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August 05, 2006

Google's "one-trick pony" is learning new tricks

I’ve long called Google a “one-trick pony” because so much of their business comes from one primary revenue stream – online search ads. This has been further reinforced by recent articles like Businessweek’s article, “So Much Fanfare, So Few Hits” where the uses traffic data to show that most of Google’s new products haven’t gained traction in the market (with the exceptions of Google Maps and Google News). Paul Kedrosky also takes an excellent look at the Hitwise data to reinforce this point.

I don’t dispute the facts, but make a different conclusion – I think Google is actually making progress in diversifying out of search and into new businesses – yes, the pony is learning new tricks. But just like training a real animal, it takes time, patience, and the pony performs some tricks better than others.

NnrdataI took a look at Google’s most recent traffic data from Nielsen//NetRatings but looked specifically at Google’s unique users and page view data. I wanted to see what percent of Google’s users were using search versus its other properties. I also compared the traffic between June 2006 with traffic from June 2005. I found that traffic to Google Search accounted for 88% of Google’s unique users in 2006, down from 91% in 2005, and drew 49% of total page views in 2006 versus 62% of page views in 2005 (see the figure below). More importantly, properties like Gmail almost doubled in unique users from 4.3 million uniques in the US in June 2005 to 8.3 million uniques in June 2006.

Note that there problems with this methodology: I don’t know how NNR categorizes the properties or if they were consistent from 2005 to 2006; the data from NNR wasn’t available for Google Local/Google Maps, and I don’t know half of Google’s page view traffic is going if it’s not going to Google Search. But I still think it provides a different, temporal look at Google’s portfolio.

So, Google’s done a decent job in building momentum behind a few of its properties and will likely continue to gain steam. Its biggest problem was pointed out in the Businessweek article – that there’s only so much that you can push through a single search query box. Google understandly doesn’t want to clutter the home page, but it should take a close look at Ask.com’s new home page redesign which pushes its most popular tools to the surface – and allows users to customize the interface as well.

Askhomepage_3The other problem is actually diversifying the revenue base. Pay per click search ads remains the mainstay, but Google has been busy developing cost per impression display ad options, cost per action ads, and extending into offline markets like radio. None of these products will be run away hits, but with billions of cash on hand, Google can afford to be patient as these markets develop.

My point is that we should give Google’s product team a break. Before you think I’ve gone soft on Google I haven’t – I’m just asking for a bit of realism in thinking about new product development at Google. It took Google several years to become the dominant search player – and this is for a product where there are very few switching costs. As I wrote in March about Google Finance, it’s going to take a long time to tear users away from highly involved, personalized services. It’s only been four and a half months since Google Finance – it’s going to take a while for it to gain traction against Yahoo! Finance’s ten year lead! But you gotta start somewhere and at least Google’s getting started.

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Comments

John

I'm alway amused when people call Google a “one-trick pony”. But you could say that about companies like, let's say oil companies like ExxonMobile - they are essentially a "one-trick pony" - they sell oil. Well, if oil is selling for $70/barrell and demand is increasing faster than demand, then that's great.

What I like is that Google is a very patient company. They are very much like Microsoft. They are willing to make big bets and win over time. A war of attrition.

TanNg

Microsoft was two or three tricks pony, they was patient. But they still face threat from Google, who is fast to innovate. So if Google is being like MS: patient and one-trick pony, and not innovate like mad, then one day they will face consequences.

That's why I thing ppl call Google one-trick pony.

John

I don't see anywhere in the hitwise data that most of Google's new products "haven't "gained traction in the market." There's no competitive data there. The Hitwise data only shows the "percent share amongst top Google properties", so the data is against itself. It isn't competitive traffic data.

That's what I'd like to really see. How the the TRAFFIC of Google Maps stacks up against MapQuest, Yahoo Maps, etc...

The market share of any of their products is going to look dismal when compared to search. I want to see real traffic numbers for each of these products' competitors.

argplywood

Thank you very much from Turkey
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Nick Chen

I have current predetermnined school project about (bragging) Google.
My professor will never agree with that Google is a one-trick pony.

wlai

The only issues of consequence are that Google's trick is the most profitable trick that exists in the history of the industry; that they are increasing their share of this one trick; and that it's rate of change on the # of tricks is going up. The rest is just fodder.

Timothy Coote

If you're in the process of world domination I guess it's comforting to know Google is taking it's time to work out how best we are to be dominated.

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Richard L. Brandt

Charlene makes a very good point about Google's supposed "one trick pony" -- and she's concerned that people will think she's going soft on Google! People forget that when Microsoft was moving from operating systems to applications, everyone said the company would never make a major impact there. I covered Microsoft at Business Week for about a decade, from 1985 on, and I saw it exercise patience and tenacity. Lotus Development, for example, first came up with the idea of suites of software, but then gave up on it before it took off. Gates once told me in an interview that he was surprised that Lotus gave up so quickly. He stole the idea and made it a hit. Google is the same way.

You still worry that Google is too reliant on advertising. But that is a pony with long legs. Google dominates online advertising, the only ad market that's still growing in double digits. Google's revenue and profit in the last quarter doubled from a year ago. I don't know if Google will find other forms of revenue. I hope not. By relying on relevant ads, it is able to offer its "products" for free.

Alex Bukinis

Google start more looking like tricking business, nothing is streight with google , everything is contingent and teh list of explation of how to is ever growing

Alex Bukinis

I also think google is losing the market share on trafic , it significantly less then last year, click through is less is customer visibility is less

continued research on hoodia http://www.offshelf.net.

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