Should Google Abandon Google+, Buy Hewlett-Packard?
OPINION
[Opinion]
"Never forget what people say to you when they're angry -- that's when the truth comes out." -- Author unknown
Steve Yegge, a senior engineer at Google who later retracted harsh comments about its Google+ product, was probably drunk or out of his mind when he lambasted the search giant's social network. He should be getting a promotion for doing that. When the truth hurts, many resort to living in a lie. But he didn't.
"Google+ is a prime example of our complete failure to understand platforms from the very highest levels of executive leadership (hi Larry, Sergey, Eric, Vic, howdy howdy) down to the very lowest leaf workers (hey yo)," he wrote on Google+. "We all don't get it."
As more people are spending more time on Facebook, Google wants a share of those advertising dollars and hopes to lure 800 million Facebook users to a social network that has better features for sharing content and protecting users' privacy.
Google has gained more than 40 million users just 13 days after it went public and 108 days after launching on invite-only mode. Facebook on the other hand obtained its 100 millionth user almost four years after Mark Zuckerberg launched the site in his Harvard dormitory. And Google's Yegge could have had just a bad day at that time.
Google has a host of market leading products and services that could be a social-media game changer. Google's search engine is the world's most popular Web site and it has YouTube, Google Books, Blogspot, the Chrome browser, Gmail e-mail service, and GoogleDocs. Facebook has its apps but even its partnership with the provider of its most popular apps, Zynga, isn't even exclusive.
Google recorded a $2.5 billion profit in three months ended June 30, 2011 primarily from ads across its sites and services. It could make more money if it lures traffic from Facebook. But Google+ probably can't beat Facebook gven that the former is already losing traffic this early.
"Google+ is a knee-jerk reaction, a study in short-term thinking, predicated on the incorrect notion that Facebook is successful because they built a great product. But that's not why they are successful. Facebook is successful because they built an entire constellation of products by allowing other people to do the work," Yegge wrote in his post, which was deleted immediately after posting. "So Facebook is different for everyone. Some people spend all their time on Mafia Wars. Some spend all their time on Farmville. There are hundreds or maybe thousands of different high-quality time sinks available, so there's something there for everyone."
The Google+ team tried to mimic Facebook's usage of games but simply ended up being run-of-the-mill, thanks to a lack of understanding of platforms, Yegge said.
The brilliant minds of Google should just channel their efforts somewhere else.
Talking about platforms what Google has masterfully learned in the past two years is the platform for mobile devices. Its Android operating system is now being used by almost 50% of smartphones. Piper Jaffray analyst Gene Munster estimated that Google made $850 million revenue from mobile advertising, with Android-related ads generating 16%. As users increase, Google could generate in excess of $1 billion in Android-related ad revenue in 2012, he says.
And how much does it earn from Android licenses? None. Google doesn't charge directly for use of the Android OS but has an ad revenue sharing deal with device-makers.
The licenses have come in cheap but it doesn't mean Google has not been accruing costs for developing, and protecting, Ice Cream Sandwich and other platforms named after desserts. Google is paying for litigation costs and is threatened by a minimum of $2 billion in damages sought by Oracle for alleged violations of Java's copyrights and patents in Android, according to Electronista, citing court filings by Google. And Google is paying $12.5 billion for Motorola Mobility -- a business that lost $56 million in its most recent quarter and $137 million in the past six months -- just to get hold of patents that would protect itself against patent litigation.
Becoming a handset maker with the purchase of Motorola Mobility -- and thus a direct competitor to its Android partners HTC, Samsung and LG -- Google's Larry Page should at least take a cue from how Apple and Steve Jobs has transformed Apple to be a company worth $370 billion. Like Apple, Google will soon start selling handsets and smartphones through its Motorola business.
But Google needs something more than Motorola. It should set its sights on the PC and integrate it with its Android platform.
Apple's iOS trails Google's Android in number of users but Apple recorded $13.8 billion in revenue from sale of iOS devices -- iPhone and iPad -- for the three months ended June 25, 2011, had margins of 41%, pushing the company's net profit to $7.3 billion during the quarter. Apple also sells iMacs and MacBooks, which uses Apple's own operating system, contributing $5 billion of revenue in the quarter.
Microsoft is making more money than Google from the sale of licenses -- it provides the Windows 7 platform for non-Apple PCS. The Windows 7 and Windows Live business generated net profit of $3.1 billion on $4.78 billion of revenue for the three months ended June 30, 2011.
Like Microsoft and Apple, Google needs a PC business to stay relevant.
Apple has launched the iCloud, the service that allows users to content on remote computer servers for download or access via the iPhone, the iPad, the iMac and other Apple devices. Apple's latest OS for the Mac (Mac OS X Lion) has an interface and features heavily influenced by the iOS (Apple's platform for the iPad and iPhone). Recent changes to the software for Apple devices indicate that Apple will soon have a unified ecosystem of its devices.
As for Microsoft, it is launching a new platform designed to specifically work for smartphones, tablets and PCS. Windows 8 has an extensively redesigned user interface, optimized for touch-screens as well as mice and keyboards. With Microsoft promoting coherence and consistency across different form factors, Google needs to go beyond the Android for mobile phones.
Google already has the Chrome OS, which boots the tailor-made Chromebooks, in under 7 seconds. But Chrome OS, Google's operating system for PCs, hasn't gained any ground against Microsoft. Google should probably set its sights on Hewlett-Packard, whose PC business is potentially for sale, CEO Leo Apotheker said before he was fired. HP already has 20% of the worldwide PC market. Given HP's brand, Google could immediately penetrate the market if it buys HP's PC business.
HP's PC business is valued by analysts at just under $10 billion. Didn't Google pay $12.5 billion for Motorola?