet, even if that was possible in one model, which it isn’t.

        No, the iPhone or iPad are the best all around devices I can find. And Apple has been making some pretty good trade-offs when it comes to specific functions.

        Besides, though they may not always be the best of each and every function ever possible, Apple does provide the best of at least half of them, and certainly most of the ones that matter to most people most of the time.

      • Shawn Dehkhodaei

        Hopefully you’ve come up with something as well-designed that functions better, yes?

        Please show us a link to your prototype or shipping product ….

    • Kizedek

      That phrase of Apple’s is not too vague and all-encompassing when we consider they have a handful of actual products that anyone can handle when they walk into a store… I think it’s implicitly implied in the statement this way: Make Great Products [of the products that we make].

      Anyway, I think Apple’s “stated greater purpose”, is more like “computing for the rest of us”. Making Great Products may be an “aim” or “goal”?

      As to what Horace was perhaps getting at in the article: it’s understood that any public company has the basic purpose of making money whatever else is clearly or vaguely stated as a “greater purpose”… so, when making money is something that Google goes out of its way to dismiss and seemingly scorn, then their “stated greater purpose” must be all the more clear and compelling. Since it isn’t, we have a disconnect. That’s the issue.

    • Shawn Dehkhodaei

      Actually Jony Ive never said that “we don’t want to make money” …. he said that “we want to make great products” and yes, the money follows. Not saying it doesn’t imply it. So that’s different than coming out with “Do no evil” and then turning around and doing exactly the opposite; i.e. doing evil, or whatever (generally negative things that piss people off).

      So there is a distinct hypocrisy in Google’s actions vis-a-vis their mission statement, which is not present in Apple; they say that “they want to make great products” and they do !!! And yes, they also happen to make lots of money doing it … well, great. Every company similar to Apple says the same thing: Mercedes wants to make safe, fast luxury cars, which they do (and boy they make loads of money). Pick any high-end consumer goods company and the message is the same.

      In the case of Google is quite different. A more apt parallel would be Microsoft of late …. since the late 90’s they’ve been constantly using the word “innovation” in their PR and keynotes, when everyone in the world knows that the only thing that Microsoft DOESN”T HAVE is “innovation” …. they’re the biggest copycat in the industry (followed closely by Google) …. so it’s ridiculous for them to say things like that. Google’s mission statement as reflected by their actions seems just as ridiculous.

  • normm

    I disagree somewhat with your concern. Google’s success is based on search, and further improvements there depend on progress in difficult AI problems. Undirected academic research has resulted in much of the success of the internet. And evolution is an undirected search that has produced everything interesting in the world, including business goals! If research progress doesn’t get incorporated into business success in time to keep Google profitable, evolution will get rid of them.

    Apple has much more focused research, and they seem to leave it to the rest of the world to fund long-term undirected research. I think they should be spending at least a few percent of their profits on pie-in-the-sky.

    • Sacto_Joe

      “Google’s success is based on search” is only part of the truth. The reality is that their financial success stems from tying search into advertising.

      • normm

        If I’m going to get ads, I actually prefer ones that are about something I’m looking for. I find it impressive that we can pay for all of the useful Google products with what seems to me this relatively small cost.

      • Kizedek

        The problem is not that we do or don’t get ads vaguely relevant to something going on in our lives.

        The problem is that there is a suspicion that Google is taking upon itself the role of the world’s knowledge curator. It is curating all content in some fashion, and we don’t know how or why. As Horace points out, a lot is vague and opaque. Everyone on the planet is basically placing themselves in the hands of three people, and we have to trust them.

        Well, some people don’t trust FoxNews. Others don’t trust other news. We come to expect some bias or agenda, and strive to understand it so that we can get a wide range of views and balance them, or strive to find an unbiased source.

        For us to consider a source unbiased, we have to trust it. That usually comes through personal knowledge or the recommendation of people whom we trust.

        That all goes out the window when it comes to Google. I don’t know what view of “reality” I am getting when I do a Google search on anything. I don’t know if they are serving me what they think I should see; I don’t know if they are serving me what my “friends” “like”; I don’t know if they are serving me things that are popular with people whom Google judges are “like” me (nor how they judge that); I don’t know if they are not showing me certain results because someone is being punished somehow…

        It might as well be a lottery, because Google is pretty mum about it; therefore the suspicion is that their unknown processes and purposes simply suit some hidden agenda of their own.

      • PCurc

        The opaqueness of search is an excellent point. When it comes to search, at least, Google almost seems like a public utility (which is partially why I thought the comparison to Bell Labs was interesting) – except if Google ran the phone system, phone service would be free, but you’d hear ads while the phone was ringing, and when you dialed your local plumber you might get connected to Roto-Rooter instead if they put in a higher bid for your call.

        It’s funny because utilities tend not to be particularly exciting, but there’s power in being the source for something that everybody needs. You could argue that Amazon is on its way to becoming a shopping “utility” (and on the other side of its business, a general computing and content delivery utility).

      • deceit

        It’s not a small cost. The companies doing the advertising must be getting a return on their investment, so it’s costing the average “you” significantly more than they’re paying Google. It’s just an indirect business model to make you think you’re getting something for free.

      • http://www.asymco.com Horace Dediu

        The cost is small to those smart enough to avoid the ads or their enticements. The cost is high to the gullible. I would conclude therefore that internet advertising is a regressive tax and a subsidy for the smart. (I came to this conclusion after trying to figure out how Google could possibly afford me. I use a vast amount of their resources and almost never see any ads. I don’t think I’ve clicked on one since the 90s. Thousands of poor people must be paying for my lunch.)

      • telcodud

        If you believe that the collection of data itself is somehow nefarious, then how does avoiding ads (I assume you mean clicking on ads) work for the smart ones amongst us? The ad is already shown to you.

        OTOH, I feel bad for the poor(er) people who’ve bought expensive iPhones for minimal use. For instance, my gardener. He could have bought an equivalent (for his use) Android phone for a third of the cost.

    • Mark Jones

      Apple doesn’t talk about its “pie-in-the-sky” research; it doesn’t mean they aren’t doing it.

      • normm

        You’re right, but I haven’t seen much evidence of this yet. I would say Apple has a history and culture of excellent applied research, and they have gotten huge very suddenly. A small company should apply basic research, the biggest tech company should do it.

      • marcoselmalo

        What sort of basic scientific research (as opposed to applied research) is Google doing that Apple is not?

        What sort of basic scientific research are you proposing big companies do?

        Should Apple repurpose their new under construction headquarters to be a particle accelerator?

        I’m not sure that what you are asking is reasonable. Maybe you can clarify it.

      • normm

        That’s a good question. I think Apple should own a fab and support basic semiconductor research. I think they should support all sorts of materials science research. And Apple should support a lot of academic computer science and AI research — they more than almost anyone else will benefit from advances in the state of the art. They should also support at least a little far out research. Probably not astrophysics and particle colliders, but certainly quantum theory and condensed matter. The entire budget of the National Science Foundation, which provides 60% of the non-medical basic research funding to US universities, is less than $8 billion/year. If Apple threw in another billion it would have an enormous impact! Just subtract that from the $30 billion a year it’s currently using to buy back shares and retire them — seems like a much more promising use of funds!

