What’s the biggest threat to Google?

October 22nd, 2009

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Following from our previous article (see Google vs Rupert Murdoch- who will win?), we will look at what is the biggest threat to Google. For those who are interested in investing in the technology sector, this is one of the things to watch out for in your business analysis because it will have major flow-on implications on other technology and media businesses in the long run. For those who are thinking of starting an Internet/technology business, it will determine which sides of the dividing line (information as commodity vs free and expansive information) that you will be supporting (or switch sides to).

For starters, Microsoft’s new search engine, Bing, is not the biggest threat. Bing and Yahoo! are there to keep Google competitive, but they don’t pose a long term strategic threat to Google. So, assuming that information will remain free and abundant for the foreseeable future, what can deal a long term mortal blow to Google?

Remember, in our previous article, we wrote that

… information (collectively) is free and abundant, but consumers’ attention (for each individual information provider) is scarce.

And here is the beauty of Google’s business model- it sells access to consumers’ attention.

For a rival to erode the long term competitive advantage of Google, it must be able to:

    1. Steadily gain more and more attention of consumers over the years
    2. Shut out Google from what gained the attention of consumers

    Any rival that can fulfil these two conditions will undermine and erode Google’s capability to sell access to consumers’ scarce attention. Microsoft’s Bing may be able fulfil the first criteria, but it cannot fulfil the second one. After all, the search engine robots of both Google and Bing trawl in the same playground of freely available information.

    But there’s a potential rival in the horizon that fulfils both conditions: Facebook.

    At first glance, Facebook and Google seem to compete in two different market space. Some may argue that they complement each other. But there’s one problem for Google- its search engines cannot penetrate through the wall of Facebook and index the consumer-generated content. With each of the 300 million Facebook users who can potentially interact with each of the other 300 million users (via status updatess, posting and commenting of pictures, engage in forum discussions, play games and so on), plenty of content are generated everyday that is outside the view of Google.

    Then there’s a disturbing trend that may perhaps be happening right now- as people spend more and more time in Facebook, more and more ‘Internet’ activities are migrating towards it, which in theory can make it an ‘Internet’ within the Internet (we will call the former “Facebook world” and the latter “public Internet” from now on). For example, as Facebook contains more and more interactions between people, more people are using Facebook messages in favour traditional emails to communicate with each other. We can imagine a possible future where Facebook messages supplants traditional emails. Also, it is already possible to host forum discussions at Facebook groups within Facebook world, which in theory, can replace public Internet forums. Software developers can also develop Facebook applications, which in theory, can function as services (in Facebook world) normally found in the public Internet (which is the domain of Google). For example, what is stopping Facebook to host blogs, polls, newspapers, forums and other content inside Facebook world?

    Facebook is also intruding into the public Internet. Through its Facebook Connect feature, people can bring their Facebook identity into the public Internet to take part in discussions, which can then be tracked by Facebook. This feature serves to draw people from the public Internet into Facebook world.

    Obviously, Google has already seen this threat as you can see from this article. We believe that it is no coincidence that Google’s next big idea product, Google Wave, is a competitive threat to Facebook’s social media function.

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    • I think Facebook being a threat to Google requires a huge leap… or even an evolution of sorts on Facebook’s behalf.

      Facebook is nothing more than a exclusive “closed off social network”, and as you correctly point out Google would be considered an “Open System”.

      So until the entire world decides to move to this “closed off system”, i wouldn’t percieve any threat to Google from Facebook.
      And as a loose example of closed systems ~ look how Mozilla continually eats away at Microsoft’s browser market share… i think we can see clearly now just ‘where’ the world is heading on this.

      Beyond this lets consider – If Google was to stop indexing Facebook in their search engine tomorrow, who do you think would win… Facebook or Google?

    • I think Facebook being a threat to Google requires a huge leap… or even an evolution of sorts on Facebook’s behalf.

      Facebook is nothing more than a exclusive “closed off social network”, and as you correctly point out Google would be considered an “Open System”.

      So until the entire world decides to move to this “closed off system”, i wouldn’t percieve any threat to Google from Facebook.
      And as a loose example of closed systems ~ look how Mozilla continually eats away at Microsoft’s browser market share… i think we can see clearly now just ‘where’ the world is heading on this.

