Reader question: Why isn't Google more focused on its core business?

Reader question: Why isn't Google more focused on its core business?

Summary: A young reader asks why Google is investing in so many technologies that seem to add little shareholder value. Good question, eh?

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I get lots of emails from readers, some of which are complimentary, some of which offer suggestions or alternative viewpoints, and most of which just tell me why I'm wrong or why Google is actually evil. However, yesterday I received an interesting question from a student in Argentina that's actually on the minds of a fair number of industry analysts. I have a few ideas and thought that instead of answering his email directly, I'd write a post about it instead. By the way, I'm writing the post on my freshly-delivered Chrome notebook, but more on that later.

So here's the question from a young student in Argentina (I've reprinted it as he sent it. I blame the US educational system for not being able to write back to him in even hesitant Spanish):

...I would really much appreciate your help for my final conclusions concerning your ideas about which business direction is taking Google, and why they are investing such amount of money in projects that seems to have no monetization or at least short term returns on  investments like Robotics (self-driving car)/journalism/green impact/hardware (notebooks /tablets) and so on.

Is it because of their liquidity, or maybe it is because founders' ideals were to help solve common problems with technology?  I wonder if they are playing to be God.

Good question, right?

And while most people don't see them trying to be God, a whole lot of people see them trying to be Big Brother (and succeeding remarkably well). Are they really an Orwellian beast of a company? I don't think so, but then again I think we landed on the moon for real, I don't think Area 51 really exists, and I'm pretty sure that Lee Harvey Oswald actually killed JFK.

Even if I'm being completely naive, I'm inclined to think that most of what Google does, including some of their seemingly off-the-wall investments, is in the name of long-term profit. That's hardly Orwellian...it's just good business.

Google also happens to have several billions of dollars sitting in the bank. Those billions allow them to take risks, conduct basic research, and buy companies that might or might not pay off in the long run. However, everything that Google does essentially relates to its core business of search and, arguably, its real business of advertising.

The robotic cars to which the question refers are a great example. If Google is driving your car, it obviously knows where you are. This isn't as creepy as it sounds. It simply gives Google the ability to suggest restaurants or gas stations near you. Gas stations and restaurants will pay significant sums to be first on the list of suggestions and Google guarantees itself another revenue stream from local advertising and search (the motivation behind their failed Groupon acquisition). Clearly, this is a long ways off, but investing in research in this area now ensures that Google has a place at the local search table in the years to come.

Google has struggled to be a "sticky" website since it rolled out its first search. Facebook users will spend hours at a time on the social networking site, while Google users tend to be in and out very quickly once they find what they were searching for. That stickiness translates to more advertising dollars. Thus, the idea of a Google operating system (whether Chrome OS, like that on the notebook I'm using now, or Android) makes perfect sense from a stickiness point of view.

If users are immersed in Google Docs, Google Search, Gmail, and all of the tools that natively work very well (or are actually required for both Android and Chrome OS) then Google has many opportunities to hit them with advertising. In the same way, Google can much better learn a users habits and preferences if the company is literally tapped into the user's OS. Better understanding of these preferences translates into better search results that are more relevant for any given user, which then, again, translates into more advertising dollars. Wouldn't you, as an advertiser, pay more for an ad if users were twice as likely to click on that ad than if you ran it on Yahoo?

Everything Google does is somehow tied to driving revenue in its search and advertising business or opening parallel revenue streams that complement this core business. Google may not make money on Android directly, but the billions are already beginning to roll in from advertising revenue on mobile Maps, Apps, and localized search. Imagine how many billions will roll in from Google Car?

Topics: Google, Banking, Emerging Tech

Christopher Dawson

About Christopher Dawson

Chris Dawson is a freelance writer, consultant, and policy advocate with 20 years of experience in education, technology, and the intersection of the two.

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21 comments
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  • RE: Reader question: Why isn't Google more focused on its core business?

    Because they don't have to do be. Simple.
    RSVR85
    • Well, it IS more than that. If they let MS control the operating system,

      then MS can over time use that to steer things away from Google, and make the OS work better for Microsoft's way of doing things, thus disadvantaging Google. Google building an OS allows them to make something that works very well with THEIR products, and not so well with Microsoft products. This will reduce the cost of a computer to use on the run, and get a lot more people using Google services.
      DonnieBoy
      • but then you get what you claim that M$ is bad for doing.

        @DonnieBoy
        If M$ is evil and should be fined for making their software work better on windos then a competitor, how would google doing the same thing be any better?

        Theyd be just as bad, at which point not worth considering.
        Ron Bergundy
      • Well, point taken, but, ChromeOS and native client are all open source, and

        thus anybody can make compatible versions. Of course we DO have to keep Google's feet held to the fire.
        DonnieBoy
  • RE: Reader question: Why isn't Google more focused on its core business?

    So, each one of your answers end-up in selling more advertisements. Will there be any other revenue stream that google is thinking of.. or will it always be about how to get more advertisements?