      • dontknow

        They’re still filing for liquidmetal patents, and working on this sapphire thing. I don’t really know what they are or aren’t doing internally, I guess.

    • Kizedek

      “Apple has much more focused research, and they seem to leave it to the rest of the world to fund long-term undirected research. I think they should be spending at least a few percent of their profits on pie-in-the-sky.”

      Apple does. It’s called Acquisition. Whenever they spend a couple hundred million on an interesting little company and small team, that is Apple’s pie-in-the-sky.

      Then that talent is brought in and is there specifically to carry it on, with focus. Apple can’t task its own talent to pie-in-the-sky, because they wouldn’t then be focused.

      You are asking Apple to be both focused and unfocused. That’s a muddle, and that’s what we have Google for.

      • charly

        Those small companies were by and large doing applied research

      • Kizedek

        A small startup with a pie-in-the-sky idea may have applied to a VC or other body for funding for their very specific idea. Maybe Apple thinks that idea has merit and aligns with their goals.

        Think of it as a bunch of little R&D labs all over the world, each having one pie-in-the-sky idea of their own and taking it a bit further, rather than one formal lab sitting down and cranking out lots of ideas without having the luxury of taking each idea very far.

        The world is the lab, and ideas (which are cheap) get a little more testing by someone devoted to them. Kind of like Kick-Starter, with Apple fully funding certain projects.

      • marcoselmalo

        What’s your point? Apple should be searching for elementary particles? Mapping genomes? Funding archaeological research?

      • charly

        My point was that Apple isn’t paying for fundamental research by buying up small companies

      • marcoselmalo

        Is your point therefore predicated on the proposition that pie-in-the-sky research is exclusively basic scientific research?

    • rational2

      Microsoft has the best academic research org. What good is it doing for them?

      Google is lot more practical in its research. Each mega research project they take on seems to challenge existing laws and assumptions made by society (self driving cars; glasses; mapping and photographing the world etc)

      You don’t see the research departments of other big tech companies disrupting society as much as Google s.

      • dannyo152

        Disruption is not a goal. The goal is to find some market sector which is difficult for established entities to enter, and to bring into that market profitable products. Disruption is a by-product when the new sector evolves (bottom-up) and pulls profits from an existing sector.

        As for Microsoft, in the corners of the world where I’m watching, I see things that Microsoft Research is accomplishing.

        As for Google. They have put quite a few things in beta and then pulled them.

        Is it imperative that every research project be transformed into a viable product? I don’t think so, though something has to benefit the company’s product line, otherwise management gets punished for spending on r&d instead of putting the money into an investment.

        The connection between research and new products is hardly linear. Think 3-M and the Post-It. Some research breakthroughs only benefit internal processes and other companies get to productize them. Think Unix and Bell Labs (old AT&T).

        That’s research and products. Research and disruptions? Disruptions are rare.

        When I was in college in the mid-70s, everyone knew that the next 20 years of computing was already running in IBM’s labs. Well, it was and it wasn’t. 20 years later, the PC was well established and IBM was beginning to consider its ultimate exit from the pc business, which IBM single-handedly expanded significantly. So those 1960s and 1970s research dollars, wasted?

        I come from a family of academic biology researchers. I am absolutely, positively supportive of research for research’s sake.

        With Mr. Dediu’s commentary today, I don’t take it as endorsement or critique of Google’s choices. I look upon it as an exploration into the ways we talk about Google and ascertain its success. In some ways, it’s a search into the meaning of success and the nature of our conversations about technology companies. Is “success” an objective term? With the limited perspective of markets, yes, because it’s profit or stock price changes. But in a larger sense, two companies with the same stock price or profits may not be equally successful when we factor in their goals and their impacts on society.

        Oh and to the preceding poster who said Apple should spend more on r&d. Why? I expect they already have enough ideas floating around and that company has placed its bets on focus.

  • http://petervandijck.com/ Peter Van Dijck

    I renamed “processes” to “habits” in our company. Much more precise and encompasses things that are written down as well as most things that are not written down :)

  • Marcosardi

    I believe there might be another explanation, not instead of this one, but in addition to. Google is reluctant to talk openly about profits and money flows because those listening are not customers, they are the product. Google’s “users” are the product and telling them over and over how much money Google is making thanks to them might lead to problems.

  • synthmeister

    “This is the radical bet underlying the Google thesis: are business models necessary? This is in fact a bet many VCs are implicitly placing within the current start-up culture. ”

    Yeah, VCs were making that same stupid bet in the dot.com bubble.

    • rational2

      Thanks to Fed’s easy money!

    • charly

      Google business model is clear. Sell adds on the Internet. More Internet more adds.

      • Sacto_Joe

        It’s “ads”, not “adds”….

  • Bruce_Mc

    I sense in this post that a gauntlet has been thrown down! It will be interesting to see who picks it up and explains Google’s intentions.

    Benedict Evans has been known to use the following line: “Google can go on creating a benevolent AI or whatever it is they are doing over there…”

    I don’t think he is entirely serious but it is interesting speculation!

    Remember Benedict was the one who explained the concept of arbitrage in cell phone plan pricing in an earlier podcast with you…

    My two cents on “Don’t be evil” is that it was a reaction to the practices of Microsoft at the time Google was formed. Therefore, any “evil” not practiced by Microsoft around or before the turn of the century is exempt from the prohibition.

    • marcoselmalo

      What Google did to Google Reader (and by extension what they did to RSS) looks an awful lot like the Microsoft strategy of Embrace and Extend. They killed it to move people over to G+.

    • Tim Sweetman

      “We are not scanning all those books to be read by people,” explained one of my hosts [at Google] after my talk. “We are scanning them to be read by an [Artificial Intelligence].” — George Dyson, 2005.

      http://edge.org/conversation/turing-39s-cathedral

  • charly

    Some businesses are killed by to much focus on profit optimization. See for example the first generation of search engines. My guess is that Google feels that it makes it money in a business which is very susceptible to this and why they mainly try to grow profits by growth of the pie and not by being more “efficient” with adds.

    There is also the strategic interest of harming Microsoft (Gmail, Chrome OS) and Facebook (g+), tactical interest of paying less to Mozilla (Chrome), people having more time to be on the internet (not driving means more surfing, cheap smartphones with Android), more money (self driving car is very close to robotics and we can use that to make money in robotics) and just interesting toys for the bosses (life extension)

    Is there anything left in Google that wasn’t mentioned?

    • Tatil_S

      On the other hand, competing in the field of search engines brought MS ridicule, management distraction and large financial losses. When we look back on it five years from now, would we decide that it’d be better for Google not try this hard to compete against Google?

