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- Google was not the first search engine, so its technology was not lagging or outdated, quite au contraire, its PageRank technology / methodology was arguably better than that of its peers.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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September 13th, 2008 at 2:57 pm
[…] Sprinks came along to weld the future business of search, which Google parlayed to create a perfect storm which left all would-be contestants in the […]