    They just seem to widen the scope where they can put these advertisements and not completely different streams of revenue.
    5ri
    • RE: Reader question: Why isn't Google more focused on its core business?

      @5ri Doesn't CBS, ABC, NBC, media companies make all their money from advertising? How come I never hear your dopey type complain about those companies?
      jack of daniels
      • RE: Reader question: Why isn't Google more focused on its core business?

        @jack of daniels its because people dont think. They see the way traditional companies may work and think that's the way things ate supposed to be. Ironically when the major traditional companies were formed they could be seen as going against the grain as well. Some people just aren't meant to lead.
        storm14k
  • The answer to the question:

    Because Google is the only company in the world willing and able to take the risk to solve the world's greatest problems. A company should be able to have and execute great and in many case noble goals and make money for and add value to other companies as well as make money for itself to help fund those goals. Before you ask half baked questions try listening to Eric Schmidt. I watch all his talks on YouTube and have been following Google for years.
    jack of daniels
    • Lots of universities are working on robot cars

      @jack of daniels

      But they don't have Google's advertising budget to shout about it.
      jorwell
    • Right...

      You watch all Eric Schmidt's talks on youtube. No wonder you have been hit by the google version of RDF.
      g@...
    • Well, in a way, what ChromeOS and other things cost, is a drop in the

      bucket compared to search revenue. But, even though insignificant, ChromeOS will help Google maintain revenue and keep MS from using the OS to disadvantage Google. It is really Google's Android, ChromeOS, and Chrome the browser that is forcing MS into very uncomfortable territory. Who would have thunk that MS would have the best HTML5 implementation and the best (or near the best) java script performance 2 years ago???
      DonnieBoy
    • WHAT?!

      @jack of daniels You're kidding, right? Or do you really mean the question of who has the lowest price on the new Lady GaGa record is one of the "world's greatest problems"?
      matthew_maurice
  • Are Google really doing any real research?

    Software is applied mathematics.

    How many peer reviewed mathematical papers have come out of Google?

    If the software isn't based on published and peer reviewed mathematical principles then as a layman I cannot trust the software to produce consistent results.

    Of course it may appear (on an empirical basis) to produce consistent results, but tomorrow it may start producing completely different results that do not conform to the model I have built of how I expect the software to work.

    Unless Google publish the model, I cannot trust their software to work reliably.

    If Google keep their methods secret, then their methods must be unreliable from a user perspective.
    jorwell
    • Papers vs products

      "If Google keep their methods secret, then their methods must be unreliable from a user perspective."

      No, it demonstrably works better, see you don't need to know what's in the black box to feed data in and get results out.

      But a lot of the research papers and patents from others, look good on paper but are just plain junk in the real world.

      And users live in the real world.
      guihombre
      • You're very easily satisfied

        @guihombre <br><br>So if your calculator gets 1+1=2 correct 90% of the time this is an acceptable result for you?<br><br>Or is expecting it to get the right answer all the time "just plain junk in the real world"?<br><br>I don't want to know how Google implement their software but I definitely want to know the logical foundation of what they do.

        I expect you would have also dismissed the mathematical work of Frege, Russell, Wittgenstein, Turing and von Neumann that forms the basis of the whole of the modern computer industry as "just plain junk in the real world"?

        Wake up and educate yourself, there is an exciting adventure waiting for you.
        jorwell
      • Google aren't there to satisfy users

        @guihombre

        They are there to satisfy advertisers, who pay for everything you get from Google.
        jorwell
      • RE: Reader question: Why isn't Google more focused on its core business?

        @jorwell

        my calculator doesn't publish its source code, or even the language it is written in, but i trust it to return 60,808,804 every time i enter 7,798^2

        the vendor has proven itself to return reliable data given a set of inputs. should that change, the vendor's reputation will crash extremely fast
        erik.soderquist
    • RE: Reader question: Why isn't Google more focused on its core business?

      @jorwell

      How about you do some research yourself. Google has been publishing research papers on journals and blogs online about all kinds of topics related to Search since its founding. Here's the repository:<br><a href="http://research.google.com/pubs/papers.html" target="_blank" rel="nofollow">http://research.google.com/pubs/papers.html</a><br><br>and here's their more layman friendly "Official Google Research Blog":<br><a href="http://googleresearch.blogspot.com/" target="_blank" rel="nofollow">http://googleresearch.blogspot.com/</a>
      job514
  • Chris: Google charges per month for the premium version of Google Apps

    They will also be be charging more for hosting web applications as time goes on. But, for the near future, of course that will be insignificant compared to advertising.
    DonnieBoy
    • RE: Reader question: Why isn't Google more focused on its core business?

      @DonnieBoy Indeed, the real question investors have for Google is what other major profit engines do they have in store? MSFT struggles to create profit engines to equal their Windows/Office ones. It seems Apple is the only company that has figured out how to release new products that become instantly, massively profitable.
      MSFTWorshipper