      • charly

        Search engines are highly profitable so how can MS be losing money (by overpaying) and Google sees MS as enemy so MS needs to attack Google to distract them. Also realize that there are not that many fields that Google or MS could invest in that are large enough to matter and are close enough to their core competence

  • Dougal Watt

    Horace, ‘3p’s’ is a very simplistic way to understand business models, and risks obscuring interesting details. Consider the role of information as perhaps the most important enabler in a business model. Typically in business, processes (and other resources like organisation roles, staff members, and technology) are relatively transient and evolve significantly over time, yet information persists (and is actually added to) over long periods of time.

    Simplifying business models to a three-factor model will ignore this critical resource, which when you consider Google’s business model, we see that it is supposedly their reason for existing after all, and is overwhelmingly how they ‘add value’ and generate income.

    • Kizedek

      The three alliterative words that Horace used to make the title and communicate the concept that any analysis has to ask at least three questions may appear simplistic.

      But it’s shorthand for his analytical approach and process. Horace did in fact cover information under People, when he alternatively called it Resources and asked the fourth question — What? in addition to Who?

      • Dougal Watt

        I get that this is illustrative, but information is not mentioned anywhere in the article. Information would not logically fall under Process as processes, while not formally defined and agreed anywhere, are often thought of as action steps that operate on resources, one of which is information. Thus a process may use or change the state of information (the state-change view), but information is a separate resource in its own right.

        I strongly doubt that Google thinks about information under Process or Structure – almost every organisation thinks in terms of processes or systems, not information (even information centric businesses).

      • Kizedek

        Fair enough. Perhaps there is a fourth dimension that bears exploring. Perhaps this even explains why Google defies explanation to some degree.

        Perhaps Apple defies explanation for another reason (though Horace seems to be homing in on some of the particulars): Apple has tuned its Processes to fairly reliably and regularly produce an abstract — (repeatable) success.

      • marcoselmalo

        Perhaps “information” is too general a word. There is raw data and there is structure for data. Another thing to think about is how the data functions within the company. Does that help in the assignment of information to conceptual categories?

      • Dougal Watt

        Information is data with context, just as knowledge is information with human-provided context and processing (e.g. judgement, experience…).
        The problem with our industry is it can’t even define these things properly, let alone define standard architectural approaches to understand and manipulate information for business value creation.

      • marcoselmalo

        Thanks. You put succinctly that for which I was grasping.

      • http://www.asymco.com Horace Dediu

        The original three P’s were Christensen’s RPV: Resources, Processes and Values. Values later became Priorities as the term “corporate values” hijacked any meaning out of the word values. My extension is to redefine resources as “people” since that represents the most meaningful resource for a company. But I should have stated that People are not the only resources. Resources include assets (as in balance sheet assets) and intellectual property and of course information. (Priorities also became Purposes).

  • obarthelemy

    So much FUD !

    “The trouble lies in that organization also having de-facto control over the online (and hence increasingly offline) lives of more than one billion people.” Control ? How so ? I use 3 search engines, 3 email accounts… I guess I should look into alternative calendars too, though somehow this seems not very “controlling”. Or may be you mean Android and the PlayStore, to which there are several major alternatives, if only forked Android and the Amazon AppStore…

    “the road to hell is paved with good intentions”. Failed to prove they are bad intentions, heh ?

    My general understanding is that Google stumbled into a windfall of search revenues. They could go the Apple/MS way and try to ringfence their core business, then embrace and extend adjacent ones. They’re not doing that, they’re looking at the Next Big Things in tech, even if those are long-term: self-driving cars, smart glasses, cheap-as-dirt computers (whether in the pocket, laptop, and maybe next desktop, category), now robots…

    I understand the search-funded model is generating much anxiety for more old-school types. I also understand the “let’s make stuff that kicks ass, profits will follow” attitude is unfamiliar to i-nalysts very focused on Apple not over-serving, keeping milking subsidies, and keeping the upgrade machine pumping. Alternatives worldviews are not that hard to understand though.

    • Kizedek

      Oh, hi Obart. Missed you in the last couple of articles.

    • azazello

      The modernist utopia: science and (now) IT will continue to bring progress, help to meet our needs and answer our age-old burning questions. Science and IT cannot parse ethics, esthetics and existence/transcendence. As the discussion on the board suggests from a purely IT vantage point the ‘don’t be evil’ motto remains opaque as it is a naïve motto of a possibly naïve company, itself opaque. (Naïvité defined as a lack of recognition of destructive wishes and desires of the subject and the other.) Since there is not much of a narrative of those involved in leading Google and presumably shaping its fundamental philosophy our meta-narratives about Google are contextually poorly anchored. Platitudinous categorical statements about Google’s amoral or moral nature is of no help BUT I note the tension between Google’s attempt to pattern-recognize and market us as individual—commodity-desire generated—commodities while remaining opaque. If our personal information is the substance of the Hegelian/Kojévian trope of the Master-Slave and the Slave finally recognizes that, the waking recognition and bartering this information directly to Google’s clients, the advertisers, would collapse Google’s core and possibly only business.

      The metaphysical/ethical question then is: is the Master amoral? The ambiguity of the term (outside of or without ethical consideration) speaks of another tension between vantage points.

      @obartelemy
      ‘I also understand the “let’s make stuff that kicks ass, profits will follow” attitude is unfamiliar to i-nalysts’ (…) well, then you do not understand Apple as this is exactly what is the engineering/design philosophy that drives the company your unnecessarily sarcastic tone notwithstanding.

      • obarthelemy

        Indeed, “don’ be evil” is a weird motto, especially w/o context. Then again “build the best computers” is also either naive or overbearing or totalitarian…and immature/blinkered in all cases: reminds me of all the kids debarking into World of Warcraft and asking what the Best Class is, or rolling a Hunter and asking what the Best Pet is: http://www.youtube.com/watch?v=WhvvNGeHHME

        As for Corps being amoral, I think that’s an established fact, for all corps. Just looking at all the tax optimization, abusive patenting, under-handed HR, business, political and legal practices, not to go into customer service,… provides ample proof.

      • azazello

        Trying to create a better user experience and excel in hardware engineering is not overbearing, totalitarian nor naïve. Ethics does not deal with the category of ‘facts.’ Other than that I agree.

      • obarthelemy

        It’s assuming there’s one “better user experience”, and one “better hardware”. Both are ridiculous, plus those other epithets.
        Case in point: for me, smartphone user experience = screen size. I’d be willing to compromise on a lot of things just so that my phone can be a pleasant ebook reader and video player. Luckily I don’t have to sacrifice anything at all to get a 6″-6.5″ phone, I even have a choice (Huawei Ascend Mate, Samsung Galaxy Mega 6.3, Sony Xperia Z Ultra, and more obscure chinese stuff, even HP and Lenovo are coming up with phablets). I also need my phone to last for an extended day w/o juicing up, and to have FM radio and an SD slot (much time spent outside 3G/Wifi coverage). iPhones are very far from “better” **for me**.
        Ditto with tablets: I purchased a 13″ tablet about 2 yrs ago. Definitely not something to carry outside of home (if that.. it barely left my desk), but a “better” product for me.

