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.
I 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.
The 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.