Come the morning of September 7, you’ll probably go to the Google search box and find a fun-loving in-house artist has replaced the first “o” in the company name with a symbol that looks like a “1” and the second "o" with a slightly altered version which looks like a zero.
It’ll be the
10th anniversary of the incorporation of the self-designated organizer of the world’s information.
In that span, Google has caused more upheaval and fear of further upheaval in more industries than any single company within recall.
Central to that upheaval has been Google’s economics, which are formidable. Don’t hire anyone you don’t need. Let an algorithm do whatever needs to be done. Let others create content. Let others build networks. Ride on top. Just make sure people can find what they want, fast. Provide whatever services they need. And just use math to do it.
Now, if, for example, you want to see what’s happening in the world, do you really need to go to CNN.com or NYTimes.com or … dare I say it … (ZDNet sister site:) News.com? Or do you really just start with
news.google.com and get the automated, aggregated view first? Drill down, maybe. But get your update first.
And if you want to find out whether your flight home from Disney World in Orlando to Boston is on time, do you go to Delta.com, find the flight information page and then type in your flight number? Or do you just go to the Google box and type in “Delta 1436”?
Even when it comes to video, Google creates nothing. You and your friends do and upload it to YouTube. Google just organizes it and makes it easily retrieveable.
Nice gig.
And the avoidance of as much cost as possible from human creation has rewarded shareholders and sent further fear down the spines of competitors, particularly Yahoo and, judging by Steve Ballmer’s pirouettes, Microsoft, as well.
Just go back to the fall that Google was launched.
“With more than 26 million visitors a month and a market capitalization of nearly $10 billion -- about twice the worth of rivals Netscape, Lycos, Infoseek, Excite and CNet combined -- Yahoo can credibly lay claim to the throne as king of the World Wide Web,” wrote Charles Piller of the
Los Angeles Times. “A demonstrated ability to respond to change and even to write the rules for success on the Web has made Yahoo a darling of users, pundits and Wall Street alike.”
Simply type ‘YHOO’ into the Google search box and you see that Yahoo is now worth $30.5 billion, even after the recent plunge in its stock price from rejecting Microsoft’s overtures for a merger.
That’s a tripling in value over 10 years.
But type in “GOOG” and you find a snapshot of a company that didn’t even exist a decade ago and is now worth $173.2 billion. Yahoo: Woulda, coulda, shoulda. Google: Did it.
Let’s put Googlenomics into a bit of perspective.
In the most recent four quarters that Google has reported results, it recorded revenue of $18.1 billion. That’s phenomenal for a ten-year-old company in any field, but sometimes seems puny, still, in a field where there are ‘real’ giants like IBM and HP, with revenues surpassing $100 billion.
But what really counts, of course, is the bottom line. In the past four quarters, Google has reported $4.5 billion of net income.
That’s 25 cents of every dollar of revenue, after taxes, after all expenses of any type.
By comparison,
IBM only gets about 11 cents on the dollar, producing $11 billion of net income on a little more than $100 billion in revenue.
HP only gets about 7 cents on the dollar even with its vaunted turnaround under Mark Hurd: $8.1 billion on $110.4 billion of revenue.
Heck, Google generates more profit than the entire cable television industry. Comcast, Time Warner Cable, Cablevision and Paul Allen’s Charter Communications, combined, generate $3.5 billion in annual net income. The rest of the industry is privately held, but most likely does not generate another $1 billion in net.
Yahoo, ten years down the pike, has less than half the revenue of Google and a fourth of the net income: $1.0 billion of net on $7.1 billion of revenue.
The only real remaining counterpoint to Googlenomics:
Microsoft. It generates 28 cents on the dollar and is three times Google’s size, with $58 billion in annual revenue.
I know one editor of a major business publication that now avoids the Google search box almost entirely because its organization of information is undercutting the need for creation of new information. He uses Microsoft’s Live Search instead, because Microsoft realizes that it takes money to create real content and has invested in the same (Thank you, Bill Gates, for
Slate and MSNBC, over the years).
But there’s nothing that suggests that Google has or should change its game (although its stance on net neutrality comes off as mostly a big cost-avoidance scheme). The world’s information needs to be organized. And, if, in effect, becoming the chief librarian of an increasingly multifaceted and multimedia World Wide Web generates outsized profits to the outfit that figures out how best to do it, that is the way it should be.
Here's how it lines up: Google wrings $235,000 of profit from the work of each of its 19,000 or so employees. Microsoft? $178,000 from each of its 79,000. Yahoo? $77,000 from each of its 13,800. Although that's going to go up, now that its top dogs are
leaving in droves.
Would-be kings of the Internet just have to figure out how to generate more intuitive and intrinsic value to the Web user than Google does.