      • azazello

        I see… never mind. I regret having provided food for a non-dialogic response. I apologize to all others in the thread.

      • Kizedek

        Welcome to the club

      • peto1

        You must be from Brobdingnag …

      • obarthelemy

        More like Mr Maggoo

      • marcoselmalo

        OK, so Apple doesn’t try to be all things to all people. That’s pretty damn amoral if you ask me, if not actively evil. The company actually says so publicly.

        Choice is good, in the moral sense. That’s why cable company executives are first in line for heaven.

    • def4

      They are doing exactly what you claim they aren’t.
      Google plus and Android are exactly about complete control over access to online information and they help fortify the search business.

      Andoid is a rip-off that has killed innovation in mobile solely by virtue of its licensing model.
      Remember webOS? MeeGo? They were much more innovative than Android yet they had no chance. Others are still barely showing a pulse.
      Google plus has no pricing advantage so it has the market share it deserves.

      Google does the exact thing as Microsoft used to do: muscle in on every profitable niche in their area and suck up all the air in the room.
      Microsoft did it for desktop software and Google does it for web services.

      All the rest is vaporware, exactly the kind of stuff you would expect to come out of rich people with grandiose ambitions.

      • obarthelemy

        Well, the licensing and funding model are the innovation, though transposing to IT (which is increasingly about Content, be it apps, or social) the radio/TV/magazine ad-supported model isn’t that hard to dream up.

        I had a HP tablet at one time, and I can’t grok what the still-enduring devotion is about. It had a gimmicky task switcher, which looked nice but required full-screen redraws and big gestures to switch apps (Android overlays miniatures of recently-used apps when long-pressing the Home button, and automagically unloads old apps while saving their state); and aside from that, not much of notice. I upgraded to a Xoom, and never had any desire to go back. I’m sure there’s an Android app to mimick the task switcher, for nostalgics of in-your-face, wait-while-I-redraw, task switching. I haven’t tried MeeGo, my impression is that Nokia dropped it because they never could stabilize and finalize it. BTW, Nokia went to MS, not to Google, for a production-ready OS.

        Google mostly succeed because their products are superior. Gmail and its IMAP was long a blessing when Hotmail only supported EAS or POP, and Yahoo Mail only POP. Both have come round only last year. Same with calendaring, contacts, rss, IM… for a long time only Google supported standards and interoperability, as well as made full-featured, pleasant to use products. And built-in tools to migrate out of their services at will. That’s changing a bit though, Hangouts is certainly not interoperable, and Jabber support mostly got the axe. I’m fairly sure that’s a reaction to MS and Apple having closed systems though, leaving theirs open would only have lead to pillaging for Google. Or not.

        Google+ is mostly tanking because it is a rather bad product (my home page is filled with hangouts logs ???)

      • def4

        Making a rip-off and giving it away is not a business model innovation. Microsoft did it to Netscape.

        At the time, Android was inferior. It’s pointless to compare the Android of today with its competitors of several years ago.
        The fact that you bought a Xoom and liked it speaks volumes of what you are willing to accept just because it’s coming from Google. That was one of the worst products to ship from a big name brand in recent memory.

        Google plus seems much nicer than Facebook but it’s simply late.

    • marcoselmalo

      “They could go the Apple/MS way and try to ringfence their core business, then embrace and extend adjacent ones. They’re not doing that . . .”

      Google Reader, cancelled because they wanted to move users to G+.

      How is that not Embrace, Extend, and Extinguish?

      I’m also curious as to what technology Apple has applied the EEE tactic. I’m honestly curious.

  • DesDizzy

    As a risk professional having been involved with business risk for 20+ years I am particularly interested in organisational behaviour. A study of recent business history i.e. past 100 years or so suggests that whilst the 3Ps might be a useful guide for comparative analysis, one under-estimates leadership at one’s peril. Time and time again, when looking at key corporate decisions/events decisions are made by senior management which do not conform to “norms” of business logic.

    I believe a simple word “hubris” would address many of the projects undertaken by Google/Google management. These projects are not atypical, historically speaking, of large profitable quasi-monopolistic organisations with weak governance structure/internal control mechanisms.

    Many people will hasten to defend these “Googleisms” as the new thing/paradigm, especially those that have a tendency towards the nirvana of the new order business world based on open/freebee eco-systyems, which they hope will triumph over the prosaic old order of profit, focus and excellence of product. I think this is exemplified most eloquently by the “Hacker” culture i.e. make your mistakes as a business process, where if you have sufficient scale/profit there are no downsides to shipping defective products/features/policies, they can all be remedied later and are not deemed to be business critical.

    • marcoselmalo

      A failed goldmine or two is merely part of learning how to mine for gold successfully. Meanwhile, can we sell you a pick and shovel? How about my latest book, The Seven Habits of Successful Prospectors? Will that be cash or charge (or bitcoins)?

      • David

        A lovely skewering of an entire industry in four succinct sentences. Bravo.

  • orienteer

    Horace, was this meditation prompted by the acquisition of Nest?

    • http://www.asymco.com Horace Dediu

      Partly. The Nest acquisition is not cause for alarm by itself. The price is. In other words, it’s not that Google does not care about users. That is well understood. It’s not that they don’t care about their investors. That is a declared truth. It’s that they don’t care about money. It’s not that they don’t care about money. That too seems to be waved around with pride. It’s also that they don’t need a business model logic to make decisions about any activity. R&D activities should be relatively free from a proof of value burden. But when spending tens of billions (or should I say Pi and “e” billions) on whimsical ideas the trust one may have in the stewards of our online presence becomes an issue.

  • http://prenatal-cradle.com/ Prenatal Cradle

    Having experimented with organic SEO, Google clearly has a buisness model and a keen interest in profit. It’s called AdWords and to anyone who relies on Google traffic for business is well aware of Google’s efforts to destroy all competition in the world of paid links, which in essence is what AdWords is.

  • peter

    Om Malik has a thoughtful article about the Google diabetes contact lenses, which really raises the question what Google is about. It is worth a read as it gives the impression that Google is about applying technology, more than about solving real problems of real people.

    http://gigaom.com/2014/01/17/one-diabetics-take-on-googles-smart-contact-lenses/

  • willo

    Google wants to be everywhere we are. If they can manage that, they´ll have the ability to always serve us ads. We´re heading away from the web in big numbers, iPhone came suddenly everyone was spending more time in Apps than on the web. Soon we´ll spend more time with wearable. They want to obtain information and popularity simply to stay relevant.

    • Walt French

      It’s obvious to approximately everybody that virtually every cent that Google collects is due to its ad business. That is NOT the sort of thing that’d excite actual geeks and the “tech enthusiast” wannabes.

      My opinion is perhaps a bit more charitable than Horace’s: that Google is doing things to keep the faithful thinking of them as the tech innovators, while they steadily build their ad revenues, thereby minimizing badmouthing in the blogosphere about privacy, lousy monetization for all the actual content originators, etc. I certainly believe that integration/synergy between scraps of data can be more valuable than the pieces left here and there, but also that Google sucks up all the surplus from those efforts, and then some, leaving original authors/composers worse off.

