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Careless Chinese Baggage Handler Really Throws Himself Into His WorkThe New York Times Digital Domain column wonders about "The Human Touch That May Loosen Google's Grip" in Sunday's edition. Given that nearly all of Google Inc.'s (NASDAQ: GOOG) revenue comes from ads that appear on its search results pages and partner sites, it's an issue that Google shareholders may need to worry about. After discussing the severe smackdown that Google has laid on the likes of Microsoft Corp. (NASDAQ: MSFT) and Yahoo! Inc. (NASDAQ: YHOO) in terms of search revenue, author Randall Stross sums up what may be the best bear case on Google:
"The fumbling of Google's largest challengers, however, has not dampened the enthusiasm of entrepreneurs and venture capitalists for entering the search game. The combination of low start-up costs and potentially huge profit makes it seem a reasonable bet.
Developing a search algorithm can be accomplished by very small teams. It was a team of two -- Larry Page and Sergey Brin, the founders of Google -- who developed a new and improved search algorithm. They beat out Alta Vista, whose search engine was developed by seven people at the Digital Equipment Corporation."
While much has been made of Google's acquisitions, corporate culture, and innovation, let's face if folks: Google is a search engine and the rise of a new, better, algorithm designed by two other college kids could spell the demise of Google.
Every Google shareholder should read Stross's column. With the large amount of venture capital funding available, there's an awful lot of would-be Larry Pages and Sergey Brins out there looking for a piece of Google's staggering 29% net profit margins.
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Reader Comments (Page 1 of 1)
6-24-2007 @ 4:07PM
Sheldon L said...
Zac,
I made this point in one of my very first posts over a year ago, SEE: Google me this Batman: Do you feel lucky?
http://www.bloggingstocks.com/2006/05/23/google-me-this-batman-do-you-feel-lucky/
Excerpt "I have been told so many times that the company, its product, its management and everything about it is fantastic and competitors have been stymied (for now). So I ask, why can't someone come up with a better idea? After all Google started with "two Stanford students in a dorm room" again!"
This was the same scenario for Yahoo...HP...SUN...INTEL...GOOG is not the end of innovation.
6-24-2007 @ 8:42PM
Lfe said...
GOOG is much more than a search engine now. First and foremost, it has now evolved into an enormous advertising revenue generating machine that literally prints money. GOOG has sold its ad platform to many companies who have lots of $$$ and will pay GOOG lots of $$$. It takes a long time plus a track record of success plus advertising acumen to achieve GOOG's status and brand recognition. Two guys can develop a better search algorithm tomorrow but that is light years away from being able to challenge or knock GOOG from its lofty perch. Moreover, there are lots of very smart search engine folks at YHOO, MSFT, IAC and elsewhere who have not been able to develop the next-greatest search engine to topple GOOG. Even if they have done this, it means nothing if a competitor can not turn that improved search into proven advertising revenue generating capability.
6-24-2007 @ 8:41PM
vroche said...
the algorithm designed by two college kids has had many man years of development added to it by now. It doubtful that a startup can surpass it in the current state of technology. If the data source changes from the Web to its next evolutionary form, it may be a different story.