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Google (GOOG) Under Attack From All Angles
Posted By IS On July 14, 2011 @ 5:00 am In Stock Opinions | 2 Comments
Today we take a look at Google, which is reporting earnings today! When Larry Page stepped up to the table [2] to become in charge again of the company he had co-founded over a decade ago, he knew he had a lot of different challenges to work on. It has only been a few months but it’s safe to say that things have not gotten any easier for Google as it tries to protect its key businesses and become relevant players in many others where it faces solid competition. A good friend of this blog helped us illustrate what is going on. That is not to say that Google isn’t counter-attacking many of these companies. I do however think that Google faces more competition than any other company in the world.

The Good News For Google

Most internet users connect to the web through a laptop or desktop and scour the internet through Google’s search engine. Google places ads on those listings. It has dominated this market for years and despite competition from many of the largest tech companies, Google’s market share has been stable and even increased slightly. There are some challengers that have gained increased exposure in “search” such as Twitter [3], Youtube and Itunes but the biggest of those 3, Youtube, is owned by Google. The main challenge here is Google’s absence in China where Baidu (BIDU) dominates [4] mostly thanks censorship laws and other interventions by the Chinese government that even caused Google to mostly pull out of China. It is certainly a limitation on Google’s growth in search to be out of the one market that seems to be growing these days.

Platforms Are Changing

Google’s biggest concern stems from the fact that users are now interacting with the web in very different ways which can influence Google’s earning power.
[6]Move to Mobile: Increasingly, users are reaching the web from mobile devices to get local information, communicate with friends, etc. Google is a major player in the mobile space thanks to its search engine (used on almost all mobile operating systems) but also thanks to Android, which is the most used mobile operating system (34.7% market share as of the end of March). I don’t think it’s difficult to argue that Google is in a great position to beenfit from the growth of mobile, mostly thanks to Android. That being said, Microsoft has been aggressive, and there are always questions about which direction Apple will head towards. Thanks to the Iphone, the top smartphone almost everywhere around the world, Apple has a lot of influence [7] and with the recent rumors of Apple releasing cheaper phones that could go mainstream, Android’s dominance is far from certain.
[8]Move To A Social Web: While surfing the internet used to be about searching and finding information, the incredible rise of Facebook [9] has had a huge part in a big change of how consumers actually connect to the internet. That is significant in many different ways but it also means that Google’s search becomes less relevant. Why? Because Google does not have access to Facebook data (and even lost access to Twitter recently) making it vulnerable. Facebook has strong ties to Microsoft which would certainly mean even stronger ties between Facebook and Bing. How would a world where the web is increasingly closed look for Google? Very dangerous. It’s unclear how this will play out but I think it’s very clear how serious Google is taking this. After Larry Page confirmed that social was the top priority for Google, and the one employees bonus would be decided on, Google finally launched what now looks like a credible product a few days ago; Google+. Does it stand a shot against Facebook? It’s difficult to say and there’s a strong possibility that both will co-exist rather than only one surviving. At this point, even surviving and becoming a Facebook rival would be a huge accomplishment for Google. Of course, it’s far from done, as most users already have their networks up and established on Facebook, something few will be tempted to duplicate, but it does look like Google’s most promising attempt by far.

[10]Cloud Computing

It seemed as though Google had taken an incredible lead in the clouds years ago thanks to Google docs, and other such initiatives. While those products do still look solid and have great market share, the recent announcement by Microsoft of its Office suite being offered in the clouds, as well as various Amazon products have put into question Google’s offerings. Can it continue to increase its presence? Will it ever make significant money out of it? Amazon’s AWS offerings looks like a product that Google could and should have offered.
These days, cloud computing also means bringing the complete pc experience (operating system, browser, etc) to the clouds and Google does have a solid presence on those fronts but still faces many challenges there as well.

Antitrust Agencies

I think it’s easy to overlook how big of a problem recent investigations by US and European government agencies are having. If Google is going to run into all kind of legal complications every time it makes an acquisition, launches a new product and thinks about entering a new market, it will certainly make a big difference. It’s difficult to say how much of a problem all of those same issues ended up creating for Microsoft in the 1990′s but I don’t think anyone doubts that Microsoft could have became a very different company had those regulations not been in place. Would Google have acquired Twitter or smaller social players if not for worries of more involvment and issues with authorities? Perhaps. If every move is being analyzed by the US government, is there any doubt that it will end up slowing down Google significantly? Does anyone not think that it’s easier for Facebook or Amazon to make acquisitions these days than it is for Google?
Who Else Is Throwing Rocks?
I don’t think there are any doubts that many other companies are facing off with Google from local players such as Groupon and Yelp to smaller players such as Dropbox in cloud computing.
Disclosure: Long Google [11]

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[12] Tech War being taken to a whole other level (MSFT, GOOG, AAPL, NFLX, AMZN, EBAY):

Wikio – Android (GOOG) Topples Peers, Becomes Number One U.S. Smartphone Platform – comScore – Android (GOOG) Topples Peers, Becomes Number One U.S. Smartphone Platform – comScore

March 7, 2011 1:36 PM EST

According to data from comScore (Nasdaq:SCOR) today, Google’s (Nasdaq: GOOG) Android has overtaken Research In Motion’s (Nasdaq: RIMM) BlackBerry as the top smartphone platform in the U.S. for the three-months ended January 2011.

Having been in second place over the last two quaters, Android has now secured a 31.2% market share, top amongst its peers. The number is a 7.7 percentage point jump from the last reading.

RIM actually lost market share, dropping 5.4 points to 30.4%. Coming in third was Apple (Nasdaq: AAPL), with a 24.7% share, a modest increase sequentially.

Microsoft (Nasdaq: MSFT) and Palm (NYSE: HPQ) rounded-out the top five, losing 1.7 and 0.7 percentage points, respectively.

ComScore notes that 65.8 million people in the U.S. owned smartphones through January.

In terms of mobile OEMs, Samsung was atop again, with a 24.9% market share. LG came in second at 20.8%, Motorola (NYSE: MMI) was third at 16.5%, RIM fourth with 8.6%, and Apple fifth at 7%.


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