      On the other hand, we don’t yet have a good way of dealing with money on the intertubes. Micropayments, my preferred choice, haven’t happened yet, and BitCoin seems designed for utterly different purposes. So we continue to sacrifice out attention and bandwidth to give authors a tiny fraction of what our time is worth. More of this will be more worse.

      • marcoselmalo

        So you are saying the innovation coming out of Google is PR? I’ll buy that for 0.0012th of a bitcoin. A lot of the announced products carry the aura of unselfishly helping humanity, such as Project Loon (internet via high altitude balloons) or the glucose level monitoring contact lens. This provides great press for Google, creating the image of a beneficent behemoth.

        However, on closer examination, problems of practicality continually crop up. Project Loon might have problems regarding sovereign airspace, especially with those countries that don’t want to give their people unfettered internet access. Diabetes sufferers are often told that they shouldn’t wear contact lenses. Google glass seems to be (to me, anyway) a solution in search if a problem*.

        Meanwhile, there are pressing real world problems that a genuinely benevolent organization might work on. The problem is that they are not geewhiz sexy to Google’s fan base.

        *unless the problem is defined as “how do we keep the fans engaged”.

      • Space Gorilla

        Yes, Google is an advertising company, and that ain’t cool. But they work on many ‘tech/geek’ problems (the wrong problems in my opinion) in order to manufacture a cool tech/geek image, and it works, people have bought the lie. Other than search, I can’t name a Google product/service that isn’t mediocre. And search is actually going that way, to the Land of Mediocrity.

        The other way to look at it is that the Google founders are actually pissed that they ended up making almost all their money by selling ads, and they’re painfully aware of how lame that is, so they’re trying whatever they can to break out of that advertising box.

      • charly

        Android, or is that a dirty word

      • Kizedek

        Are you proposing that as an alternative way that Google attempts to make money? Either directly, or by extending their opportunities to place ads? Because either way, it hasn’t worked — as you know, from this site alone.

        I just listened to the Cubed Podcast by the Bens. They suggest that the Mobile space is quickly becoming “the internet” as it were — not merely an annex. This is because the Mobile market is several times larger than the PC market already; and people always have their Mobile device with them, usually connected to the internet.

        Thus, due to the nature of webpages as they are displayed on Mobile devices, and the fact that most people prefer to spend time in dedicated mobile apps vs webpages, means that the ad opportunity for Google on Mobile (and therfore much of the internet), is significantly different than their opportunity on the desktop. It’s more difficult for Google to monetize the Mobile Internet experience.

        This is true, whatever the marketshare they have with Android. But, as we know, Google makes more money off the fewer iOS devices than it does off all Android devices due to the superior experience and ease of use of iOS.

        Android is a “dirty word” precisely because is it is posited as the answer to everything, but facts like the above are conveniently ignored — yes, Android is somehow winning; not for Google, but somehow, it’s “winning”.

      • charly

        The Google play shop is a direct, not advertising based, method to make money out of Android. If they get the usual 30% cut then i think this is already a near profitable way for Android to sustain itself. Android also allowed faster price drops in the price of useful smartphones. That in itself allowed Google to grow by having more customers. I have never read on this site that it didn’t work

        Mobile is becoming a full partner in internet traffic but it will not end up being the major interface to it. My expectation is that smartphones will end up with a third of the interface time. Tablets/PC two third and other (smart tv, game console etc) 5%. Smartphones will also be used at a time and place where pc based internet wasn’t really possible so smartphone use is mainly added time spend on the web.

        Your assumption that the current situation that most people use an app on a smartphone is IMHO a passing affair. Apps need trust and that is for most fleeting contacts with websites not there. Apps were also necessary because Apple didn’t allow flash. HTML5 is solving the flash problem but the trust problem stays so my expectation is that people will stop using websites-in-an-app completely and that even most apps that are more than a website will move to the web as also happened on the PC. Websites also have much less friction than apps but that is not always a good thing as leaving is also easier.

        IOS had a head start and is owned by on average (much) richer people who don’t live in countries Google isn’t big (read China and Russia) so it is not surprising that the average is higher for Apple devices but it your claim that they make more from IOS than from Android isn’t true anymore

      • dajhilton

        Explain. Who precisely is paying for Google Play? It’s free with my phone. Like the rest of Android.

      • marcoselmalo

        It protects their money making operation which is advertising. Therefore, they are still making money off of you. You’re still the product.

      • charly

        The apps you can buy with play aren’t free (duh) I believe i read a number of 2 billion dollar gross that Play made. 30% of that is 600 million dollar. I could do a lot with that even in Silicon Valley

      • Kizedek

        I think you totally misunderstand apps, certainly native iOS apps.

        The reason YOU don’t use them so much, find HTML5 a passable substitute, think they are a passing phase, or think that Google can fund itself from Google Play… is because apps on Android aren’t what they are iOS.

        If Google really is funding Android development out of its 30% of the Google Play Store (as well as running the store), then that only confirms what we think — Android isn’t a serious effort by Google. Apple funds iOS development out the gross margins on 100’s of millions of iOS devices.

        Trust? If you are talking about security, that is largely an issue with Android and Google’s vetting. If you are talking about the web service itself, then the issue is there whether you interface with it through an app or through a web page.

        There are plenty of trustworthy online web services whose primary interface is an app, particularly a native iOS app. They have web interfaces, certainly; but the primary way iOS users interface with them is through a dedicated, native app, because it makes a far superior experience. This includes services like Evernote, Freshbooks (accounting and invoicing), Linked In, Skype of course, Wunderlist, Calendar, Twitter, various collaboration apps… These are a smattering of those appearing on the first couple of screens of my iOS devices. This is where I spend most of my online time.

        As I have said elsewhere — using some iOS apps is actually preferable to the desktop app experience (let alone the web app web page). For example, I do all expense reporting, invoicing and accounting through iOS apps.

        This isn’t going away, it’s only going to intensify. No offense, but I take the opinions of people like Horace, Ben Bajarin and Benedict Evans over yours.

      • charly

        You are using words that i didn’t utter because where did i say i don’t use apps. Or that HTML5 is good (or bad)

        Google Play has an expected app revenue (without ads) of $1.3 billion in 2013. 30% of that is $400 million. That is serious money. Add the in-app advertising and and attributing the cost of the gmail, map, etc. apps to the same account as what is paying those apps on ios and my guess is that Android is making money for Google.

        Trust is not the same as security. I don’t have a security issue with apps that want microphone access without an obvious reason but i have trust issues with those apps

        The apps you named are the type of apps that also installed on (almost) every windows PC. They are not what the appstores are filled with. It is the netflix, amazon, wallmart, kfc apps that are the difference between the PC and smartphones.

