Google’s Project Loon, a broadband by balloon service, seemed like its weirdest moonshot. It’s not. It turns out that it also has wind turbines on kites, which it calls Makani. It works by mounting turbines on gliders attached to a tether, which carries power down to the grid. Do either of these relate to pairing what people search for with relevant ads, the company’s fundamental business? Kind of.
“Without getting into specifics, I assure you we are looking at very substantial opportunities for Loon—Google-scale opportunities,” Google exec Astro Teller told Conor Dougherty at the New York Times in February.
A new 7,000 word report from CB Insights called “Google Strategy Teardown” explores how the company has worked to build on its strength today to remain relevant in the future. Assuming that more can be learned from how a company spends its money than what it says, CB Insights looks in detail at Google’s acquisitions and what’s happened to those acquisitions in the last five years or so. It paints a portrait of a company aware that its core business, ads on the internet, is under threat, but it can’t quite figure out what to do next.
CB Insights has built its business around keeping detailed records on investments and acquisitions, with data-driven analysis that investors are willing to pay for. By the way, Google is technically just a division of Alphabet. The company restructured itself this time last year under the new moniker. But since no one calls Google “Alphabet,” we’re going to call Alphabet “Google.”
‘Mobile ads generally are also less lucrative than desktop ads, so Google’s success in mobile has been accompanied by a decline in cost-per-click’
- Google wants to catch up on cloud. It is surprising that a company known for giant server farms got beat on cloud services. Amazon clearly leads the pack here, but other companies have carved strong niches for themselves. Mountain View appears to hope it can buy its way to somewhere closer to the front of the line. It spent $625 million earlier this year to buy Apigee, a company that makes it easier for developers to use cloud services. Both Apple and Spotify have taken contracts on Google servers, which is braggable.
- Display ads aren’t dead yet. One path to growth: get more people online more often. First, close the digital divide globally.
- Machine learning will help even if Google fails to own it. CB Insights makes a big deal out of Google’s efforts in artificial intelligence, but the main thing we got out of it was this: machine learning can make big systems more efficient (such as running servers or distributing autonomous vehicles), even if it turns out that Google fails to own the space.
- Patents. Anyone to whom conspiratorial analysis appeals will find CB Insights analysis of the company’s patents appealing. It counts up the words used in all the patents to see where its putting most of its inventive energy. One word appears again and again, from 2012 to the present: vehicle.
- Stay weird. Honestly, power-from-kites isn’t that strange from a strategic perspective. Google uses a lot of electricity and smart companies know that power from traditional sources has to get pricier. Commercial sustainable energy at scale would let the company fix the price for part of its energy costs. You know what is weird? Google buying into luxury hotel bookings and delivering burritos by drone. Those are weird.
Google today in the CB Insights report sounds a lot like Microsoft during the early days of the Internet. Microsoft ruled the pre-internet era, with every PC maker licensing its Windows OS and usually Office as well. When the internet came along, it famously tried to force its subpar browser, Internet Explorer, on every user of a PC. Then it started chasing everyone else’s imitations, making its own MP3 player (the Zune) and its own console gaming system (the Xbox). Eventually, it even made its own search engine (Bing).
As an aside, Microsoft seems have gotten its groove back, with its stock at an all time high as an enterprise cloud services company, but it also has a 20 year advantage on Mountain View. At least one decade of that lead time has since been pronounced a lost one by Kurt Eichenwald, writing in Vanity Fair.
Today, Google is chasing Amazon and Microsoft in the cloud. It’s chasing Apple and Amazon in natural language assistants and home appliances. It’s also chasing Apple in devices. It’s leading in self-driving cars, probably, but it’s hard to say.
‘Each query handled through an Alexa- or Siri-driven device threatens the foundation of Google’s current revenue model’
Here at the Observer, we’ve criticized the search giant for its aggressive tracking of users. It was one thing when it just refined searches on what people were searching for, but it has since undermined end-to-end encryption for personal communication and it literally follows around users of its Android operating system everywhere they go. What the report helps to illustrate, though, is that excessive tracking reflects increasing desperation, as the future for its fundamental business looks increasingly bleak.
CB Insights writes,
It gets worse.
There’s an art project called Google Will Eat Itself, where display ads are used to buy shares in Google. It may have been more prescient than the artists behind it realized. Google pushed for more internet access, which led to the internet of everything. Ads can’t be shown on everything, though. It successfully shifted to mobile, but mobile ads earn less money. It built the proof of concept for searching by voice, but Amazon built the product.
In technology, one product can only keep a company on the very top for a finite amount of time. To its credit, Mountain View does not appear to be in denial about this reality. Display ads’ days are numbered, and Google has a lot of uncertain options open that could take the business’ place. Those come in letters.