      Beyond this lets consider – If Google was to stop indexing Facebook in their search engine tomorrow, who do you think would win… Facebook or Google?

    • Hi Bliss!

      I think Facebook being a threat to Google requires a huge leap? or even an evolution of sorts on Facebook?s behalf.

      We doubt it will be a huge leap. The more likely result will be, as you say, evolution on Facebook.

      Beyond this lets consider ? If Google was to stop indexing Facebook in their search engine tomorrow, who do you think would win? Facebook or Google?

      Well, Google is currently unable to index Facebook user’s content. As more and more useful content are generated by Facebook users, this will increasingly be a problem for Google. But if Google impose a search engine blackout on Facebook, we doubt it will deal a mortal blow to Facebook because it has already gained a big enough critical mass. Google’s strategy is to steadily build a social network that is in the open e.g. Google Wave, Friend Connect, etc.

      So until the entire world decides to move to this ?closed off system?, i wouldn?t percieve any threat to Google from Facebook.

      Agree with you on that. Whether Facebook will eventually win against Google remains to be seen.

    • Hi Bliss!

      I think Facebook being a threat to Google requires a huge leap? or even an evolution of sorts on Facebook?s behalf.

      We doubt it will be a huge leap. The more likely result will be, as you say, evolution on Facebook.

      Beyond this lets consider ? If Google was to stop indexing Facebook in their search engine tomorrow, who do you think would win? Facebook or Google?

      Well, Google is currently unable to index Facebook user’s content. As more and more useful content are generated by Facebook users, this will increasingly be a problem for Google. But if Google impose a search engine blackout on Facebook, we doubt it will deal a mortal blow to Facebook because it has already gained a big enough critical mass. Google’s strategy is to steadily build a social network that is in the open e.g. Google Wave, Friend Connect, etc.

      So until the entire world decides to move to this ?closed off system?, i wouldn?t percieve any threat to Google from Facebook.

      Agree with you on that. Whether Facebook will eventually win against Google remains to be seen.

    • light3

      “Well, Google is currently unable to index Facebook user?s content. As more and more useful content are generated by Facebook users, this will increasingly be a problem for Google. But if Google impose a search engine blackout on Facebook, we doubt it will deal a mortal blow to Facebook because it has already gained a big enough critical mass. Google?s strategy is to steadily build a social network that is in the open e.g. Google Wave, Friend Connect, etc.”

      The only logical explanation for why Facebook can’t be indexed is that its a CLOSED system where people socialise, I don’t see how this conflicts with Google whose business is to index OPEN information.

      As per your points in the article:

      For a rival to erode the long term competitive advantage of Google, it must be able to:

      1. Steadily gain more and more attention of consumers over the years
      2. Shut out Google from what gained the attention of consumers

      You can gain as much attention from a consumer as you like, but as soon as that consumer needs to search for something, they’re going to google it. Google’s main revenue comes from search advertising, Facebook does not provide search, and as such they’re not direct competitors in this sense. On the contrary you can argue that the longer people spend time on the internet be it Facebook or whatever it be, they will be more likely to Google something, so there is certainly support for Google and Facebook to be complementary services as opposed to competitors which the article says.

      Social networking sites come and go, today Facebook and Twitter are all the fad, yesterday it was Myspace and Friendster. Until somebody comes along and blows Google out of the water in terms of search accuracy and relevance, they will not be challenged. Its true Google, for the exception of search, has not made any other significant applications which generate revenuel. They may be trying to compete with other social networking sites(which are flourishing) – I haven’t been following up, but its obvious the reverse is not happening.

      The threat to Google, ie a threat to its search is very hard to see right now. They’re doing everything they can to invest in to what they(and many others) believe to be the next big thing – which is cloud computing. Just look at their browser Chrome and the mirage of web applications they’re developing, they believe computing will move towards a web based system where all the people will need is a browser and internet connection, mitigating the operating system. Until facebook figures out how to mitigate the people’s need for search services, there will be no challenge.