        There are reasons why the internet led to the development of webapps and not native apps. It had to do with trust and especially friction. A website works after clicking on a link. An app needs to be installed and that allows time to think about it which often leads to not installing it. There is also the question of tablets etc. that are operated not by the owner but by somebody else (like all those work, school or kids tablets). A website works likely on those but an app can probably not be installed. This is the same reason why you don’t have an amazon app on your pc. You can’t use it on your boss his computer but going to amazon.com during your lunch-brake is possible from most PC’s as work

      • Kizedek

        The other part of friction is realizing that a dedicated app, from a service that you trust and use obviously, often represents better use of time than the web interface, regardless of whatever friction there may be to install it.

        Of course app stores aren’t filled with them. I said people are spending significant amounts of their online time in such mobile apps. There are only so many hours in the day.

        Again, people are increasingly spending online time in dedicated native mobile apps, because they are actually accomplishing something in a superior and more efficient manner — it’s called getting things done. Sorry if you haven’t discovered that yet.

        Of course they are available cross-platform. That’s what makes a compelling service. The mobile app itself must be incredibly compelling if it causes more people to spend more time in it and differentiates the service from its competition in the first place.

        Nothing you have said impinges on my statements. However, it is arguable that the shape of the internet is changing due to the amount of online time people spend in dedicated native mobile apps. It’s not a passing phase, it’s a development of the internet (at the expense of the traditional web).

      • charly

        But the early “internet” (more the pc’s using modems to phone in into servers era) was also filled with dedicated apps. And they were better than the webapps that replaced them (at least according to my aunt and how she talked about the banking website that replaced her banking app). But those apps were replaced by websites.

        Apps need more time and effort to be used ones.If you use them more often than they can be faster but if you use an app ones than a website is better

        There is also the whole trust issue which are easier to deal with with websites

      • Kizedek

        “…it is not surprising that the average is higher for Apple devices but it your claim that they make more from IOS than from Android isn’t true anymore”

        http://appleinsider.com/articles/14/01/21/apples-ios-edges-out-android-in-mobile-ad-traffic-dominates-in-revenue

      • charly

        If you read the report you would have read that Android smartphones have a larger ad marketshare than iPhone and Google probably has a bigger marketshare (per country) on Android than on IOS. They don’t have to share with Apple any of the ad revenue on Android so if i look at all those things i think it is obvious that Google makes more money from Android than from IOS

        ps. Their worldwide marketshare of pageviews of IOS is way to high so i think they overvalue the American market in their measurements which isn’t surprising for an Western company

      • charly

        Project loon isn’t exactly unselfish if you make money by people using the Internet. More people using it means more money for Google even if they are poor Sub-Sahara Africans.

        The glucose measuring contact lens is just an extension of project glass. It is also one that pays itself back as those glucose measuring sticks aren’t exactly free so if you could integrate it in a contact lens for say $200 a year than you could probably own the market for glucose measurements

      • Khürt L. Williams

        As a person with type 1 diabetes I can tell you there are all kinds or problems with a contact lens glucometer that will first have to be resolved. Current blood serum Glucometers are only +/- 20% accurate. A device that’s measuring something as variable as the moisture in the eye will most likely be even less accurate. It may be painless but provides inaccurate information needed to make a health decision the I’m not using it.

      • marcoselmalo

        IF is the operative word.

        Project Loon was a proof if concept that something was technically possible, but that doesn’t mean it is practical. Indeed, it’s practicality can be foreseen before engaging in the experiment.

        Ditto with the contact lens project. Even if they succeed in accurately measuring glucose levels in the blood (which is doubtful, they still have the problem that contact lenses are incompatible with certain symptoms of diabetes.

        They *could* make money, if N is overcome, where N is a host of practical considerations.

        Google is so focused on technical solutions that they ignore the practical considerations.

      • charly

        Those contact lens are not invented for glucose measurements. That is more a way to get the idea out in the world but i think that they would be very useful for professional athletes.

      • marcoselmalo

        I’m not saying that they aren’t useful. I’m sure they’ve already earned back whatever investment was made in terms of positive PR to counter the post Nest fallout. That is surely useful, both to the company and to Google believers peace of mind. It feeds the narrative that Google is saving the world one bit at a time (even if contact lenses aren’t the most significant bit).

    • dajhilton

      And the last ad that you involuntarily received on your mobile device which you followed up on was for what product exactly? It’s a dead space for ads that actually deliver customers.

  • Jerome

    Isn’t Google’s business model absolutely transparent? Its advertisement. Google wants to be the best place to spend advertisement budget. To achieve this, Google needs to
    – maximize number of users. More eyeballs, more revenue.
    – maximize channels where users can be exposed to ads.
    – maximize understanding their users, to be able to show only relevant ads.

    Every product Google “gives away” is a means to collect data and/or expose users to ads. There is absolutely noting crazy or benevolent about that. TV and Radio have always been doing this: give something for free in return for eyeballs and analytics. Only, Google is MUCH more effective.

    Ads on TV are hit-and-miss. Google is able to serve EXACTLY to the target audience. Young couple just moving together, expecting a baby? There’s an ad for that.

    Googles competition is not Apple or Microsoft. It’s TV, Radio, Press – and Facebook. Whoever gives stuff away and sells ads. Apple, Microsoft, and all other companies that are disrupted by Googles freebie offerings are just collateral damage.

    • Sacto_Joe

      Is it a disruption, or is it a sideshow? Putting an ad on the side of a bus doesn’t affect the utility of being a bus. In a contest of cheap versus utility, users will opt for utility. They’ve learned that cheap has its own price.

      The real question is, can high quality, high utility devices be commoditized to the point where profit shrinks to almost nothing, as happened with PC’s? Until that happens, Apple won’t be suffering any “collateral damage”. And if Apple continually improves their product and keeps their quality high, they will own the high end market, and avoid commoditization.

      • obarthelemy

        Depends how you define high-end: if it’s by sticker price and design, Apple does own it. If it’s by performance, features, upgradability, Apple doesn’t even have product.

        As far as quality is concerned, Apple have as many hardware issues as any OEM; ditto for the software.

        There are very good buses and bus services laden with ads, and very bad buses and bus services devoid of them.Ditto good films and series: sometimes they’re on HBO, sometimes on NBC, sometimes they’re watched on $5k home theaters and sometimes on $100 TVs… I’m not sure ads have much to do with quality.I’m sure that if the only market for TV series was owners of $5k TVs cum HBO subscribers, there’d be a lot fewer, good or bad.

      • @Khürt L. Williams

        “As far as quality is concerned, Apple have as many hardware issues as any OEM; ditto for the software.”

        The sources I’ve read indicate otherwise.

        http://www.zdnet.com/want-the-most-reliable-windows-pc-buy-a-mac-or-maybe-a-dell-7000014469/

        http://lifehacker.com/computer-manufacturers-ranked-how-to-pick-a-laptop-tha-1467145338

      • obarthelemy

        In your links, Apple have 2 models in the top 10, including 1st place at 0.1% better than the second. That’s very good, but then the other Apple laptops are NOT in the top ten, which is not very good.

