Mobile apps, verticalization may be killing Google's golden goose

Mobile apps, verticalization may be killing Google's golden goose

Summary: Google's third quarter earnings miss may reflect that user behavior is changing to mobile apps and vertical search. That move may impact search profits.

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This is a guest post by Anshu Sharma, a cloud computing executive and an active blogger at anshublog.com and member of Enterprise Irregulars. The post is timely given Google's third quarter earnings miss.
 
Marc Andreessen rightly pointed out that Software is Eating the World, in a Wall Street Journal article. Well, the rule of creative destruction applies to software companies too including Search. And now this search for dominance is joined by newly energized for another round - Yahoo! with a new CEO and COO. But is this battle for search dominance by Google, Microsoft and Yahoo! still a relevant or are the giants fighting a war for shrinking territory?

I believe that their some big shifts happening in user behavior driven by new technologies. But first let's look at the premise of this post - ask yourself the following questions (and yes, put away the iPhone for a few minutes to think about this):

  • Where do you go to search for a hotel to reserve? (Hint: Google, Hotels.com, Expedia, Hotwire)
  • Where do you go to search for a car to buy? (Hint: Google, TrueCar.com, Edmunds.com)
  • Where do you to to search for a laptop to buy? (Hint; Google, Amazon.com, Best Buy)
  • Where do you go to search for a collection of clothes to browse? (Hint: Google, Pinterest, Macys.com)
  • Where do you go to search for a person you met at a party? (Hint: Google, Facebook, LinkedIn)
  • Where do you go to search for a person you met at a conference? (Hint: Google, LinkedIn, Facebook)
  • Where do you go to search for a movie to rent? (Hint: Google, Netflix, Amazon)
  • Where do you go to search for a restaurant to go to? (Hint: Google, Yelp)
  • Where do you go to search for a restaurant to reserve? (Hint: Google, OpenTable)
  • Where do you go to search for clothes and shoes to just browse and just may be buy? (Hint: Google, Pinterest)
  • Where do you go to search for your future spouse? (Hint: Google, Match.com, eHarmony)

I can go on and on. You get the idea. How many of the search questions did you respond to with Google - especially when you are away from your computer on a phone or an iPad? Do you even go the web browser on these devices or do you go straight for the app?

Think about it.

Did you wait to come home and search for the person? Do you go to a desktop to order a cab? Order a meal? Or do you do these searches on your smartphone?

Do you even go to the web browser any more or do you skip to your favorite LinkedIn, Facebook, Kayak, Netflix app and search for the person, hotel, movie?

Verticalization of Search Leaves Generic Search with the Long Tail

If you observe the list of questions, you will notice a pattern.

  • First, the searches all seem to be category or vertical specific.
  • Second, the searches all seem to have a hugely profitable vertical associated with them be it hotel reservations, airline reservations, eating out, entertainment or be it the mother of all categories - buying everything under the sky where the winner is Amazon.

Here is what Forrester recently pointed out in a blog post outlining the results of their survey:

'Some 30% of online buyers began researching their last online purchase with Amazon, compared with 13% researching a product on Google, according to a new Forrester survey of nearly 4,000 US respondents.'

anshu1

Source: Forrester Research

Now combine that with the growth of Pinterest - which Ian Schafer calls out as "half-shopping" in his blog post here. In a very revealing article by Fast Company's Co.Design, they point out how Pinterest has solved a problem that Google and others have struggled with - the problem of discovery.

Apps are Eating the Search Pie 

As with many industries, a generic solution was good enough - perhaps even better due to the technological advantage - but over time the web has evolved. Due to user generated content, tagging, social networks - we now have websites that are essentially curated indexes for finding movies, movie ratings, homes, help, restaurants, restaurant reviews, etc.  These curated indexes are maintained at almost no cost to the provider and to us end users usually supported by other economically interested parties. A recent example of this is Foursquare - Foursquare launching local search for everyone - essentially Foursquare took user curated check-in data and realized that the historical data made it a pretty good local search engine.

It will be interesting to see how Google, Microsoft and Yahoo! respond to this eating away of the search pie by vertical search engines disguised as mobile (and desktop) apps. 

Anshu Sharma is a product executive at a leading cloud computing company. He has over 12 years of experience in building enterprise software products including platforms and applications. The opinions expressed here are his personal views and do not reflect views of his employer (Salesforce.com) or any other entity.

Topics: Mobility, E-Commerce, Google

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11 comments
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  • Native apps offers better UX compared with HTML

    Good analysis. It's undeniable that a rich, specific native app is much more enjoyable than a dumb generic search through web pages.
    LBiege
    • @ LBiege

      One of the most sane comments on zdnet's boards in a while.

