Google has one trick. Microsoft likes to say it has a habit of creating $1 billion or more businesses such as Windows, Office, Windows Server, Azure, Xbox and others. Apple has had a few big tricks: Mac, iPod, iPhone, iPad and maybe Apple Watch. Google has text ads and lots of betas. Display ads were acquired via DoubleClick. Video was bought with YouTube. Google's best and only real really profitable trick is advertising. It's a helluva one-trick pony, but Google will need more.
Mobile. At Google I/O this week, Android will be front and center. The master plan was to use Android to drive mobile advertising. Google is making some headway, but has an innovators dilemma issue. Google gets better ad rates on the desktop relative to mobile. As a result, Google has tried to blend the two types of ads to maintain rates. In contrast, Facebook, which didn't have much to protect on ad rates, went all-out for mobile. Facebook's most recent quarters highlight the mobile momentum vs. Google, which still doesn't break out numbers for the small screen.
And a lot of that engagement is going to Facebook.
Facebook. Facebook has improved its advertising tools and is working the social graph to gain share. Facebook and Google dominate the ad market, but the split between the two is shifting. Over time, expect more market share to go to Facebook because it can deliver 1:1 marketing.
The Facebook hit isn't showing up yet, but Glassdoor does indicate that employees are lowering their expectations for future business. Note the positive business outlook trend.
Distance from the customer. As Google has ballooned into a massive company it has made moves that alienate and annoy customers. It's not hard to find a marketer annoyed with Google's market power and rates. One recent exhibit is Google's decision to truncate No. 2 paid search ads. The game is obvious: Get you to buy the No. 1 spot for higher rates. Then why have a No. 2 spot? Due to the need of customers to have a counterweight, Facebook is going to grab more dollars.
Dependence on Apple.Via Search Engine Land, a Goldman Sachs report estimates that Google collected about $11.8 billion on mobile search ads and 75 percent of that sum came from the iPhone and iPad. The stat was surfaced in a New York Times story. About half of the iOS mobile search revenue is attributed to a Safari search deal. Apple could easily use Bing for default search. Or better yet, Apple could build its own search engine. That thought brings me to my next point.
The time is ripe for a new search engine. Bing and Yahoo have provided a counterweight, but aren't going to match Google's dominance. The reality is that only two tech giants could punch Google in the search nose: Facebook and Apple. Facebook's social data would make a powerful search tool. Apple could also make headway. Remember a new search engine would only need 10 percent market share to put the squeeze on Google.
The beta culture and the enterprise. Google could be an enterprise powerhouse and is often mentioned as a player along with Amazon Web Services and Microsoft Azure. But a funny thing happens when you talk to CXOs. They're not so sure that Google is in the cloud services game to win or whether it's just another project on the side. Would you put your mission critical apps on Google's cloud? CXOs to date see it more as a developer playground. Google will have to counter its beta-all-the-time perception to win CXOs over.
Distractions. Give Google props for trying out a lot of moonshot-type projects. However, should ad growth slow or even decline, Google's penchant for crazy projects may look like a big distraction. The returns on self-driving cars, delivery services just to compete with Amazon and Internet access businesses may look like folly. Perhaps the biggest distraction for Google is regulatory issues in Europe and potentially elsewhere. These regulatory moves against Google can slow the company down.