      • Kizedek

        You keep talking about performance as though it is as simple as looking at a spec list and seeing that the MHz number or number of “cores” on some Android devices are higher than on the iPhone. Many commenters have assured you it is not that simple, yet you persist in your wishful and naive outlook with nothing more than a repeated mantra that Apple doesn’t even have a high-end product in terms of performance and features.

        There are other, significant factors impacting “performance” — such as power management; hardware acceleration through various chips including, but not limited to, the GPUs; better integration of software, OS and hardware; and of course, chip design (not knowing exactly what Apple has done inside the A7 besides making it 64-bit), etc.

        Now, show us the HD video editors on an Android phone.

      • obarthelemy

        1- Performance is performance. Might be low-level (triangles per second, MIPS…), might be high-level (time to convert a video), composite (time to do a set of actions: load a video, demux the audio, re-encode the video), so different performances scores apply for different situations. But performance is not features and capabilities.

        2- Sure, in the features and capabilities department, Apple have some strong points. I don’t know if video editing is one, music creation is one for sure. On the other hand, Other ecosystems also have different unique features points: split-screen or PIP multitasking, lively home pages, remote admin/control, pen input, …

        I can show you a floating video playing over my Web browser ^^

      • charly

        Viewing TV on your mobile is something no iphone can do which seems a strong point in some markets

      • Kizedek

        I am aware that performance is not features and capabilities. You mixed them in your post, with this erroneous statement: “If it’s by performance, features, upgradability, Apple doesn’t even have product.”

        My second paragraph was all about processing performance related elements that Apple puts in the iPhone — the silicon, basically.

        The third paragraph mentioned an app that requires a high degree of performance. I’m not aware of such an app on Android.

        If we were talking features, that would be the video camera; if we were talking capabilities, that would be slo-mo and low light photography.

        Don’t try and play semantics to cover up or back track on your statements: “Performance is performance”. Nice. Except when it comes to real-world apps that actually perform a complex function more adequately, more efficiently and with better results than any app on iOS: there aren’t any. And we are told by the likes of Charly that no-one should be doing those things on a “phone” (which betrays a lack of imagination and illustrates why Apple is so frustrating to you both).

      • marcoselmalo

        “I can show you a floating video playing over my Web browser”

        You’re running BeOS? You need to post this on Monday Note.

      • charly

        Number of 5″ phone Apple sells = 0

        The number of people who should use a HD video editor on a

        smartphone is around zero (it maybe useful for some journalists in Syria)

      • Kizedek

        Should? 0=The number who should use a 12-43M pixel camera in a phone, at the expense of better optics, components, software, color spaces, and sensor size and spacing — just so they can quote a number like Obart.

      • Jerome

        I hope that someone escapes commoditization. It would be awful, if one day, all products or services are built only to serve as bearer signal for ads or analytics. Cheap or “for free” has a price: the user is not the customer, the product is not built to please the user. It only needs to be tolerable, everything beyond that is wasted effort.

        The current trend is saddening however. Google keeps destroying value with each acquisition, scorching viable markets and business models. Once converted to ad-financed wasteland, its hard to compete with Googles “free” offerings.

      • http://www.swift2.blogspot.com Swift2

        Putting ads on everything inevitably leads to seeing things in a commercial way. Have you looked at cable television recently? The expanded channels promised so much– History, Arts & Entertainment– it’s like a newsstand filled with the specialist magazines that would please everybody in the late ’70s– but now, half of those channels are useless, deadening “reality” shows, and many of them are non-stop infomercials. News has become infomercials. Pay TV was sold to us as being “commercial-free.” With few exceptions, that was a lie. HBO has its own subscription fee, and you actually get what you pay for. Now, that really makes me think about a future Google TV universe. If you want the Internet to look like cable TV–

    • Sacto_Joe

      BTW, one other major player that I know of is also thriving on commoditization: Amazon.

    • dajhilton

      “Ads on TV are hit-and-miss”. Really? At least people SEE them. Who on this thread has ever noticed, let alone paused to read, an ad involuntarily pushed at them by Google? I have not let my eyeballs lingers over more than a handfull of them; and I can guarantee you my kids never have. They quickly learn where the real content on the page is and where the wasted space is. It’s only a matter of time until advertisers realise that they are getting no bang for their buck advertising on Google, no matter how targeted the pitch is.

      • JB

        You cannot be serious. This is so far from the truth that it’s not even funny. You clearly don’t know anything about ROI on AdWords campaigns. Webmasters use AdWords because it’s an effective way to capture traffic looking for the products and services they offer. People read and click on ads all day every day. You are the exception, not the rule, and your personal experiences are not congruent with how the average Google user behaves. You couldn’t be more wrong.

      • http://davidhdennis.com/ David H Dennis

        Interesting idea, but unfortunately for TV producers, TV viewers often use ad times to go to the bathroom. They can also use a DVR to skip ads.

        Of course during the recent Super Bowl they would have been better off going to the bathroom for the game and watching the ads, but that’s another story entirely.

    • Walt French

      @Jerome wrote, “Ads on TV are hit-and-miss. Google is able to serve EXACTLY to the target audience.”

      You GREATLY exaggerate the differenc… anin so doing, you greatly would cap Google’s revenue growth.

      I’m not much of a TV viewer, but I can tell you the demographics of the History channel, the Fox News channel, ESPN and the local broadcast of Glee are pretty damn well identified, as is the geography of the viewers. Meanwhile, Google’s efforts to customize ads for me have been laughable, especially in showing ads for performances to which I have season tickets, or for smartphones, as if mention of some new LG handset would move me.

      And to my point that it would cap their revenues, if what you said was true: Google will have to get a LOT more effective in turning passers-by into buyers, if they’re going to capture a bigger slice of advertisers’ budgets than they do today. You look at something like Nest, and realize that it can only know the most banal of information about youand wonder how it’d take that data to get me to consider a new car, a new brand of soda, a new OTC medicine for heartburn, a vacation somewhere that I’d actually go… well, the stories would just be jokes.

      PS: I already own a home automation system that was a PITA to set up. I’m enough of a nerd that I would have liked to control my thermostat or peripheral lighting over the web. But I also recognize that very few people have any excuse to spend any time or money on such projects, not until Google makes it Apple-simple and Android cheap. Which is at least 5 years away, probably more. Google had better keep focused on their ad business, and hope that some micropayments system doesn’t disrupt it.

      • http://davidhdennis.com/ David H Dennis

        A couple of years back, I decided to buy a top of the line Nikon D4 camera. At an economical $6,000, this camera is a specialist device designed for news producers, sports photographers, etc.

        So for a while I was doing everything I could to learn more about the camera. The camera was in very short supply, unavailable pretty much everywhere. I placed the order with Electric Avenue in Miami, my (excellent) local camera retailer and settled down for a long wait.

        A few days after I placed my order, ads for the (cheaper) Nikon D800 started appearing on every web site I visited. It was pretty funny, my decision had been made and order placed, so I was highly unlikely – to say the least – to buy a D800. I think I even clicked on the ads a time or two just to see what their sales pitch was like, but my behavior had already been set.