      Microsoft has pretty much missed the boat on cloud computing, their focus has been(and unchallenged) operating systems and essential software. They became so big yet could not challenge the effectiveness of Google search, as well as losing ground in the browser wars. So many believe it was their huge size and dominance that lead to arrogance and a lack of innovation necessary to develop the next big thing. This perhaps will also be the greatest threat to Google, but right now they are an undisputed monopoly.

    • light3

      “Well, Google is currently unable to index Facebook user?s content. As more and more useful content are generated by Facebook users, this will increasingly be a problem for Google. But if Google impose a search engine blackout on Facebook, we doubt it will deal a mortal blow to Facebook because it has already gained a big enough critical mass. Google?s strategy is to steadily build a social network that is in the open e.g. Google Wave, Friend Connect, etc.”

      The only logical explanation for why Facebook can’t be indexed is that its a CLOSED system where people socialise, I don’t see how this conflicts with Google whose business is to index OPEN information.

      As per your points in the article:

      For a rival to erode the long term competitive advantage of Google, it must be able to:

      1. Steadily gain more and more attention of consumers over the years
      2. Shut out Google from what gained the attention of consumers

      You can gain as much attention from a consumer as you like, but as soon as that consumer needs to search for something, they’re going to google it. Google’s main revenue comes from search advertising, Facebook does not provide search, and as such they’re not direct competitors in this sense. On the contrary you can argue that the longer people spend time on the internet be it Facebook or whatever it be, they will be more likely to Google something, so there is certainly support for Google and Facebook to be complementary services as opposed to competitors which the article says.

      Social networking sites come and go, today Facebook and Twitter are all the fad, yesterday it was Myspace and Friendster. Until somebody comes along and blows Google out of the water in terms of search accuracy and relevance, they will not be challenged. Its true Google, for the exception of search, has not made any other significant applications which generate revenuel. They may be trying to compete with other social networking sites(which are flourishing) – I haven’t been following up, but its obvious the reverse is not happening.

      The threat to Google, ie a threat to its search is very hard to see right now. They’re doing everything they can to invest in to what they(and many others) believe to be the next big thing – which is cloud computing. Just look at their browser Chrome and the mirage of web applications they’re developing, they believe computing will move towards a web based system where all the people will need is a browser and internet connection, mitigating the operating system. Until facebook figures out how to mitigate the people’s need for search services, there will be no challenge.

      Microsoft has pretty much missed the boat on cloud computing, their focus has been(and unchallenged) operating systems and essential software. They became so big yet could not challenge the effectiveness of Google search, as well as losing ground in the browser wars. So many believe it was their huge size and dominance that lead to arrogance and a lack of innovation necessary to develop the next big thing. This perhaps will also be the greatest threat to Google, but right now they are an undisputed monopoly.

    • Hi light3!

      You can gain as much attention from a consumer as you like, but as soon as that consumer needs to search for something, they’re going to google it.

      What if more and more publishers are publishing through Facebook? It is far-fetched today, but we the beginning of the trend today. For example, we received an email from a service company. At the bottom of the email, that business advertised the fact that they are in Facebook and that competitions, promotions, contests, tips, deals are found there. The logical extension, if this trend continues steadily, is for businesses to provide content and ecommerce functionality through Facebook applications.

      For example, take a look at the Facebook Applications. In theory, Facebook can extend that and turn Facebook into the a cloud operating system. An example of an cloud-based operating system is eyeOS.

      Think about it, imagine 50% of the Internet’s free content reside inside Facebook world and the other 50% in the public Internet. That would make Google’s search less relevant because to find something, consumers have to do a search in both Google and Facebook. That’s where the danger for Google lies. Of course, we are not saying that this will happen, just that it has the potential to happen.

      Facebook does not provide search…

      For your information, Facebook is already providing search within their Facebook world. Of course, Facebook world does not have worthwhile content today. But as the trend continues, it will have one day.

      …but right now they are an undisputed monopoly.

      We have no argument against that. But this article is looking at the several years ahead and see what may threaten their monopoly from the left-field (in the same way Microsoft’s monopoly is threatened by Google). Facebook, with 300 million users (some estimated it is 30% of all Internet users) is not something that Google can dismiss.

    • Hi light3!

      You can gain as much attention from a consumer as you like, but as soon as that consumer needs to search for something, they’re going to google it.