      Mobile apps compete with websites as Steve Jobs himself pointed out.

      So increase in # of mobile apps should translate into decrease in # of web sites since native apps on mobile platforms (ios, wp, android) will translate into lesser investments into website development. Consequently firms will not invest the same into website developement leading to lesser breadth search results. Once this starts off (like Q2 2012), everything else is a feedback loop.

      It appears Microsoft were moronic to wait, see and understand this transition before they stepped into it. While Google was stupid to step into it without building a quality app environment or platform OS or user experience.

      I cannot believe that the bloggers and journalists cannot see what Wall Street sees already - that Android is a financial failure. With declining PC sales, desktop search revenue will simply disappear only proving the one trick pony that was Google. If Google were smarter, they would have acquired Yahoo or Facebook. Not Motorola. They would have partnered with Apple to create a mobile ad and mobile search experience on ios and with Microsoft on wp platforms. Instead, they developed their own platform and have entered a slow death process.

      This is gonna be grueling for everyone involved at Google. Expect Q4 2012 profits to be $1.5 billion. About 50% lesser Y-o-Y from 2011 Q2.

      Atleast Microsoft though stupid too is less stupid. If they sell to even 5% of the tablet market using Surface, they will have atleast $1 or upto $2.5 billion profit (not revenue with gross margins of $250 on each Surface) - say 10 million tablets out of 200 million tablets - in a year. They will have a new profit making engine for sure.

      Shame on Google for being arrogant and wasting my investor money. Bailed out at $600 BTW.
      calahan
    • @LBiege

      Thanks.

      -Anshu
      anshu_sharma@...
  • Not just that...

    In most of these cases, you're searching a specific data set, not the entire web. When you go to Netflix, you're searching a database that contains nothing but TV shows and movies that you can rent or stream. When you go to Google, in order to narrow it down from the entire Internet, you have to be skilled enough to craft your search terms to do so.

    Now, that may not seem difficult to an IT person, but many people either are too specific or two broad in their search terms, which either has them left with a ton of results they have to sift through to find those that really match or the results don't contain what they're really looking for at all.

    With apps, much of the art of crafting search terminology is removed.
    TroyMcClure
    • @piousmonk

      piousmonk, yes, with vertical apps (and search) you can perform 'verbs' and sub-searches ('facets') that are hard to do with generic search engine.
      anshu_sharma@...
  • As more and more mobile

    devices with the capability of native apps come into picture you would see the web based ad revenue goes down the hill. That is one of the reasons the companies that are either bilking on ad-revenue or hoping to get good ad-revenue are pushing HTML5 as the platform of choice in the name of cross device compatibility. But who would go in that route if the native apps provide richer and cleaner interfaces with optimistic performance.
    Ram U
  • In most cases

    even if I am on my 'phone, I'll search using the browser first.

    That said, I don't have Facebook, Pinterest, LinkedIn etc. apps installed on my phone.
    wright_is
    • -

      yes, many people who don't use too many apps (yet!?) rely on google search on phones too. I personally think that will change with time. You may end up installing apps soon.
      anshu_sharma@...
  • Ads Bypass

    Are you really saying to get away from the ads panels we use APPS. In This way we are by-passing google Ads and we believe better content results. Could we compare this to the old Route66 Highway Billboards that drives us to the next exit to stay at the motel 6. The APP game is just starting to make real$$ money on ADS and has many more Third Party APPS to sell those ADS then just using one or two mega company. So we are going to see the same search results from google but someone else will be selling the ADS. Sounds like third parts sales. Can I buy a Toyota at a GM Dealership.
    dbrown@...
  • There is a limit to this verticalization

    Anshu - Very insightful post!

    Your basic premise of search getting verticalized is right. BUT isn't there is a limit to this? My reasoning is that each of us can only work with a ~6 (give or take) verticalized search apps / sites. Most people don't hoard all manner of search apps. So beyond that, Google / Yahoo will still be dominant. The point is: the long tail remains very long and therefore will remain very profitable for Google / Yahoo.

    The second point is that those sites that have their own data (accompanying their search capability) are more defensible than those that merely crawl web sites and attempt to tag them better.

    Nimish Mehta
    nmehta0
    • @Nimish

      I agree that most people use a few apps. But these are high value transactions often and tend to be 'most used' domains like finding a restaurant to eat. I agree that generic search continues to dominate the long tail BUT you should borrow a teenager or recent college grad's iPhone and see how many apps they have. You may be shocked. If true, in 5-10 years we could see very massive changes.

      On second point, agree that data ownership enables you to do interesting things that generic search can't.
      anshu_sharma@...