Why have we not seen any Google’s since Google?
Umair Haque says:
Google, despite serious interest from Microsoft and Yahoo—what must have seemed like lucrative interest at the time—didn’t sell out. Google might simply have been nothing but Yahoo’s or MSN’s search box.
Why isn’t it? Because Google had a deeply felt sense of purpose: a conviction to change the world for the better.
Paul Graham answers:
This has a nice sound to it, but it isn’t true. Google’s founders were willing to sell early on. They just wanted more than acquirers were willing to pay.
It was the same with Facebook. They would have sold, but Yahoo blew it by offering too little.
Tip for acquirers: when a startup turns you down, consider raising your offer, because there’s a good chance the outrageous price they want will later seem a bargain.
From the evidence I’ve seen so far, startups that turn down acquisition offers usually end up doing better. Not always, but usually there’s a bigger offer coming, or perhaps even an IPO.
I very respectfully disagree. Why we have not seen the next Google has very little to do with those reasons.
I think they are looking at this in a micro-level whereas the real answer has to do with the macro landscape. In a previous post called “Who Will Be The Google of Video?“, I outlined why Google was a once in a lifetime success story (I am adding two more labeled first and second addendum):
Google managed to leverage a perfect storm to become the fastest growing and most valuable web company ever.
The factors include:
- Google was not the first search engine, so its technology was not lagging or outdated, quite au contraire, its PageRank technology / methodology was arguably better than that of its peers.
- Due to the lack of business models in search, all of the larger search engines - AltaVista, Excite, Lycos - embraced portalization and left the pure-search business. They left a market right before the monetization model was creeping into the market.
- Google managed to “borrow” from GoTo’s pay per click business model and took advantage of the fact that GoTo.com lacked direct to consumer distribution to make the model its own. It’s worth noting that GoTo.com sued Google, but only once it was owned by Yahoo! did the companies settle… explaining why Yahoo! ended up making some money on Google derivatives after the IPO.
- Somehow Tim Koogle, Jerry Yang and David Filo got convinced to showcase Google as its default search engine on the world’s largest portal, Yahoo!
- The dot com bubble burst, so no one was competing with Google aggressively while Google rose to prominence. This is the main point: no one had the stomach or bank account to compete with Google.
- What made Google take off even more was then buying Applied Semantics for a “mere” $102M. This really made Google’s ad sales business take off because it extended Google’s reach far, far beyond Google’s owned properties (first addendum).
- If that were not enough, lightning then struck twice and Google bought the only company that was remotely competing with it in this space: Sprinks.com (second addendum)
- By virtue of being a private firm, Google did not need to disclose financials until it filed for its IPO. Only then did competitors realize just how profitable search and Google were. But by then, it was too late for others to step on the offensive.
- By the time Yahoo! decided to get serious about search by buying Inktomi (algorithm) and GoTo.com (then called Overture), it got entangled in an integration nightmare, giving Google even more time to build on its lead.
- Looking back, search advertising benefited from the bust because pay per click was a relatively low risk advertising proposition for advertisers.
These factors, in a nutshell, explain why Google became a dominant player in search, and has since leveraged its quasi-monopolistic position in the market to extend its grip on ad dollars onto display/banners (acquisition of Doubleclick), newsletter/emails (Feedburner), video (YouTube).
I won’t say Haque and Graham are wrong, I just disagree with their assessment.
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WatchMojo NewsletterThe single biggest challenge I have every time I click “Write a Post” is to balance that delicate line between being an executive and covering the industry on this site.
As the CEO of WatchMojo.com, I see and hear a lot of juicy tidbits from the front lines as it pertains to the video space. I also am privy to some discussions with regards to business and corporate development.
Generally speaking, even devoid of an actual NDA in place, I usually write pieces for HipMojo.com as if one were in place with the companies that are the subject of a piece in question… just to err on the safe side. Make no mistake about it, I do aggregate all of the data and insight from the front lines to try to make my pontifications be as realistic as they could be… and I think this is why CEO bloggers add to the landscape.
The downside is that I don’t try to “break” stories, be it something (all of the following are things in the past) on YouTube’s monetization efforts, or Adobe’s latest video player, or the date of Hulu’s launch, or an impending shift in strategy or tactics of another player. I also don’t tell YouTube what MySpace TV is about to do, either, or vice-versa. In all fairness, people have the courtesy not to ask either.
Of course, I presume if you read between the lines, you can probably pick up some Freudian slips or subconscious references… and that is human nature.
