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Is Google moving too far (from search) too fast?

Google should diversify, analysts say, but risks losing focus

February 12, 2010 05:51 AM ET

Computerworld - Google Inc. is stuck between something of a rock and a hard place.

The company, which rose to prominence and fortune on the basis of its highly popular search service, has been expanding out from its core business at an increasingly swift rate -- and in a growing number of directions.

That expansion has some analysts wondering whether Google is in danger of losing focus on what made it such a profitable company, even as those same analysts say it can't rely on search as its only avenue for making money. Right now, Google relies on search for 95% of its revenue, according to Karsten Weide, an analyst at IDC.

"Google has the problem of too much money and not enough control over what to do with it," said Rob Enderle, principal analyst at Enderle Group. "As a result, they are building complexity at an alarming rate, and that complexity should eventually choke them, much as it did Microsoft.... It isn't that each project isn't important. It's that they often don't dovetail well and should eventually result in a company that is unmanageable."

"I think they are a little scattered," said Weide. "They are doing a whole lot of things, and I think a little more focus could not hurt.... But this is a market where you can't afford to sit on your hands. You have to look at what's going on and what is new and what is coming up. Basically, you're betting money."

Last summer, Google announced that it was developing an operating system called Chrome OS. Then in September, it released its Google Wave collaboration tool, taking another step away from its search roots.

And then earlier this year, it unveiled the Google-branded and -designed Nexus One mobile phone.

And this week, Google picked up the expansion pace quite a bit. On Tuesday, it took a major swing at social networking sites like Twitter and Facebook when it unveiled its Google Buzz upgrades to Gmail that make it more of a social networking hub than just an e-mail service. Google Buzz is aimed at helping users better find the most important information contained in their flood of social posts, pictures and video.

The company followed that with an announcement that it plans to build what it calls ultra-high-speed broadband networks in some parts of the U.S. Finally, yesterday, Google announced that it's buying Aardvark, a social search company.

Weide agreed with Enderle that Google has so much money in its coffers that it can try new projects and venture into new areas.

The problem, though, is that undertaking so many new projects can, over time, strain a company's finances and cause executives to lose focus.

"I think they're so rich it doesn't really matter at this point," said Weide. "IBM has been there and Microsoft has been there -- even AOL and Yahoo were there. They were so big, they just didn't care. And everybody has their comeuppance. It will happen to Google eventually. Everyone has their time. You want to be wise in what you do, and prudent. And you don't want to be all over the place."

Stuart Williams, an analyst at Technology Business Research, said Google is on a positive track, trying to pull in revenue from new sources. And that, he added, is a good idea.

"These [moves] all surround Google's efforts to expand its total available market and to seed new markets for growth," said Williams. "Google's strategy is to expand outward from search to include more of the software, hardware and devices that either drive or enable search and information.... Increasingly, Google will need to focus on operations and the execution of its initiatives."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at Twitter @sgaudin or subscribe to Sharon's RSS feed Gaudin RSS. Her e-mail address is sgaudin@computerworld.com.

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