        Interestingly enough, at the time the web was flooded with ads for the D800, it was impossible to buy one. Demand for both D4 and D800 skyrocketed way beyond Nikon’s ability to cope, creating bad feelings for many customers, including myself. I finally took delivery of my D4 about three months later. I think I was still seeing ads for the D800 at that time, despite the fact it was still nearly impossible to find one anywhere.

        Late last year, I wanted to buy a used Mercedes E350. So I started trolling the usual online car sources. I also called my auto mechanic, who located an excellent car for me. Ads for the E350 on cars.com started about when I took delivery, and kept on appearing until about a month after I bought the car.

        I guess we can say, then, that Google’s ad systems still need a bit of work, since this example is just the tip of the iceberg. It does show, though, that despite what DajHilton says below, Google ads are read when there is enough interest in what they are selling. Are they effective? That’s an interesting question since I’d already decided to buy the D4 and Mercedes before I saw any of them …

        PS I’m delighted with the D4 and have used it to take over 300,000 pictures to date.

      • Walt French

        On reflection, among many Google masterstrokes is the setting of terms discussing it. They naturally prefer to talk about “relevance” of ads, as if they’re doing us a great favor by showing us ads for products that somehow are associated with our browsing or Google Plus friends.

        Let’s be clear: Google is trying to maximize their income by getting advertisers to PAY MORE for ad placement. An advertiser who can convince me to buy a D4 or Mercedes will pay Google more than an advertiser who might convince me to spend half as much on substitutes (or the same item at a lower price). “Relevance” is actually, “propensity to increase advertisers’ profits.”

  • berult

    Some entities are best defined by words-of-wisdom carved out of a block of concrete. The unibody discourse of a taught-full déjà-vu.

    Others, …by words-of-mouth. As though ‘putting words in one’s mouth’ could muster civic parlance. A ‘hole’ lexicon of catch-22 free-for-alls.

    And lo and behold, Big Silence upstages Big Science, as up-and-coming Big-Daddy indulges in orgasmic Big Data.

    Google doesn’t do search-and-rescue. Google does ‘re-search and cue’. It doesn’t bliss. It frisks. Hence the well traveled locution, ‘…at your frisk and peril…’.

    • marcoselmalo

      Good to see you again and in top form. Your wordplay here is less obscure and more enjoyable for casual reading (some of your comments in the past seemed downright hermetic).

  • Richard Hamilton

    Horace, Bell Labs were very much on my mind as I read your thoughts, so was interested to see your footnote. Although I mostly agree that they were state-sponsored, I wouldn’t be so quick to dismiss it as a useful example to think about.

    Having worked closely with them, my observation is that the issues you are raising are still very much debated today within Alcatel-Lucent, current home of Bell Labs. What remains a question is whether pure research unencumbered by driving, real world concerns can deliver value to customers and shareholders. Bell Labs is anything but state-sponsored today, but there is still a significant amount of “pure” research going on.

    In support of your point, in their golden years, Bell Labs was clearly driven by AT&T’s need to build a telephone network. There were real engineering and commercial challenges to meet. Or in the case of radar, a war effort that was driving them. To use your language, there was a job to get done.

    And yet, much of what they discovered or invented was never driven by short-term engineering demands or commercialism, but led to commercial success. Sure, not all of their discoveries were successfully commercialized by the parent. In the cases of the transistor or UNIX, it took others to drive the inventions forward. Nonetheless, a lot of the research that was done there had much the same spirit as we see today in Google, and it built more than a few successful businesses over time, and, arguably, entirely new industries.

    And before these comments are dismissed by someone citing Alcatel-Lucent’s current struggles, it would be a mistake to blame the research philosophy of Bell Labs on their woes. One wonders how much longer they can support Bell Labs, but Alcatel-Lucent’s issues are rooted in structural changes to telecom markets, late entry into the GSM mobile market, and the entrance of the Chinese. They continue to lead the world in many areas, such as optical or radio technology, because of Bell Labs research that was and is still done in an environment where science and engineering issues drive the research, not a product roadmap.

    And then there is the further issue of non-profit-oriented human progress. One thinks of Claude Shannon riding his unicycle through the halls juggling. Will anyone at the get-the-job-done Apple have the luxury of time that might allow them to invent information theory, or, like Penzias and Wilson, stumble on the origins of the universe? Perhaps there are Nobel Prizes in store for some of the Googlers playing around in Mountain View today? And although it is a long shot, that might mean Google outlasts the rest of the players in today’s market by inventing entirely new ones.

  • Antonio D’souza

    Organize the world’s information and make it universally accessible and useful.”

    Sounds like a purpose to me.

    • http://www.asymco.com Horace Dediu

      You should ask, on average, five whys before being satisfied with a causal inference.

  • Gray_Williams

    Masterpiece in concise analytical brevity. I truly enjoy reading this blog.

  • sfumatoxxx

    There’s a reason why this article is being quoted all over the web, by Goliaths, as well as Davids. Beside being one of the best worded analytic story I have read in recent times, this piece puts its point forth with calm practicality, without FUD or Fanboism. This is what an analysis should be.

    Very well done. I thank both Asymco & Horace for this offering.

  • Charles

    I took advantage of a free trial advertising run on Google a couple of years ago, advertising my music lesson business in small ads on the right side of locally seen search results pages for ‘music.’ Without the promised phone call notice, it switched from free to paid and I was in the red for hundreds of dollars before I noticed it. For a company that is not devoted to making money, Google’s bulldog bite was quite painful and unshakable for several weeks until I finally pried it open and was let go for the money supposedly owed. If I hadn’t threatened to open a dispute through my credit card company, I might not have prevailed at all, but been declared a defaulter and taken a big hit to my credit rating. At that juncture, I probably would have paid them. Please don’t tell ME they are not devoted to profit.

  • http://blog.nextblitz.com gzino

    Great article.

    This sentence is interesting:

    “For all the technology innovations the company can claim, it has not had one internally sourced business model innovation”

    I would classify their initial product – AdWords – as business model innovation. I know Yahoo (and maybe others) dipped their toes in selling ads based on a user’s perceived intent (as determined by their search strings), but Y! and others always fundamentally seemed to be basing their business models on selling content? And of course Google wrapped self-serve etc. around AdWords, essentially inventing a business model?

    Maybe the argument is that Google’s investment in search algorithms essentially caused that business model, but I am not sure if Google would have invested in their search technology (and self-service etc) to the degree that they did if they weren’t convinced of the business model itself (and ultimately funded by it)?

    These days, I completely agree: one of the world’s most powerful labs and we are often at the mercy (good or bad; knowingly or unknowingly) of the experiments.

    • http://www.asymco.com Horace Dediu

      Adwords was acquired. Reluctantly as many have attested.

  • http://www.jlist.com Peter Payne

    That first paragraph is the most amazing thing I’ve read in years.