Google risks losing focus amid expansion, analysts say

Google Inc. is a search company that is expanding out from its core business - way out.

This week's unveiling of the Google branded and designed mobile phone, the Nexus One , along with an operating system, browser and social collaboration tools still in the works, the company has moved pretty far afield from its initial - and phenomenally successful -- search service.

While analysts say that while Google's expansion is risky, the vendor needs to find ways beyond the search tool to generate business.

"The phone is a potentially a brilliant move," said Rob Enderle, an analyst with the Enderle Group. "You've got to credit them with the guts to try this. But Google has some risk here. As you try to do too many things, you start to lose track of who you are and lose focus on your customers. There is a risk here of Google losing its way. There's risk with regard to everything and just because the risk exists doesn't mean you shouldn't do it. If all of us avoided risk, we wouldn't get out of bed in the morning."

Just over 11 years ago, Google was launched as a search engine business and grew quickly into an online behemoth. Google, whose name has become synonymous with search, is one of the great Internet success stories. Today, Google "owns" the search market with a 64% share.

But Google executives clearly have bigger dreams for the business.

The company has upgraded the search tool over the years, adding popular features like Google Maps and Google Earth. The company also added hosted Google Apps applications like Gmail.

But the company's effort to branch out has picked up speed in the last six months or so.

More recently, Google has directly targeted Microsoft's Internet Explorer browser and even Windows with its acknowledgement last summer of a project to develop the Chrome OS and browser. Meanwhile, Google last September announced plans to release an early version of its Google Wave collaboration tool to 100,000 users and developers for testing.

"Underneath it all, Google doesn't think of itself as a search company, even though that's been their big success," said Enderle. "They don't want to be just a search company. Ultimately search isn't sustainable. Google search could become irrelevant. You eventually could have specialized search providers or Google search could become part of something else and just fade into the background. The market has a tendency to move and one-trick ponies have a history of not surviving."

Allowing the company to rest on one laurel, no matter how successful and profitable, could be a riskier move than venturing out into new territory, some analysts say.

Ezra Gottheil, an analyst with Technology Business Research, contends that Google still wants to be a search company. It just wants to be a whole lot more than that.

"Google wants to use its core competency, software design and development, to make more and more money for its investors," said Gottheil. "Their core is software design and development. That's what they do. They can monetize it a dozen different ways."

Dan Olds, an analyst with The Gabriel Consulting Group, said search is the springboard for all Google moves.

"Google is still definitely a search company. Despite all of their other activities, they still get the vast majority of their revenue and profit from search and are intimately identified with it," he added. "I don't see Google's activities in other lines of business as a way for them to get away from their search roots. Quite the contrary, I see their other products as a way for them to capture more user eyes and time, which furthers their position as the dominant web advertising company."

So, does Google risk stumbling off course with all these new directions?

Sure. The company definitely has a lot of balls in the air but only time will tell how well they manage to handle everything.

"When a company participates in a bunch of different markets, there's always the risk that they might lose focus and start to slip in all of their markets," said Olds. "While Google certainly faces this risk, they have a pretty good track record of cutting their losses and bailing out on loser opportunities while sticking with the winners."

Sharon Gaudin covers Internet and Web 2.0, emerging technologies and desktop/laptop chips for Computerworld . Follow Sharon on Twitter @sgaudin , send e-mail at or subscribe to Sharon's RSS feed? .

Copyright © 2010 IDG Communications, Inc.

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