Google Steamroller a Result of Ability to Focus
RENEE MONTAGNE, host:
On Monday's we focus on technology. Today, more good news for an Internet success story. Google, the internet's leading search engine, has seen its revenues jump nearly 80 percent from last year. Quarterly revenue has past the $2 billion mark.
We called independent technology consultant Rob Enderle to ask how Google has managed to be so successful. Good morning.
Mr. ROB ENDERLE (Technology Consultant; Founder of The Enderle Group): Good morning.
MONTAGNE: One of the areas Google managed to make a profit in is Internet advertising sales. So what did Google do right that other search engines, like Yahoo and Alta Vista, didn't?
Mr. ENDERLE: Well they focused almost exclusively on search and have been able to mine the base, I think, more effectively than everybody else. They've realized their search market share, depending on which numbers you look at, not only went up, but probably crossed about 50 percent of the market.
Yahoo and Microsoft actually dropped a little bit. They're about twice what Yahoo is and Microsoft, about four times where they are. And the end result is, is they're making lots more money than the other guys.
MONTAGNE: I guess it's just search is what people want to do.
Mr. ENDERLE: Well, that's it, and they charge for how you rank the search, plus, if you put in a particular term in the sidebar, they give stores that have been paying them money priority. And so, they get money for doing that, and the more traffic they get, the more money they get.
MONTAGNE: Google has created quite a loyal following of users. How did they do that?
Mr. ENDERLE: Well, by being very good at search. You know, we look back at some of the most successful companies in their time, say Palm, when they first came out with the handheld computer, most recently with Apple and the iPod. They just focused on doing the core technology surrounding the product, and the end result is that product jumped to the head of the market and it took a while, and, in the case of Apple, it's still the number one product in the market, but it took a while to change that.
And by staying very focused, as opposed to trying to do everything on the planet, Google has done just a very good job of keeping their customers loyal and providing a good, high quality experience.
MONTAGNE: Okay, but now that Google has mastered--kind of the master of the universe of online searches, they're branching out into other areas. Is there some risk in that?
Mr. ENDERLE: Well, the more they branch out the more they risk losing that focus. We certainly use Palm as an example in that the more they chased Microsoft, the worse that overall market segment got.
And of course Netscape is the classic example of this. They owned the browser market. They decided to go after a whole series of other things; lost focus on the browsers, lost the market and eventually lost their identity and independence.
So there is a danger as you move away from the area that made you successful that that lack of focus will cause you to lose the market at some future point.
MONTAGNE: Well, Google is even thinking of competing directly with eBay, in online auctions.
Mr. ENDERLE: Well, if you think about it, a lot of people get to eBay through Google. In fact, you might argue that the majority of them may get there through Google. And if Google goes into the auction business, they can intercept those searches and take them to the Google sites first. It's probably a natural place for them to expand because the two events are relatively closely linked together. So that's not something that's probably going to put them at a tremendous amount of risk, unless they can't do search well, or if they, like eBay, run into a lot of phishing problems that cause people to trust them less.
MONTAGNE: Speaking with us from San Jose, California, Rob Enderle. He's a principle analyst for The Enderle Group, a Silicon Valley research firm.
Thanks very much.
Mr. ENDERLE: Hey, my pleasure.