Hedged Bets

8 June 2006

Many, many people have been talking about the “Google mania” evident since the launch of Google Speadsheet. They quite rightly point out that Google hasn’t done anything even remotely innovative with their speadsheet offering, and that it quite obviously doesn’t have anywhere near the amount of features Excel has.

I’ve also seen postulations on the topic of whether this is all a big distraction – leading Google’s competitors (such as Microsoft) to try and compete against Google’s web office, when Google is busy making lots of money off advertising.

I think everybody’s missing the point.

Microsoft make most of their money from Office. Don’t forget that. There is a huge market there for Google to go after, and it’s a market that Google – with it’s army of crack developers it’s being hiring for years now – can do well in (potentially at least).

With the point about Google’s core business being advertising, I think people are ignoring two things quite fundamental:

Firstly – with the amount of resources they’ve built up to date, why would they not go after the office market? They certainly have the capital to throw at it, and nothing to loose in that market.

Secondly, and more importantly – advertising is currently 99% of Google’s revenue stream (the ~1% being their search appliance business coupled with small amounts from things like Google Video). If their advertising revenue dries up, that’s it.

End of Google.

By diversifying into another market, they are simply setting up a backup revenue stream, that conveniently screws over one of their biggest competitors.

Why wouldn’t they want to do that?

From: Articles

8 June 2006