      What if more and more publishers are publishing through Facebook? It is far-fetched today, but we the beginning of the trend today. For example, we received an email from a service company. At the bottom of the email, that business advertised the fact that they are in Facebook and that competitions, promotions, contests, tips, deals are found there. The logical extension, if this trend continues steadily, is for businesses to provide content and ecommerce functionality through Facebook applications.

      For example, take a look at the Facebook Applications. In theory, Facebook can extend that and turn Facebook into the a cloud operating system. An example of an cloud-based operating system is eyeOS.

      Think about it, imagine 50% of the Internet’s free content reside inside Facebook world and the other 50% in the public Internet. That would make Google’s search less relevant because to find something, consumers have to do a search in both Google and Facebook. That’s where the danger for Google lies. Of course, we are not saying that this will happen, just that it has the potential to happen.

      Facebook does not provide search…

      For your information, Facebook is already providing search within their Facebook world. Of course, Facebook world does not have worthwhile content today. But as the trend continues, it will have one day.

      …but right now they are an undisputed monopoly.

      We have no argument against that. But this article is looking at the several years ahead and see what may threaten their monopoly from the left-field (in the same way Microsoft’s monopoly is threatened by Google). Facebook, with 300 million users (some estimated it is 30% of all Internet users) is not something that Google can dismiss.

    • anon (with a decapitlized a)

      The real clash i.m.o. is between Google and Microsoft. Whoever dominates the search engine market has a huge competitive advantage, and can always rely on a secure stream of revenue.

      Google has immaculately manicured a good-guy image. Looking forward to the upcoming Google OS!

    • anon (with a decapitlized a)

      The real clash i.m.o. is between Google and Microsoft. Whoever dominates the search engine market has a huge competitive advantage, and can always rely on a secure stream of revenue.

      Google has immaculately manicured a good-guy image. Looking forward to the upcoming Google OS!

    • Hi anon!

      Google has immaculately manicured a good-guy image.

      We like Google too.

      But our worry is that if they acquire too much monopolistic power, they can turn into a bad guy. It happened to Microsoft (Microsoft used to be an underdog) and it can happen to Google too.

    • Hi anon!

      Google has immaculately manicured a good-guy image.

      We like Google too.

      But our worry is that if they acquire too much monopolistic power, they can turn into a bad guy. It happened to Microsoft (Microsoft used to be an underdog) and it can happen to Google too.

    • Imagine, back in 2000, it is easy to see that the next competitive threat to Microsoft’s monopoly is Linux. It takes quite a fair bit of left-field thinking to foresee that Google is the threat, not Linux.

      Fast forward to today. It is easy to see that Microsoft’s Bing will be the competitive threat to Google’s monopoly. But could Facebook be the one instead? That’s quite left-field. Of course, the outcome can turn it to be something other than Facebook.

    • Imagine, back in 2000, it is easy to see that the next competitive threat to Microsoft’s monopoly is Linux. It takes quite a fair bit of left-field thinking to foresee that Google is the threat, not Linux.

      Fast forward to today. It is easy to see that Microsoft’s Bing will be the competitive threat to Google’s monopoly. But could Facebook be the one instead? That’s quite left-field. Of course, the outcome can turn it to be something other than Facebook.

    • Pete

      light3:

      The only logical explanation for why Facebook can?t be indexed is that its a CLOSED system where people socialise, I don?t see how this conflicts with Google whose business is to index OPEN information.

      Closed systems are currently the minority, and therefore Google hasn’t needed to worry.

      The issue is that as closed systems like Facebook grow, they are no longer a minority. The larger they become, the smaller the open system world will be (not necessarily proportionately).

      Now if Facebook also started its own search function…it could do away with Google altogether. I think that is unlikely in the short/medium term as Google has a significant advantage in that industry and any search engine that Facebook produced would be inferior.

      Something else to consider is the business models of Google and Facebook. So far we have been talking about theoretical information control. What we have not discussed are the ways that Google and Facebook make money – and will continue to do so in the future.

