Google is concerned about keeping up with “rapid technological change to remain competitive” in a rapidly evolving industry. As discussed in The New York Times “A Search Engine That’s Becoming an Inventor” story today:
Google increasingly needs systems that are less likely to fail than those it uses for its search engine in order to handle important information, like e-mail and payments in its new Google Checkout service.
Building out its infrastructure is but one of the challenges Google faces in maintaining competitive advantage. In the latest publicly available 10-Q statement, first quarter, 2006, Google identified a myriad of risks it faces, as it seeks to maintain its search dominance and its revenue growth rate. Here are eight of the risks impacting Google, according to Google:
1) We May Have Difficulty Scaling and Adapting Our Existing Architecture to Accommodate Increased Traffic and Technology Advances or Changing Business Requirements , Which Could Lead to the Loss of Users, Advertisers and Google Network Members, and Cause Us to Incur Expenses to Make Architectural Changes
The greater the user traffic and the greater the complexity of our products and services, the more computing power we will need…expansion is expensive and complex and could result in inefficiencies or operational failures…Cost increases, loss of traffic or failure to accommodate new technologies or changing business requirements could harm our operating results and financial condition.
2) We Rely on Bandwidth Providers, Data Centers or Other Third Parties for Key Aspects of the Process of Providing Products and Services to Our Users, and Any Failure or Interruption in the Services and Products Provided by These Third Parties Could Harm Our Ability to Operate Our Business and Damage Our Reputation
We exercise little control over these third-party vendors, which increases our vulnerability to problems with the services they provide…We have experienced and expect to continue to experience interruptions and delays in service and availability…could negatively impact our relationship with users and adversely affect our brand and our business and could expose us to liabilities to third parties.
3) New Technologies Could Block Our Ads, Which Would Harm Our Business
Technologies may be developed that can block the display of our ads. Most of our revenues are derived from fees paid to us by advertisers in connection with the display of ads on Web pages. As a result, ad-blocking technology could, in the future, adversely affect our operating results.
4) Proprietary Document Formats May Limit the Effectiveness of Our Search Technology by Preventing Our Technology From Accessing the Content of Documents in Such Formats, Which Could Limit the Effectiveness of Our Products and Services
A large amount of information on the Internet is provided in proprietary document formats such as Microsoft Word. The providers of the software application used to create these documents could engineer the document format to prevent or interfere with our ability to access the document contents with our search technology…could harm our brand and our operating results.
5) Index Spammers Could Harm the Integrity of Our Web Search Results, Which Could Damage Our Reputation and Cause Our Users to be Dissatisfied with Our Products and Services
There is an ongoing and increasing effort by “index spammers” to develop ways to manipulate our Web search results…If our efforts to combat …index spamming are unsuccessful, our reputation for delivering relevant information could be diminished. This could result in a decline in user traffic, which would damage our business.
6) Privacy Concerns Relating to Our Technology Could Damage Our Reputation and Deter Current and Potential Users from Using Our Products and Services
Concerns may be expressed about whether our products and services compromise the privacy of users and others…about our practices with regard to the collection, use, disclosure or security of personal information or other privacy-related matters…It is possible that certain jurisdictions may enact laws or regulations that impact our ability to offer our products and services…could harm our business.
7) More Individuals Are Using Non-PC Devices to Access the Internet, and Versions of Our Web Search Technology Developed for These Devices May Not be Widely Adopted by Users of These Devices
The lower resolution, functionality and memory associated with alternative devices makes the use of our products and services through such devices difficult. If we are unable to attract and retain a substantial number of alternative device users to our Web search services or if we are slow to develop products and technologies that are more compatible with non-PC communications devoices, we willl fail to capture a significant share of an increasingly important portion of the market for online services.
8) If We Fail to Detect Click Fraud or Other Invalid Clicks, We Could Face Potential Litigation as Well as Lose the Confidence of our Advertisers, Which Would Cause our Business to Suffer
We are exposed to the risk of fraudulent clicks and other invalid clicks on our ads from a variety of potential sources…If invalid clicks are not detected, the affected advertisers may experience a reduced return on their investment in our advertising programs because the invalid clicks will not lead to potential revenue for the advertiser. This could lead the advertisers to become dissatisfied with our advertising programs…further litigation, as well as potentially leading to a loss of advertisers and revenues.