In fact, apart from one period in particular when I used this blog as a soapbox to defend myself against an unfair, meritless and frivolous lawsuit brought forth by my petty and jealous erstwhile partners, I try not to use it as an inter-company communications channel or medium. It’s an insider’s blog, basically… but not one that is used for communications between companies or executives even though sometimes I will comment on what industry leaders ought to be doing (last year for example, I lashed out at GooTube’s efforts to monetize videos…).
That all being said, I absolutely love this post by Zoho’s CEO Sridhar Vembu: he’s commenting on Google’s partnership with Salesforce (the two compete with his firm) and chronicling - in depth - how Salesforce CEO Marc Benioff offered to buy Zoho.
Just to protect his neck, he explicitly mentions a few times that he is NOT under any DNAs; I would too if I would be writing with such details on an actual, specific exchange… but the danger is: how will other CEOs feel about sharing ideas or pitching to him in the future? Then again, I am sure some people worry about me going public, but that’s why I generally speaking step away from the machine…
Either way, interesting read and insight into the life of a CEO behind the scenes, from the front lines.
In any self-respecting capitalist society, the capital markets will be at the heart of any financial storm. As such, it’s no surprise to see the fallout from the sub-prime mortgage crisis spill over to other segments. However, for all of the doom and gloom scenarios, in the context of how this affects the Web, a few things are very different from 2000.
The main reason for that argument being that the 2000 meltdown was a result of the Web and high technology excess, this time around, it’s a victim, and dare I say it: an innocent stander-by. Let’s consider how times are different:
In 2000, as this table above illustrates: the main culprit was the technology and new media sector (ie. the Web). Today the Web - while not a shelter per se - does offer some cover for traditional media companies. It’s not the culprit, it’s the refuge.
Last Friday, GE for example suffered the twin attacks of seeing a massive fall in earnings on its financial unit (GE Finance) as well as see its media arm NBC Universal experience some weakness. But that weakness in media came due to NBC’s reliance on traditional media: TV mainly.
While digital revenues are not yet material enough to provide much hope for such behemoths, the fact remains, online is actually one shining light. In fact, provided there is a dynamic of scarcity, you will see many more deals. It’s not a coincidence that Q1 saw more deals for more money. This trend will continue, today AOL announced that they are buying Sphere.
In 2000, for example, AOL had just come from a disastrous merger with Time Warner and was not exactly in the market looking for more digital acquisitions. Today, it wisely sees digital as its salvation.
TW is not an exception to this trend: these days tech companies are cash rich: Apple for example has $18B in cash on its balance sheet; it just hired a lawyer from HP whose background lies in M&A. Back in 2000, all tech companies were seeing their stock prices tumble. All of a sudden, the currency they had used for acquisitions was in the toilets.
Today, these companies generate billions and have cash and stock as available currencies. But it’s not only the buyers who are in a very different state of mind, sellers too have changed: Sphere for example had only raised $3.5M in financing.
It’s also not a coincidence that you will see more and more buyouts: when we compiled a list of the top 10 best digital acquisitions of all time, most of them came during the 2001-03 nuclear winter. As they Japanese say: where some see threats, others see opportunity.
Big media and technology firms have learned the lessons: CBS just opened an office in Menlo Park to make more digital acquisitions, presumably. See our thoughts on CBS’ options here, in CBS Should Buy CNET, merge with Yahoo! or go private.
Of course there are fundinistas that have raised $25M to $100M in capital (making them harder/impossible to sell) but the fact remains: this time around, it is different… the technology and new media crowd are not the culprits, they are the victims of the mess in the housing, credit and banking sector.
This does not mean that we in the new media or technology are immune, it simply means that it’s a bit different in 2000 when we all got decimated.
Life isn’t getting any better for magazine companies:
According to figures released by the Publishers Information Bureau and TNS Media Intelligence, in Q1 2008:
- ad pages fell 6.3% compared to the same period in 2007, from 54,126 in 2007 to 50,696 in 2008.
- total revenues remained basically flat with a slight 0.4% decline.
- the decline in ad pages was led by the top six consumer magazine publishers, with:
* Conde Nast down 2.6%,
* Time Inc. down 5.3%,
* Hearst down 3.2%,
* Bonnier down 11.5%,
* Hachette Filipacchi down 7% and
* Meredith down 12.2%.
The greater problem frankly is that even when the economy picks up, I can’t see how any advertising will rush back to print. Ad dollars are stampeding online… and the online spike in revenues for these companies’ websites isn’t big enough to offset the erosion in print.
Of course, one untapped, totally incremental area would be video content and advertising. While web video is cannibalistic for TV media firms, for print media it is all new. However, as some executives in these companies confide to me, print media does not have the pedigree or DNA to tackle video projects… so while this hypothesis remains intact in theory, I am not sure it holds water in practice.
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