      Some things to ponder:
      – Google’s reluctance to go crazy advertising on Youtube, even though it has been under immense pressure to do so by investors/analysts
      – Facebook’s increases in advertising
      – Facebook’s neglect when protecting client information
      – Facebook’s neglect in allowing all sorts of applications to be made (this includes applications that charge you money)
      – Facebook’s lack of experience in business.
      – Google has been in the industry for a long time now.

      If I had investment money in Facebook, my concern would be that Facebook business managers would cave in to the temptation for more advertising dollars. This would open the door for someone like Google to launch a less intrusive social networking system – with better functionality.

    • Pete

      light3:

      The only logical explanation for why Facebook can?t be indexed is that its a CLOSED system where people socialise, I don?t see how this conflicts with Google whose business is to index OPEN information.

      Closed systems are currently the minority, and therefore Google hasn’t needed to worry.

      The issue is that as closed systems like Facebook grow, they are no longer a minority. The larger they become, the smaller the open system world will be (not necessarily proportionately).

      Now if Facebook also started its own search function…it could do away with Google altogether. I think that is unlikely in the short/medium term as Google has a significant advantage in that industry and any search engine that Facebook produced would be inferior.

      Something else to consider is the business models of Google and Facebook. So far we have been talking about theoretical information control. What we have not discussed are the ways that Google and Facebook make money – and will continue to do so in the future.

      Some things to ponder:
      – Google’s reluctance to go crazy advertising on Youtube, even though it has been under immense pressure to do so by investors/analysts
      – Facebook’s increases in advertising
      – Facebook’s neglect when protecting client information
      – Facebook’s neglect in allowing all sorts of applications to be made (this includes applications that charge you money)
      – Facebook’s lack of experience in business.
      – Google has been in the industry for a long time now.

      If I had investment money in Facebook, my concern would be that Facebook business managers would cave in to the temptation for more advertising dollars. This would open the door for someone like Google to launch a less intrusive social networking system – with better functionality.

    • light3

      Google is getting very big, and that will definitely go against their “don’t be evil” slogan, just as with all big corporations.

      Microsoft has been trying(perhaps not hard enough?) to compete with Google for many years, they should have done something when Yahoo(founded 1995) came to fame, but Google(founded 1998) was a dark horse that came out of no where with its simplicity and accurate results, it had no problems in dealing with Yahoo. In the mean time Microsoft still had its own crappy MSN search, now they bought Yahoo and created Bing – but its way too late, and I doubt they would come up with something that rivals Google, since the bar is so high and Google’s popularity so wide spread.

      In my opinion Facebook is not the ‘biggest’ threat to Google, Facebook is more like a potential source of influence/revenue which Google missed out on, where Google seems to bet its money on is cloud computing.

      In the far future if Facebook manages to fairly significant portion of the internet, then yes they may take a portion of revenue from Google, but to challenge Google on open search will be extremely difficult.

      I’m a skeptic on how long Facebook will remain popular, as I have seen the social networking fads come and go, ICQ died to MSN, Myspace/Friendster are shadows compared to Facebook, I think social networking is more a fashion compared to something as generic as internet search. You can get social recognition for having(or not) Facebook, similarly for having(or not) an Mac, but nobody talks about using Google like its part of their identity. Which is why I believe there will be new Facebooks in the future.

    • light3

      Google is getting very big, and that will definitely go against their “don’t be evil” slogan, just as with all big corporations.

      Microsoft has been trying(perhaps not hard enough?) to compete with Google for many years, they should have done something when Yahoo(founded 1995) came to fame, but Google(founded 1998) was a dark horse that came out of no where with its simplicity and accurate results, it had no problems in dealing with Yahoo. In the mean time Microsoft still had its own crappy MSN search, now they bought Yahoo and created Bing – but its way too late, and I doubt they would come up with something that rivals Google, since the bar is so high and Google’s popularity so wide spread.

      In my opinion Facebook is not the ‘biggest’ threat to Google, Facebook is more like a potential source of influence/revenue which Google missed out on, where Google seems to bet its money on is cloud computing.

      In the far future if Facebook manages to fairly significant portion of the internet, then yes they may take a portion of revenue from Google, but to challenge Google on open search will be extremely difficult.

      I’m a skeptic on how long Facebook will remain popular, as I have seen the social networking fads come and go, ICQ died to MSN, Myspace/Friendster are shadows compared to Facebook, I think social networking is more a fashion compared to something as generic as internet search. You can get social recognition for having(or not) Facebook, similarly for having(or not) an Mac, but nobody talks about using Google like its part of their identity. Which is why I believe there will be new Facebooks in the future.

    • Hi light3!

      I’m a skeptic on how long Facebook will remain popular, as I have seen the social networking fads come and go, ICQ died to MSN, Myspace/Friendster are shadows compared to Facebook, I think social networking is more a fashion compared to something as generic as internet search.

      If Facebook remains just another social media site, then you may be right that it will fade away. But what if, Facebook evolve into something much more than just social media in say, 7-10 years time?

      If we are Facebook, and seeing that we have 300 million users already (and still growing), we see a juicy opportunity for expansion into far outside its current social media function. We have already seen Facebook toying with that already- e.g. Facebook Connect, virtual currency, etc.

      Whether Facebook will succeed against Google will depend on how Google respond and whether Facebook commits any mistakes.

    • Hi light3!

      I’m a skeptic on how long Facebook will remain popular, as I have seen the social networking fads come and go, ICQ died to MSN, Myspace/Friendster are shadows compared to Facebook, I think social networking is more a fashion compared to something as generic as internet search.

      If Facebook remains just another social media site, then you may be right that it will fade away. But what if, Facebook evolve into something much more than just social media in say, 7-10 years time?

      If we are Facebook, and seeing that we have 300 million users already (and still growing), we see a juicy opportunity for expansion into far outside its current social media function. We have already seen Facebook toying with that already- e.g. Facebook Connect, virtual currency, etc.

      Whether Facebook will succeed against Google will depend on how Google respond and whether Facebook commits any mistakes.

    • “Whether Facebook will succeed against Google will depend on how Google respond and whether Facebook commits any mistakes.”

      i think the one thing everyone’s missed in all this discussion, – are any thoughts about Zuckerberg (Facebook’s CEO).
      From my understanding, most Techlonogy analysts are now saying that Facebook needs to ditch Zuckerberg if its to have ‘any real future’ (beyond just a social network).

      And well thats my thought ~ Facebook is in trouble under Zuckerberg’s control, and dosen’t pose any sort of ‘risk’ to Google while its under Eric Schmidt’s control.
      Also possibly consider in relation to the discussions here about ‘Open’ & ‘Closed’ Systems ~ Eric Schmidt previously headed SUN, and led the team which developed JAVA… thus he has plenty of expericince with Open Systems & Open Ideas.
      Mark Zuckerberg on the otherhand, has anything but “experience” when it comes to running Multi-national/multi-million dollar companies.

    • “Whether Facebook will succeed against Google will depend on how Google respond and whether Facebook commits any mistakes.”

      i think the one thing everyone’s missed in all this discussion, – are any thoughts about Zuckerberg (Facebook’s CEO).
      From my understanding, most Techlonogy analysts are now saying that Facebook needs to ditch Zuckerberg if its to have ‘any real future’ (beyond just a social network).

      And well thats my thought ~ Facebook is in trouble under Zuckerberg’s control, and dosen’t pose any sort of ‘risk’ to Google while its under Eric Schmidt’s control.
      Also possibly consider in relation to the discussions here about ‘Open’ & ‘Closed’ Systems ~ Eric Schmidt previously headed SUN, and led the team which developed JAVA… thus he has plenty of expericince with Open Systems & Open Ideas.
      Mark Zuckerberg on the otherhand, has anything but “experience” when it comes to running Multi-national/multi-million dollar companies.

    • Good comment, Bliss!

    • Good comment, Bliss!

    • Well… considering all this discussion about Google vs Facebook (and which will be a bigger player in the future);

      Well here’s Eric Schmidt’s vision of what the web will look like in 5 Yrs…
      http://www.readwriteweb.com/archives/google_web_in_five_years.php

    • Well… considering all this discussion about Google vs Facebook (and which will be a bigger player in the future);

      Well here’s Eric Schmidt’s vision of what the web will look like in 5 Yrs…
      http://www.readwriteweb.com/archives/google_web_in_five_years.php